Most business owners think of payroll as one job: pay your people the right amount on the right day. That is the visible part. Behind it sits a chain of calculations, payments and reports that all have to line up, and if one link is wrong the ATO, the super fund or your employee will let you know.
Here is what actually happens across a full pay run, start to finish, in plain English.
Every time you run a pay, you are quietly doing five things at once: working out what each person is owed, withholding tax, paying super, reporting it all to the ATO, and keeping records that back it up. Miss any one of these and you have a problem, even if the wages themselves went out correctly.
Let us walk through each step.
Gross pay sounds simple, but it is where most errors start. You need the right hourly rate or salary, plus anything on top: overtime, penalty rates, allowances, bonuses, commissions and leave loading. Awards and enterprise agreements set minimums, and paying under them is one of the most common and most expensive payroll mistakes in Australia.
You also have to track leave. Annual leave, personal or sick leave and long service leave all accrue as your staff work, and they need to be paid out correctly when taken or when someone leaves.
You do not hand employees their full gross pay. You withhold tax under the PAYG withholding system and send it to the ATO on their behalf. How much you hold back depends on the employee's tax file number declaration, whether they have claimed the tax free threshold, and things like study loan repayments (HECS or HELP).
Get this wrong and your employee either ends up with a surprise tax bill or has too much taken out all year. You report and pay the amounts you have withheld to the ATO, usually through your activity statement.
On top of wages, you pay superannuation. The super guarantee rate is now 12 percent of ordinary time earnings, which has been the rate since 1 July 2025. This is money on top of the employee's pay, not deducted from it.
The big change is timing. From 1 July 2026, payday super applies. That means super is no longer a quarterly job. Every time you pay wages, the super contribution has to reach the employee's fund within 7 business days of payday. For a brand new employee, the first contribution has a longer window of 20 business days. Pay late and extra charges apply, so the days of leaving super until the end of the quarter are over.
If your payroll and super have never been tightly connected, this is the step to sort out first.
Not sure your current setup meets the new payday super timing? Book a free call with Artiq and we will tell you plainly whether you are on track or exposed.
Australia runs on Single Touch Payroll, known as STP. Each time you pay staff, your software sends a report to the ATO on or before payday showing wages, tax withheld and super. There is no separate form to lodge; it happens inside your payroll software when you finalise the pay run.
STP Phase 2 asks for more detail than the original version, breaking down the components of an employee's pay, their employment type and the reason someone leaves. Your software does the heavy lifting, but only if the underlying information, such as pay categories and employee setup, has been entered correctly.
Every pay run needs to be backed by records: payslips issued within one working day of payday, super payment records, leave balances and tax withheld. As a general rule you keep payroll records for five years.
At the end of the financial year you complete an STP finalisation, which tells the ATO your figures for each employee are final. That is what turns their income statement in myGov from "not tax ready" into "tax ready" so they can lodge their own return. Miss it and your staff are left waiting.
The pattern we see over and over is not one big failure, it is small gaps that compound. Common ones include:
None of these are dramatic on the day. They tend to surface months later, often with interest or penalties attached.
No. Good payroll software automates most of the calculations and the reporting, and that removes a lot of the risk. But software still does what you tell it, so the setup, the award interpretation and the deadlines still need a human who knows what they are doing.
That is where a lot of small business owners decide the time and stress are not worth it. If payroll is eating your week, or you are simply not confident it is all correct, it is worth having someone check the whole chain rather than waiting for a problem to appear.
At Artiq we handle payroll for small businesses, sole traders and tradies, with fixed fees agreed upfront and every question answered within 24 hours. Book a free call and we will walk through your setup with you.
This article is general information only and does not take into account your personal circumstances. Please seek advice tailored to your situation before making decisions.
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