Australian Payroll Compliance Update: Key changes for 2025

Australia has a robust payroll compliance framework, which means employers must adhere to various regulations, from tax obligations to superannuation requirements, to ensure accurate, compliant wage payments for employees and many other aspects of managing a workforce.

Employers must be aware of key changes for the financial year 2024/2025, and several changes and amendments impact payroll and workforce management. 

The Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 received Royal Assent on 26 February 2024. Several changes have already come into effect, with the remaining changes penned to commence later this year and in 2025. 

Several reforms are included in the Fair Work Legislation Amendment Act 2024 (Closing Loopholes No. 2).

Key dates and changes:

• Changes to the definition of casual employment began on 26 August 2024.
• The right to disconnect for non-small business employers began on 26 August 2024.
• Starting 1 July 2025, parents receiving government-funded Parental Leave Pay will also receive superannuation contributions.
• On 26 August 2025, the right to disconnect applies to small business employers.
• The criminalisation of wage theft is effective from 1 January 2025.
• As of 1 July 2026, employers must pay superannuation entitlements as part of wages rather than quarterly.

Employers must be aware of these changes before they come into effect to ensure they comply with the new rules and regulations.

The Closing Loopholes Act was introduced in two stages: first, in December 2023, and then in February 2024.

The reforms cover the following: 

• The criminalisation of intentional wage theft (effective January 2025).
• Expansion of workplace protections against discrimination.
• Updated definitions and rights for casual employees.
• Superannuation contributions as part of wages by 2026.

Understanding the timeline of these changes is critical for staying compliant. Closing Loop Holes Timeline

On 26 August 2024, significant amendments to casual employment laws came into effect. Under the new definition:

• Employees are casual only if there is no firm advance commitment to ongoing work.
• Employers must consider factors such as the nature of work, the availability of future shifts, and similarities to part-time/full-time roles.

Conversion to Permanent Employment

Eligible casual employees can now request permanent employment after six months (or 12 months for small businesses). Employers must:

• Respond in writing within 21 days.
• Provide valid reasons for denying conversion.
• Avoid actions that circumvent these obligations.

Employers must also periodically provide employees with the Casual Employment Information Statement (CEIS) and maintain accurate records to meet compliance standards.

The rise of hybrid working has significantly changed how we approach work-life balance and establishing boundaries and prioritising self-care has become increasingly important.

Employers and employees in Australia understand the importance of fostering a healthy work-life balance, which is why this trend is gaining traction.

Today's modern work environments blur boundaries between professional and personal life, especially with the rise of hybrid working and working from home. The ‘Right to Disconnect’, came into effect in August 2024, allowing employees to disengage from work communications outside their regular hours. This initiative prioritises mental health and work-life balance by establishing clear boundaries.

What is the 'right to disconnect', and why is it Important? 

The ‘right to disconnect’ refers to employees' right to disengage from work-related communications and tasks outside their regular working hours.

Employer Preparation

To comply with this legislation:

• Develop a policy outlining expectations around after-hours communication.
• Educate employees and managers on the importance of setting boundaries.
• Update employment contracts to reflect the right to disconnect.

By fostering a culture of trust and respect, businesses can ensure higher productivity and employee satisfaction.

The 'right to disconnect' legislation will help the Australian workforce and employers. The benefits will outweigh the disadvantages for a productive and healthy future.

Managing employees' mental health and preventing burnout, exhaustion, and decreased job satisfaction can burden society and should be a priority.

These factors contribute to decreased workforce productivity as employees struggle to separate their personal and professional lives. This leads to longer working hours and less focus. The absence of the right to disconnect adversely affects any business.

Some of Australia's largest employers and institutions have been criticised for large-scale underpayments, which have cost employees tens of millions of dollars.

Australia’s new laws against wage theft aim to address systemic underpayment issues. From January 2025, intentional underpayment of wages will be a criminal offence. Employers found guilty may face the following:

• Fines and legal action.
• Reputational damage.
• Obligations to back-pay employees with additional damages.

What Constitutes Wage Theft?

Wage theft includes underpaying wages, failure to pay overtime, and withholding superannuation contributions. Employers should:

• Regularly audit payroll systems.
• Maintain accurate payment records.
• Provide transparency about employee entitlements.

Download our The Criminalisation of Wage Theft Guide

The guide covers: 

• The criminalisation of intentional underpayments of wages
• What is Wage Theft?
• How to ensure you pay your employees correctly
• The Impact on Employees and Employers
• Types of Wage Theft
• Fixing underpayments
• The Fair Work Act
• Enforcement Challenges

The Payday Super legislation, effective 1 July 2026, revolutionises how superannuation contributions are managed. Employers must align superannuation payments with each pay cycle rather than quarterly, ensuring timely contributions to employee funds.

Payday super is a winning formula as it will make it more difficult for employers to dodge superannuation payments.

Is Payday super good for businesses and employees.

• According to Industry Super Australia (ISA), about 2.5 million employees missed $4.3 billion in super in 2019-20, with over a quarter missing an average of $1,736 annually.
• The Australian Tax Office (ATO) estimates that there is about based on its compliance activities.

Why Payday Super Matters

Delayed super contributions historically deprive employees of significant retirement savings for employees. Payday Super addresses this issue, benefitting both employers and employees.

Steps to Prepare for Payday Super

• Review or upgrade your payroll system to software accommodating real-time super payments.
• Adjust or streamline your cash flow practices to align with more frequent contributions.
• Educate finance teams and staff about the changes and compliance requirements.

Early adoption of Payday Super practices can help businesses identify and address potential challenges before the deadline.

Starting 1 July 2025, superannuation will be paid on government-funded parental leave. This initiative aims to reduce the gender disparity in retirement savings, as women often take career breaks to care for children. Key highlights include:

• An additional 12% contribution to super funds for eligible parents.
• Payments will be administered by the Australian Taxation Office (ATO) as an annual lump sum.

Employer Implications

While these contributions are government-funded, employers should:

• Understand the changes to support employees during their parental leave.
• Update HR policies to reflect these new benefits.

The 2025 payroll compliance updates reflect Australia's commitment to creating a fairer and more equitable workplace. By proactively adapting to these changes, businesses can avoid penalties and foster a positive work environment. 

Employers need to: 

1. Stay informed about legislative changes.

2. Regularly audit payroll and HR processes.

3. Invest in training and technology to ensure compliance.

The guide covers the following: 

• Closing Loopholes
• Casual Employment changes
• Right to Disconnect
• Criminalisation of Wage Theft
• Payday Super
• Superannuation on Parental Leave

With the right strategies, businesses can navigate these reforms seamlessly and contribute to a more transparent and fair employment landscape.

Download our guide to better understand the compliance changes for the financial year 2024/2025.