New Business Payroll Set Up

How new business payroll setup works

A strong setup has four clear stages so you can start paying people with confidence and minimal rework later.

• Discovery and registrations
  • Confirm business structure (sole trader, company, partnership or trust) and ABN.
  • Register for PAYG withholding (and GST if needed).
  • Check if payroll tax applies in your state and arrange workers’ compensation insurance.
• Software and configuration
  • Select an STP Phase 2 compliant payroll system (e.g., Xero, MYOB, QuickBooks Online).
  • Set pay calendars, pay items, super categories, leave accruals and reporting mappings.
• Onboarding and first pay run
  • Collect TFN declarations, employment contracts and super choice forms (request stapled super if no choice provided).
  • Apply award rates, penalty rates and allowances where relevant.
  • Run the first pay, submit STP, and check net pay and liabilities (PAYG and super) match reports.
• Handover, calendar and support
  • Set your compliance calendar for STP, BAS/IAS and super due dates.
  • Provide simple payroll procedures and escalation paths for leave, terminations and corrections.

Australian rules to keep in view

• PAYG withholding: register before withholding from employee or director payments.
• STP Phase 2: every pay run must be reported through STP using compliant software.
• Superannuation: Super Guarantee is 11.5% from 1 July 2024; pay at least quarterly by the due dates.
• Super choice and stapled super: offer a choice form; if no choice, request the employee’s stapled super fund from the ATO.
• Fair Work: pay at or above award/minimum rates, keep proper records and payslips, and retain payroll records for 7 years.
• Payroll tax: state-based registration may be required if your Australian wages exceed thresholds.
• Workers’ compensation: mandatory in each state/territory once you have employees.

If any of this is new, it is common to pair payroll setup with BAS support, bookkeeping and tax advice so all filings agree.

What to compare before you commit

New business payroll setup checklist

• ABN confirmed and business bank account ready.
• PAYG withholding registration completed.
• STP Phase 2 payroll software chosen and connected to the ATO.
• Default super fund selected; super choice process and stapled super request steps in place.
• Employment contracts, TFN declarations and onboarding data collected.
• Award coverage checked; base rates, allowances, overtime and penalty rates configured.
• Leave accrual rules set (annual, personal, long service where applicable).
• Payroll calendar set; BAS/IAS and super due dates added to your calendar.
• Pay run tested; STP submissions verified; payroll reports reconciled to the general ledger.

Software options and fit

The best system is the one your team will actually use correctly. For most small employers:

• Xero Payroll: clean STP flows, simple awards with add-ons for complexity.
• MYOB: strong for more detailed payroll and inventory-heavy businesses.
• QuickBooks Online: straightforward setup and reporting for micro to small teams.

For award-heavy or high-headcount environments, consider add-ons for time tracking, rostering and award interpretation. Ensure integrations are maintained and mapped to STP categories properly.

Common mistakes to avoid

• Paying super late and triggering the Super Guarantee Charge (non-deductible and more admin).
• Misclassifying contractors vs employees and missing PAYG, super and leave obligations.
• Not mapping STP Phase 2 categories (e.g., allowances, paid leave types) correctly.
• Ignoring awards, penalty rates or casual loading.
• Forgetting to finalise STP at year-end so employees see income statements in myGov.
• No process for corrections (amended STP) or terminations (ETPs, leave payouts).

Timeframes and pricing

Once you provide the required details, most small-business setups complete within 2–10 business days. Plan extra time if you need PAYG registration, complex awards or a software migration.

• Fixed-fee setup: common for 1–10 employees with standard awards.
• Hourly: typical for complex awards, multi-entity groups or back-pay cleanups.
• Ongoing: per-employee or per-pay-run fees; add-ons for super processing, lodgements and support.

If you are moving from spreadsheets to software, factor in opening balances, leave reconciliations and STP on-boarding.

Best next steps

Note your start date for payroll, pay frequency and expected headcount. Decide whether you want full-service payroll or a setup with training and handover. Then shortlist providers who match your software and award complexity.

If you also need bookkeeping, BAS or tax support, start from a service hub so your payroll maps cleanly into reporting and year-end tax.