Introduction
Hiring employees in Australia involves a range of mandatory statutory costs that go well beyond the headline salary. Employers must account for federal obligations such as Superannuation Guarantee (SG) contributions, as well as state-based levies including payroll tax and workers compensation insurance. Understanding these costs is essential for accurate budgeting, whether you are an Australian company scaling domestically or a multinational employer expanding into the Australian market.
This guide covers every major employer statutory obligation as of the 2025-26 financial year, including the latest Superannuation Guarantee rate of 12%, updated payroll-tax thresholds across all states and territories, and typical workers compensation premiums by industry.
Superannuation Guarantee (SG)
The Superannuation Guarantee is the cornerstone of Australia's retirement savings system. Since 1 July 2025, the employer SG rate stands at 12% of an employee's ordinary time earnings (OTE), up from 11.5% in 2024-25. Contributions must be paid at least quarterly into a compliant superannuation fund chosen by the employee. The maximum quarterly earnings base is approximately AUD 65,070 for 2025-26, meaning the maximum quarterly SG contribution is about AUD 7,808.
Employees do not contribute to SG; it is 100% employer-funded. However, employees may make voluntary contributions to their super fund. Failure to meet SG obligations on time results in the Superannuation Guarantee Charge (SGC), which includes the shortfall, a nominal interest charge, and an administration fee -- none of which are tax-deductible. The Australian Taxation Office (ATO) actively audits SG compliance.
State Payroll Tax
Payroll tax is a state-level tax levied on employer wage bills that exceed a specified annual threshold. Each state and territory sets its own rate and threshold, meaning the cost varies significantly depending on where your employees are based. As of 2024-25, the approximate rates are: New South Wales 5.45% (threshold AUD 1.2M), Victoria 4.85% (threshold AUD 900K, plus a surcharge of 5.85% above AUD 10M), Queensland 4.75% (threshold AUD 1.3M), Western Australia 5.5% (threshold AUD 1M), South Australia 4.95% (threshold AUD 1.5M), Tasmania 4.75% (threshold AUD 1.25M), Northern Territory 5.5% (threshold AUD 1.5M), and the ACT 6.85% (threshold AUD 2M).
Businesses with employees in multiple states may need to register for payroll tax in each jurisdiction. Many states offer exemptions or reduced rates for small businesses. The thresholds are generally applied on a group basis, meaning related entities' payrolls are combined. Accurate payroll-tax modelling is critical for large employers or those with a distributed workforce.
Workers Compensation Insurance
Every Australian state and territory mandates that employers hold workers compensation insurance to cover work-related injuries, illnesses, and fatalities. Premiums are calculated as a percentage of total payroll, with rates varying by state, industry, and the employer's claims history. The national average premium rate is approximately 1.4% of payroll, though high-risk industries such as construction and mining can pay significantly more.
In most jurisdictions, self-insurance is available for large employers that meet specific financial and governance criteria. Small businesses can obtain coverage through their state's workers compensation authority or from approved private insurers. It is important to note that workers compensation is entirely employer-funded -- no portion is deducted from the employee's salary.
Summary of Employer Costs
For a typical Australian employee, the combined statutory employer cost adds approximately 14-20% on top of the gross salary, depending on the state and industry. This includes 12% for Superannuation Guarantee, 4.75-6.85% for payroll tax (if the wage-bill threshold is exceeded), and roughly 1-3% for workers compensation insurance. Employers in lower-risk industries in states with higher thresholds may see total on-costs closer to 13-14%, while those in high-risk industries in Victoria or the ACT could face 20% or more.
Additionally, employers should budget for Fringe Benefits Tax (FBT) if providing non-cash benefits, and for long service leave accrual, which varies by state but typically vests after 7-10 years of service. These quasi-statutory costs further increase the total cost of employment.
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