Payroll Summary
A Payroll Summary is a record that totals all employee wages, tax and super for a pay period. It is required by the ATO for Single Touch Payroll and tax reporting under the Taxation Administration Act 1953.
A consolidated record of all wages, taxes and superannuation paid to employees over a specific period used for reporting and reconciling accounts.
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About this Document
A Payroll Summary is a vital financial record for every Australian business. It provides a total view of what you pay your staff and what you withhold from their pay. This document is not just a internal note. It is the basis for your Business Activity Statement or BAS, your annual Pay As You Go or PAYG payment summary, and your Superannuation Guarantee or SG obligations. For tradespeople and small business owners, understanding the Payroll Summary is essential for managing cash flow and staying on the right side of the law. This guide explains the what, why and how of Payroll Summaries in plain English. It covers the legal requirements under the Fair Work Act 2009, tax laws from the Australian Taxation Office or ATO, and superannuation rules. You will learn how to create one, what data you must include, and how to use it to keep your business compliant. This guide focuses on the specific needs of Australian workplaces, including apprentices, casuals and subcontractors. It references relevant legislation and standards to help you avoid common mistakes. Managing payroll is one of the biggest risks for small business. Get it wrong and you face fines from the ATO, back pay claims from employees, and penalties from Fair Work. A good Payroll Summary helps you catch errors before you lodge your reports. It is the master record that ties your payroll software to your accounting software and your bank statements. You need this document every time you run payroll, whether that is weekly, fortnightly or monthly. You also need it at the end of the financial year. This guide walks you through the entire process. It explains the difference between gross pay, net pay and taxable pay. It details how to handle allowances, overtime and leave loading. It also covers the specific rules for superannuation, including the Superannuation Guarantee Charge. You will learn about Single Touch Payroll or STP and how the Payroll Summary fits into the digital reporting . Even if you use a bookkeeper or accountant, you must understand your Payroll Summary. You are legally responsible for your business compliance. This document is your tool to check their work and verify your numbers. It is also a useful tool for budgeting. You can see exactly how much labour costs you each month. This helps you price your jobs correctly, especially in trades where labour is a major part of the quote. We will look at the specific fields required in a Payroll Summary. This includes employee details, tax file numbers, pay rates and hours worked. We will explain how to calculate PAYG withholding and report it to the ATO. We will cover the Superannuation Guarantee rate and how to calculate contributions. The guide includes references to the Fair Work Ombudsman, the ATO and Safe Work Australia. It provides links to the current tax tables and award rates. It warns you about common pitfalls, like failing to update tax scales or missing superannuation deadlines. By the end of this guide, you will know how to create a precise Payroll Summary. You will understand the legal requirements and how to meet them. You will have the confidence to manage your payroll effectively. This guide is written for Australian business owners who are not tax experts. It uses plain language and avoids jargon. It focuses on practical steps you can take immediately. The information is up to date with current Australian laws and standards. It addresses the unique challenges faced by tradespeople, such as managing on site allowances and travel allowances. It also covers the rules for hiring juniors or apprentices. The Payroll Summary is more than a spreadsheet. It is a legal record of your employment obligations. Treat it with care and check it regularly. This diligence will protect your business and give you peace of mind. Let us start by defining what a Payroll Summary actually is and why it matters so much. A Payroll Summary aggregates all payroll data for a set period. It lists every employee and their total earnings, deductions and net pay. It shows the total tax withheld and the total superannuation liability. It provides a snapshot of your payroll costs. This snapshot is for your financial reports. It feeds directly into your profit and loss statement. It helps you reconcile your bank accounts. When your bank statement shows a total wage payment, your Payroll Summary should match the net pay total. When the ATO sends you a BAS debt, your Payroll Summary should match the total PAYG withholding. Discrepancies here are the first sign of a problem. This guide teaches you how to spot those discrepancies. It explains how to trace errors back to individual payslips. It helps you ensure that every dollar is accounted for. Legal requirements are strict. Under the Taxation Administration Act 1953, you must keep records for five years. Under the Fair Work Act 2009, you must issue payslips and keep time records. The Payroll Summary brings all these records together. It is the document that proves you have met your obligations. If Fair Work inspects your business, they will ask for your payroll records. A clear and accurate Payroll Summary shows you are professional and compliant. It can save you time and stress during an audit. This guide also touches on workplace safety. Under the WHS Act 2011, you must ensure the health and safety of your workers. Fatigue from poor rostering or excessive overtime is a safety risk. Your Payroll Summary helps you monitor hours worked. You can see if anyone is working too many hours or not taking breaks. This helps you manage safety risks proactively. Privacy is another consideration. You handle sensitive personal information like tax file numbers and bank details. Under the Privacy Act 1988, you must protect this data. Your Payroll Summary should be stored securely. Whether it is a digital file or a paper record, access must be limited. This guide includes tips on data security and record keeping. For tradespeople using subcontractors, the line between employee and contractor can be blurry. This guide clarifies when to include someone in your Payroll Summary and when to treat them as a contractor. It explains the ATO guidelines on employee versus contractor status. This is a high risk area. Getting it wrong can lead to huge tax liabilities. We explain the key factors to consider. Control, independence and risk are the main tests. We apply these to real trade scenarios to help you make the right call. Finally, this guide covers technology. Most Australian businesses now use Single Touch Payroll software. Your Payroll Summary is often a report generated by this software. We explain how to read these reports. We show you how to export them to your accounting system. We discuss the benefits of digital record keeping over manual spreadsheets. However, we also acknowledge that some small businesses still use manual methods. We provide a structure for a manual Payroll Summary that meets legal standards. This guide is . It covers every aspect of the Payroll Summary. It is designed to be a handbook you can refer to again and again. Keep it handy when you process your payroll or prepare your BAS. Use it to train your staff if they help with admin. A shared understanding of payroll reduces errors and improves compliance. The goal is to make payroll less confusing and less scary. With the right tools and knowledge, you can manage your payroll with confidence. This guide gives you those tools. It empowers you to take control of your business finances. A clear Payroll Summary is the foundation of a healthy business. Let us build that foundation now.
Key Facts
- Employers must report employee payments to the ATO through Single Touch Payroll on or before payday.— ATO (Taxation Administration Act 1953)
- Employers must pay a minimum of 11% superannuation guarantee on ordinary time earnings.— Superannuation Guarantee (Administration) Act 1992
- Payroll records including tax calculations must be kept for five years.— Fair Work Act 2009 (Cth)
- Payslips must be provided to employees within one working day of payment.— Fair Work Regulations 2009
- The national minimum wage is currently $23.23 per hour as of 1 July 2024.— Fair Work Commission
- You must register for PAYG withholding if you pay employees.— Australian Taxation Office
- Casual employees accrue no sick leave but receive a 25% casual loading.— Fair Work Act 2009
Sources
Required Sections
Gross Wages and Earnings
Details how to calculate and record total earnings before deductions.
Calculating Gross Wages and Earnings
Gross wages represent the total amount an employee earns before any tax, superannuation, or other deductions are taken out. For Australian tradespeople and small business owners, calculating this figure correctly is essential to meet compliance obligations under the Fair Work Act 2009. You must follow the specific rules set out in the relevant Modern Award or Enterprise Agreement to ensure every worker receives their full entitlements.
Base Pay
Base pay refers to the ordinary hours of work. Most Modern Awards define ordinary hours as 38 hours per week. To calculate this, multiply the employee’s hourly rate of pay by the number of ordinary hours worked in the pay period. You must use the correct classification rate from the Award. For example, a first-year apprentice under the Building and Construction General On-site Award has a different minimum rate than a qualified tradesperson. Paying below these minimum rates is a breach of the Fair Work Act 2009.
Overtime
Overtime is payment for hours worked outside the ordinary schedule. Most Awards dictate that overtime must be paid at a higher rate, often time-and-a-half for the first two or three hours and double time thereafter. Some Awards allow for "time in lieu" (TOIL) instead of payment, but this requires a written agreement between the employer and employee. Always check the specific overtime clauses in the applicable Award, as rules vary significantly between industries like electrical, plumbing, and carpentry.
Allowances
Allowances compensate employees for specific work conditions or expenses. These are separate from the base rate and must be added to the gross wage total. Common allowances in the trades industry include:
- Tool allowance: For providing and maintaining tools.
- Travel allowance: For travelling to a job site outside a standard radius.
- Height allowance: For working above a certain height.
- Industry allowance: To compensate for specific site conditions.
The Fair Work Ombudsman provides detailed Pay Guides that list current allowance rates. Ignoring these allowances can lead to significant back-pay claims.
Bonuses and Incentives
Performance-based bonuses, sign-on bonuses, or commissions are also part of gross wages. If you pay a bonus, include the full amount in the gross earnings calculation for that pay period. These payments are generally taxable and attract superannuation contributions.
Total Gross Wages
To find the final figure, add the total base pay, overtime, all allowances, and any bonuses together. This total is the figure you must report on the employee’s pay slip and use for your Pay As You Go (PAYG) withholding calculations. Keeping accurate records of these calculations for seven years is a legal requirement under Australian law.
PAYG Withholding
Explains the calculation of income tax to be withheld from employees.
Calculating PAYG Withholding
To work out the correct amount to withhold from employee wages, you must use the current tax tables provided by the Australian Taxation Office (ATO). You cannot use a flat percentage or estimate the figure. The ATO updates these tables regularly, usually aligned with the Federal Budget or indexation changes, so always ensure you are using the latest version.
Using the ATO Tax Tables
The specific calculation depends on how often you pay your employees. Common pay periods include weekly, fortnightly, and monthly. The ATO provides separate withholding schedules for each period. Do not calculate the tax on an annual figure and divide it down. You must find the employee's gross earnings for that specific pay period within the correct table.
Claiming the Tax Free Threshold
Most employees claim the tax free threshold. This means they do not pay tax on the first $18,200 of their yearly income. When an employee starts, they complete a Tax file number declaration. If they claim the tax free threshold, you use the column in the tax tables labelled "With tax free threshold". This results in a lower withholding amount for lower income earners. If an employee does not claim this threshold, you must use the "No tax free threshold" column, which withholds tax at a higher rate because it assumes their total income will exceed the threshold.
Allowances, Bonuses and Overtime
You must treat additional payments carefully. Include allowances in the gross earnings total before looking up the tax table. The method for withholding on bonuses and lump sum payments can differ. Some bonuses are added to normal weekly earnings and taxed using the standard table. For larger, one-off payments, you may need to use Schedule 5 of the tax tables. This schedule prevents the employee from being over-taxed due to the bonus pushing them into a higher tax bracket for a single pay period.
Legislative Requirements
Your obligation to withhold tax comes from the Income Tax Assessment Act 1936 and the Taxation Administration Act 1953. You must also comply with the Pay As You Go (PAYG) Withholding requirements set out in the Income Tax (Withholding) Regulations 2023. Once calculated, you must report the withheld amounts to the ATO via Single Touch Payroll (STP) and remit the money to the ATO by the due date. Failure to use the correct tables or remit the money on time can result in penalties and interest charges.
Superannuation Guarantee
Covers the calculation and payment of super contributions.
Superannuation Guarantee
Current legislation requires employers to make superannuation contributions to eligible employees. The mandatory Superannuation Guarantee (SG) rate is currently set at 11 per cent of an employee's ordinary time earnings. You must pay this amount into a complying superannuation fund at least four times a year. These payments are due by the quarterly cut off dates, specifically 28 October, 28 January, 28 April, and 28 July. Missing these deadlines results in the Superannuation Guarantee Charge (SGC), which includes the unpaid super, interest, and an administration fee. The SGC is not tax deductible.
The calculation for the 11 per cent is based on Ordinary Time Earnings (OTE). OTE is generally the amount your employees earn for their ordinary hours of work. It includes things like base wages, commissions, shift loadings, and allowances paid for the performance of duties. You must calculate the super contribution on the total OTE amount before tax.
You must understand what is excluded from OTE to avoid overpaying. Payments for work performed outside ordinary hours are generally exempt. The most common exclusion is overtime payments. If you pay an employee double time for working on a Sunday or specific rates for hours exceeding their standard 38 hour week, those specific amounts are not included in the OTE calculation for super. Other exclusions can include jury duty pay and unused annual leave cashed out upon termination.
Compliance is monitored by the Australian Taxation Office (ATO). Under the Superannuation Guarantee (Administration) Act 1992, you are legally liable to pay the super guarantee for all eligible employees, including casual workers who meet the earnings threshold. Currently, you must pay super for employees who earn $450 or more before tax in a calendar month.
For tradespeople and small business owners, accuracy here is vital. If a roofer works a standard 38 hour week but picks up an emergency job on Saturday for overtime pay, you calculate the 11 per cent super on the standard week's earnings but not the Saturday overtime rate. However, if you pay a tool allowance or a trade allowance as part of their standard package, that allowance is considered OTE and super is payable on it.
Always check the Superannuation Guarantee (Administration) Act 1992 or the ATO website for the specific financial year rates as the government has scheduled increases to the SG rate in the coming years. Ensure you use the exact Ordinary Time Earnings figure for each pay cycle to remain compliant.
Net Pay and Reconciliation
Focuses on the final pay amount and bank reconciliation.
Calculating Net Pay
Net pay is the final amount your employees receive in their bank accounts. You must calculate this correctly to ensure staff are paid in full and on time. Under the Fair Work Act 2009, failing to pay employees their full entitlements is a serious breach of Australian law.
To work out the net pay figure for an individual employee, use the following formula:
Gross Pay minus Total Deductions equals Net Pay
Gross Pay This is the total earnings before any money is taken out. It includes ordinary hours, overtime, penalties, allowances, and leave loading. Ensure you have applied the correct rates from the relevant Modern Award or Enterprise Agreement.
Total Deductions Deductions generally fall into two categories: tax and superannuation.
- PAYG Withholding: You must withhold income tax from your employees' pay. Use the Australian Taxation Office (ATO) tax tables or the Single Touch Payroll (STP) software to calculate the exact amount. This money belongs to the ATO, not your business.
- Other Deductions: Employees may authorise you to deduct money for salary packaging, union fees, or health insurance. These voluntary deductions must be agreed to in writing and cannot reduce the employee's pay below the National Minimum Wage.
Superannuation Guarantee Note that the Superannuation Guarantee charge is paid by you, the employer, on top of the gross pay amount. You do not deduct this from the employee's wage to calculate their net pay.
Reconciliation
Once you have processed the payroll, you must verify the total net pay against the actual bank transaction. This step ensures the total amount leaving your business bank account matches the sum of individual employee pays.
Follow these steps to reconcile your payroll:
- Sum the Net Pays: Add the net pay amount for every employee listed in your payroll report to get a total payout figure.
- Check the Bank File: Open the direct entry (ABA) file generated by your accounting software. This file contains the instructions for your bank to transfer funds. Check that the total debit amount in the file matches your manual sum.
- Verify the Transaction: After you upload the file and process the payment, log in to your online banking. Confirm the total value of the transaction matches your payroll records exactly.
- Check for Discrepancies: If the figures do not match, look for data entry errors. Common issues include duplicate entries, incorrect bank account numbers (which cause rejected payments), or failing to remove a terminated employee from the pay run.
Accurate reconciliation is essential for your Business Activity Statement (BAS) and ensures you remain compliant with ATO reporting standards.
Legal Record Keeping
Requirements for storing and maintaining payroll records.
Australian law requires you to keep specific payroll records. You must manage these documents carefully to avoid penalties during a Fair Work inspection or an ATO audit.
Tax Records (ATO Requirements)
You must keep all business records related to your tax affairs for five years. The five years starts from the date you lodge your tax return, not from the date the transaction occurred. If you lodge your return late, the five-year period starts from the late lodgement date.
Under the Taxation Administration Act 1953 and records set by the Australian Taxation Office (ATO), you must retain records that allow the ATO to verify your tax affairs. These include:
- Employee details, including Tax File Numbers and declaration forms.
- Payments of wages, allowances, bonuses, and superannuation contributions.
- Records of fringe benefits and contractor payments.
You must store these records in a format that the ATO can access and understand if they ask for them. If you keep digital records, you must be able to convert them into a hard copy if an officer requests it. Your records must be in English or a form that ATO officers can interpret.
Employment Records (Fair Work Requirements)
The Fair Work Act 2009 and the Fair Work Regulations 2009 set strict rules for employment records. You must keep records for at least seven years. This is longer than the tax requirement. If a claim arises regarding employment, these seven years start from the date the claim is made.
You must keep a written record for each employee. This general record must include:
- The employer’s name and ABN.
- The employee’s name and start date.
- Basis of employment (full-time, part-time, or casual).
- Rate of pay and method of calculation (e.g. hourly rate plus annual leave loading).
- Loadings, penalties, or overtime paid.
- Superannuation contributions, including the fund name and contribution amount.
Payslips
You must provide payslips to every employee within one working day of pay day, even if they are on leave. You can issue them electronically or in paper form. Under the Fair Work Ombudsman standards, a payslip must include specific information:
- Employer’s name and ABN.
- Employee’s name.
- Date of payment and the pay period.
- Gross and net pay.
- Any loadings, bonuses, or allowances.
- Superannuation contribution amount and fund name.
- Amounts deducted for tax.
If you pay a cash-in-hand wage, you must still issue a payslip and keep written records. Failing to provide a payslip or keep correct records can result in significant fines.
Frequently Asked Questions
What is a Payroll Summary?
When do I need a Payroll Summary?
Is a Payroll Summary legally required in Australia?
What is the difference between a payslip and a Payroll Summary?
Do I include subcontractors in my Payroll Summary?
How does Single Touch Payroll affect my Payroll Summary?
What records must I keep with my Payroll Summary?
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