For companies looking to grow internationally, Australia provides a wealth of business opportunities. The country has been largely immune to the economic catastrophe facing much of the world, enjoying a strong economy and low unemployment. By expanding operations to Australia, businesses can establish a presence on the other side of the world without having to overcome the cultural and language barriers usually associated with hiring employees in other countries. Additionally, as Australia is a key trading partner with nations in the Asia-Pacific region, expanding into the country can be a gateway to working with these markets.
In order to leverage the benefits available to businesses in Australia, organizations must first become familiar with the nuances of the payroll systems of the Land Down Under. Some of the most common aspects include:
- Tax System – Australia has a pay-as-you-go (PAYG) system for income tax, which enables employers to withhold taxes from employee paychecks. The tax rate is progressive based on income and whether employees are full time or contractors, and these rates vary among Australia’s eight states and territories.
- Industrial Relations System – The Australian Fair Work Act established various industrial regulations regarding working conditions, such as the maximum number of hours worked, flexible working arrangements, parental leave, vacation time and other aspects important to employers.
- Superannuation – Superannuation refers to Australia’s retirement and pension program, for which employers are required to contribute based on a proportion of an employee’s salary. The amount is fixed and currently stands at 9 percent.
- Payroll Tax – Employers whose payments to employees exceed certain thresholds must pay payroll taxes for all types of payment, including wages, salaries, commissions, allowances and bonuses. The thresholds and the tax rate vary by individual state and territory governments.
- Workers Compensation Insurance – Employers are required to cover their employees with workers compensation insurance in case of accidents in the workplace, and they must have coverage in each state and territory in which they hire workers. Premiums are based on factors such as the type of industry, remuneration and claims history.
- Fringe Benefits Tax – Companies will face fringe benefit taxes for the provision of certain non-cash benefits, such as use of a company car, private health insurance or low interest loans. Any benefits with a value over $2,000 must be reported on the employee’s PAYG payment summary.
While these are just a small sample of the factors companies must deal with when employing payroll workers in Australia, understanding and complying with all of these regulations can be challenging for anyone. To ensure your Australian hiring plans are in order, and in compliance, it pays to work with Patersons, a trusted partner who understands the intricacies of compensating employees in Australia – and beyond.
Source of information provided by Grant Thornton Australia.