SetUp Payroll Systems that Keep You Compliant and Professional.

Your Guide to Setting Up Payroll Systems in Australia:

Payroll isn’t just about paying people. It’s about protecting your business, staying compliant, and building trust with the team you rely on.

Most founders don’t think about payroll until they hire someone — and by then, mistakes are expensive. With STP (Single Touch Payroll — the ATO’s real-time payroll reporting system), the government expects you to get things right from the first pay run, not the tenth.

The good news?

When you set payroll up properly, you’ll avoid fines, reduce admin, pay people accurately, and feel confident you’re running a professional operation.

This resource shows you exactly how to set up payroll systems in Australia — legally, efficiently, and in a way that scales with you.

What Is a Payroll System and Why It Matters

A payroll system is the software or process you use to:

• calculate wages

• withhold tax

• pay superannuation

• manage leave

• issue payslips

• report each pay event to the ATO through STP

• keep compliant employee records

In Australia, your payroll system must be STP-compliant, which means it reports payroll data to the ATO every time you run a pay cycle.

Common payroll systems include Xero, MYOB, QuickBooks, KeyPay, and Employment Hero. These platforms integrate with accounting and super tools, making payroll faster and safer.

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Why Payroll Systems Matter for Business Owners

Payroll isn’t optional admin — it’s a legal requirement and a reflection of how professionally you run your business.

Payroll systems matter because they help you:

Stay compliant

STP, superannuation, tax, leave, and awards must be accurate. Mistakes create ATO penalties.

Avoid underpayment issues

Incorrect leave, wrong hourly rates, or missed super can lead to huge back-pay costs.

Save hours every month

Automation removes repetitive admin and reduces human error.

Build trust with your team

People remember whether you pay them correctly and on time.

Scale smoothly

A proper system grows with you — whether you have one employee or 20.

Real Talk:

Payroll errors do more damage to team morale than almost anything else. Set it up right and protect your culture.

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What You Need Before You Setup Payroll Systems

To set up payroll properly, you’ll need:

• ABN and business bank account

  
  

• TFN (Tax File Number) details for each employee

  
  

• Superannuation fund details for staff

  
  

• Chosen payroll software (STP-compliant)

  
  

• Award classification or employment contract for each role

  
  

• (Optional) A bookkeeper or payroll advisor— helpful if you’re new to Fair Work obligations

Mentor Tip: 

Don’t wing payroll. Even one part-time employee requires full compliance.

Set it up right from the start or it could cost you later!

How to Set Up Payroll Systems in Australia:

Step-by-Step

Step 1: Choose Your Payroll Software

Look for:

• STP compliance

• Automatic super processing

• Leave and accrual tracking

• Employee onboarding tools

• Integrations with your accounting system

Popular options:

• Xero Payroll – simple, scalable

• MYOB – strong compliance built-ins

• QuickBooks – easy for service businesses

• KeyPay – powerful for complex awards

• Employment Hero – all-in-one HR + payroll

Outcome:

You’ve chosen software that’s legal, reliable, and suited to your size and industry.

Step 2: Set Up Your Payroll Account

Inside your software:

• Enter business details, ABN, and address

• Set your pay calendar (weekly, fortnightly, or monthly)

• Add your default super fund

• Upload or save your business bank details

• Configure payroll settings (tax tables usually update automatically)

Outcome:

Your payroll file is ready to calculate wages and report data correctly.

Step 3: Add Employees (The Right Way)

For each employee, enter:

• TFN and date of birth

• Start date and employment type(full time, part time, casual)

• Hourly rate or salary

• Award classification (if applicable)

• Leave entitlements

• Bank details

• Superannuation fund details

Outcome:

Each staff member has a complete and compliant employment profile.

Step 4: Configure STP and Super Payments

This is the compliance piece.

• Connect your payroll file to the ATO

• Register your Software ID using Access Manager (via myGovID + RAM)

• Activate STP reporting in your software

• Set up auto-super (via a clearing house or your software)

Terms explained:

• STP (Single Touch Payroll): ATO system that receives payroll data every pay run.

• Super Clearing House: A tool that distributes super payments to each employee’s fund.

Outcome:

Your payroll system is legally connected to the ATO and ready for compliant reporting.

Step 5: Run Your First Pay Run

Each pay cycle:

1. Enter hours or confirm salary

2. Add overtime, allowances, or bonuses (if any)

3. Approve leave entries

4. Review net pay and taxes

5. Finalise the pay run

6. Submit STP to the ATO

7. Pay employees

8. Schedule or process super

Outcome:

Employees are paid correctly, and the ATO has been notified — exactly as the law requires.

You’re set to run legal, automatic payroll with STP and super compliance.

Cost of Setting Up a Payroll System

Tool/Service	Monthly Cost Range
Xero Payroll	$32 – $85/month
MYOB Payroll	$30 – $100/month
Employment Hero	$0 – $12 per employee
Super Clearing House	Free (via ATO or provider)
Payroll Bookkeeper	$80 – $150/hour

Money-Saving Tip: Start with free tools (e.g., ATO Small Business Super) if you have just 1–2 staff. Upgrade as you grow.

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Common Mistakes Business Owners Make

Skipping STP registration

Missed ATO lodgements lead to penalties.

Underpaying or misclassifying staff

Can trigger audits and back-pay obligations.

Not tracking leave entitlements

Legal leave accrual is mandatory, even for casuals.

Forgetting to pay super quarterly

Late super means extra fees and lost tax deductions.

Manual spreadsheets

No audit trail, no accuracy, and totally non-compliant.

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What to Do Right Now

✅ Compare payroll software options (Xero, MYOB, etc.)

✅ Book a consult with Noize if you're unsure which system suits you [Noize.com.au]

✅ Get the complete playbook for starting your business with theStartUpDeck.com - over 200 cards that will help you set your business foundations with zero fluff.

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The Bottom Line

Payroll might not feel urgent — until something goes wrong.

Setting up a proper payroll system protects your business from fines, keeps you compliant with STP and super laws, and ensures your team is paid accurately and on time. It’s one of the simplest ways to look professional, stay legal, and avoid the headaches that come from trying to fix payroll mistakes later.

Do it once.

Do it properly.

And you’ll have a system that grows with you.

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FAQs

Do I need payroll software for one employee?

Yes. Even one employee requires STP-compliant payroll.

Which payroll software is best for small business?

Xero and Employment Hero are popular and beginner-friendly.

Can I do payroll myself?

Yes, but you’ll need to stay on top of tax, awards, and super obligations.

Is STP mandatory?

Yes. All employers must use Single Touch Payroll.

How do I pay super contributions?

Use a clearing house like the ATO’s Small Business Super or your software’s auto-super.