Introduction
Running payroll in Australia involves more than just paying employees—it also means staying compliant with constantly evolving regulations from the Australian Taxation Office (ATO). Missing updates or relying on outdated settings can lead to penalties, underpayments, or incorrect reporting.
So, how often should you review and update your payroll settings to stay compliant with ATO requirements? The short answer: regularly and strategically.
In this guide, we break down the key areas to monitor, the frequency of updates you should implement, and best practices to ensure your business stays on top of its payroll obligations year-round.
Why Payroll Compliance Matters
Payroll compliance is more than just good practice—it’s a legal requirement. Failing to stay compliant with ATO guidelines can lead to:
- Incorrect PAYG withholding
- Superannuation shortfalls
- Single Touch Payroll (STP) reporting errors
- Penalties and audits
By keeping your payroll settings up to date, you reduce risk, improve accuracy, and maintain the trust of your employees and the tax office.
How Often Should You Update Your Payroll Settings?
1. At the Start of Every Financial Year (Mandatory Review)
The financial year in Australia begins on 1 July. This is when most ATO updates take effect.
Key areas to update:
- Tax tables and PAYG withholding rates
- Superannuation guarantee percentage (e.g., increases as per legislated schedule)
- Minimum wage rates and modern award changes
- STP Phase 2 compliance configurations
Recommended Action: Perform a full payroll settings audit every June so you’re ready to go live with new rates on 1 July.
2. Whenever the ATO Releases Mid-Year Updates
Occasionally, the ATO or Fair Work Commission releases changes outside the financial year cycle—such as award wage adjustments, tax threshold updates, or COVID-related legislation.
Common examples:
- Superannuation threshold adjustments
- Changes to STP reporting obligations
- Temporary support schemes or deferrals
Recommended Action: Monitor ATO announcements and payroll software provider updates at least quarterly to catch mid-cycle changes.
3. When You Hire or Terminate Employees
Each time you onboard or offboard an employee, update relevant payroll fields to remain compliant.
Areas to review:
- Tax File Number (TFN) declaration
- Super fund details
- Award classification and pay rate
- Leave accrual setup
- Termination payout calculations
Recommended Action: Audit payroll profiles immediately during onboarding and exit processes to ensure accuracy.
4. When You Make Business Changes
Any internal changes to your business may require payroll setting adjustments.
Examples:
- Switching to a new payroll system
- Changing your business structure (e.g., sole trader to company)
- Moving to a new industry award
- Adjusting working hours or employee contracts
Recommended Action: Review payroll settings immediately following any major operational or structural change.
5. Annually for Super Fund Compliance Checks
The ATO expects employers to ensure superannuation is paid to compliant, regulated funds.
What to check:
- Super fund status on the Super Fund Lookup tool
- Employee default fund selection
- Clearing house payment confirmations
Recommended Action: Perform an annual check of super fund settings and clear any discrepancies before the end-of-year reporting period.
Best Practices to Stay Payroll Compliant
Use ATO-Compliant Payroll Software
Choose a payroll system that stays up to date with ATO tax tables and STP requirements automatically.
Subscribe to ATO and Fair Work Updates
Stay informed by subscribing to newsletters or alerts directly from regulatory bodies.
Perform Quarterly Payroll Audits
Regular internal audits help catch errors before they snowball into compliance issues.
Train Your Payroll Staff
Ensure your payroll manager or team is trained in both legislation and system updates annually.
Maintain Clear Employee Records
Accurate records of hours, leave, contracts, and payments are essential for compliance and dispute resolution.
Conclusion
Staying compliant with ATO payroll requirements isn’t a once-a-year task—it’s an ongoing responsibility. At a minimum, you should review your payroll settings annually at the start of the financial year, and ideally, conduct quarterly checks to ensure nothing slips through the cracks.
Whether you’re a growing business or an established company, taking a proactive approach to payroll compliance will protect you from penalties, improve employee trust, and keep your operations running smoothly.
At Proly, we help Australian businesses streamline their payroll and stay aligned with the latest ATO changes. Make payroll peace of mind part of your business routine.
