Australian payroll professionals: are you ready for 2025?

Payroll compliance isn’t just about ticking boxes, it’s about ensuring trust, accuracy, and adherence to the latest legislative updates. As we move into 2025, organisations must review the changes from 2024 and prepare for what’s coming.

This blog post outlines recent updates to check, upcoming changes to prepare for, and practical steps to help your organisation remain compliant and confident.

Reviewing recent changes (2024)

1. Tax threshold adjustments: are you up to date?

In July 2024, the Australian Taxation Office (ATO) revised income tax brackets and Medicare levy thresholds, impacting PAYG withholding calculations.

• Key changes:
• Adjusted tax brackets may have shifted employees into different withholding categories.
• Updated Medicare levy thresholds affected lower-income employees, particularly those earning near the taxable income cut-off.

2. Superannuation guarantee: was the increase applied correctly?

The Superannuation Guarantee (SG) rate increased to 11.5% on 1 July 2024.

• Key impact:
• Employers were required to apply the higher rate to all eligible employees.
• Payroll systems needed immediate updates to ensure compliance.

3. Fair work updates: expanded leave entitlements

The year 2024 saw significant changes to leave entitlements aimed at supporting employees’ diverse needs and well-being:

• Family and domestic violence leave: Paid leave entitlements were introduced for employees experiencing family or domestic violence.
• Parental leave enhancements: Paid Parental Leave is progressively increasing to 26 weeks by 2026, with incremental increases occurring annually.
• Personal/carer’s leave updates: Some agreements, such as the Members of Parliament Staff Enterprise Agreement, now offer increased personal/carer’s leave, rising to 18 days per year in some cases.
• Compassionate leave adjustments: Additional compassionate leave entitlements were introduced for situations such as a family member’s life-threatening illness or injury, or miscarriage.
• Cultural and ceremonial leave: New leave types, such as NAIDOC leave, have been included in certain agreements to support cultural obligations.

Upcoming changes to prepare for (2025)

1. Superannuation guarantee increase to 12%

The SG rate will increase again to 12% on 1 July 2025, marking the final step in the government’s planned increases.

• What to expect:
• Employers will need to apply the higher rate to all superannuation contributions.
• Budgeting for this increase is crucial for managing cash flow.
• Preparation tips:
• Confirm with your payroll software provider that systems are ready to handle the update automatically.
• Begin forecasting now to account for the increase in contributions.

2. Full compliance with STP Phase 2

Single Touch Payroll (STP) Phase 2 expanded employer reporting requirements, with a compliance grace period ending in 2024. By 2025, all organisations must fully comply.

• What’s required:
• Detailed categorisation of income types, such as bonuses, allowances, and salary.
• Granular tracking and reporting of leave entitlements, such as annual and personal leave.
• Expanded employee data fields, including residency status and tax file numbers.
• Preparation tips:
• Conduct a compliance audit to ensure accurate reporting and data submission.
• Work with your payroll provider to address any gaps in STP Phase 2 implementation.

Practical steps to stay compliant

1. Stay informed about legislative changes

• Regularly check updates from trusted sources like the ATO and Fair Work Ombudsman to ensure you’re aware of all legislative requirements.
• Learn more about tax changes and Fair Work updates.

2. Review employee tax and super settings

• Ensure that employee classifications and superannuation contributions align with the current 11.5% Superannuation Guarantee rate.
• Run checks in your payroll system to verify that PAYG withholding amounts reflect updated tax thresholds.

3. Prepare for STP Phase 2 reporting

• Confirm that your payroll system captures all required STP Phase 2 data fields, including income types, residency status, and granular leave details.
• Test your system’s ability to categorise and submit detailed data to the ATO.

4. Adjust payroll systems for Fair Work Act updates

• Update pay rates for employees based on the new minimum wage and award requirements.
• Add tracking mechanisms for new leave entitlements and casual-to-permanent conversion options.

5. Perform a compliance audit

• Conduct an internal audit of your payroll system to verify that all updates are accurately applied.
• Use tools that automate discrepancy detection to catch potential errors before payroll processing.

6. Communicate changes to employees

• Notify employees of any changes to their pay, superannuation contributions, or entitlements to maintain transparency and trust.

Why payroll compliance matters

Payroll compliance is about more than meeting legal obligations; it’s an opportunity to build trust, foster transparency, and streamline operations. By staying ahead of changes, your organisation can approach 2025 with confidence and efficiency. You’ll also avoid headaches like:

• Financial penalties: Fines from the ATO for missed or incorrect reporting

• Reputational damage: Employee dissatisfaction due to incorrect payments

• Increased workload: Time-consuming corrections and re-submissions

How EPI-USE Labs can help

Navigating payroll compliance doesn’t have to be overwhelming. Tools like Variance Monitor are designed to help payroll teams tackle the complexities of legislative changes and reporting requirements with ease. Here’s how Variance Monitor can support you:

• Automate discrepancy detection: Variance Monitor can compare pre- and post-update payroll data to identify discrepancies caused by changes in tax thresholds, superannuation rates, or employee classifications, ensuring that your payroll remains accurate and compliant.

• Streamline STP Phase 2 compliance: Simplify the process of validating HR and payroll data following configuration changes, system updates, or data uploads. Comparing across systems and time periods ensures that changes in employee classifications, allowances, and income reporting are accurately captured and compliant with STP Phase 2 requirements.

• Ensure payroll accuracy during Fair Work updates: Easily validate pay rate adjustments and track leave entitlements to ensure that employees are paid correctly under the latest Fair Work requirements.

• Support internal audits: Variance Monitor provides robust tools for internal payroll audits, allowing you to detect and resolve errors before they impact your reporting or compliance status.

By automating these critical tasks, Variance Monitor helps payroll teams save time, reduce manual errors, and confidently meet their compliance obligations. Whether you’re dealing with tax changes, STP Phase 2 updates, or Fair Work Act adjustments, Variance Monitor ensures your processes remain seamless and error-free.