Payroll Setup Checklist

Payroll problems are rarely dramatic on day one. The first pay run goes out, everyone gets paid, and the business assumes the system works. The gaps show up later — at STP finalisation, at a super deadline, or when a departing employee queries their entitlements — and by then the fix involves months of corrections rather than an hour of setup.

Setting payroll up properly is mostly a sequence problem. Each step below exists because something downstream depends on it, and the order matters more than most owners expect.

Before the first employee starts

• Register for PAYG withholding. This registration must be in place before you are first required to withhold from a payment — the ATO links it to your ABN, and your accountant or the ATO's online services can set it up.
• Confirm the award or agreement. Most employees in small business are covered by a modern award, and the award drives minimum rates, penalty rates, allowances and classifications. Guessing the classification is where underpayment stories usually start.
• Collect the day-one documents. A TFN declaration, a super choice form, and bank details — and provide the Fair Work Information Statement (plus the casual version for casual staff). If the employee does not choose a fund, you generally need to check with the ATO for a stapled fund before defaulting them into yours.
• Set up payroll software with STP enabled. Single Touch Payroll reporting to the ATO on or before each pay day is a standard obligation, not an optional extra. Xero, MYOB and similar products handle it once connected properly.

Setting up the first pay runs

• Enter employees carefully. Start date, classification, pay rate, employment basis (full-time, part-time, casual) and leave entitlements all flow through to STP, super and leave accruals — an error here repeats every pay day.
• Check the super calculation. Super guarantee is calculated on ordinary time earnings at the current rate — check the current percentage — and the software should accrue it automatically on each pay run. Under payday super, in force from 1st July 2026, contributions generally must reach each employee's fund within 7 business days of payday — set super to be paid with every pay run, not quarterly.
• Decide the pay cycle and stick to it. Weekly or fortnightly cycles are easier to manage for cash flow than monthly for wage-heavy businesses, and consistency matters for award compliance.
• Issue compliant payslips. Payslips must be given within a short window after pay day — commonly cited as one working day; check the current Fair Work requirement — and the software produces them automatically once set up.

What we commonly see go wrong

• Paying a flat rate that quietly falls below the award once penalty rates, overtime or allowances are counted.
• Super accrued in the software but never actually paid — the accrual is not the payment, and late super attracts the super guarantee charge, which is not deductible.
• Family members paid informally outside the payroll system, which undermines both the deduction and the records.
• STP connected but finalisation never lodged at year end, leaving employees unable to complete their tax returns cleanly.

A worked example

As an illustration: a café hires its first two staff and pays them a rounded flat rate agreed by handshake, transferred from the business account each Friday. Nothing is withheld, no super is paid, and there are no payslips. Ten months later one employee applies for a loan and asks for payslips and an income statement — neither exists. Rebuilding ten months of payroll, back-paying super with the charge on top, and correcting withholding costs far more than an afternoon of proper setup would have.

When to get help

If you are hiring your first employee, moving staff from cash arrangements onto the books, or unsure which award applies, it is worth getting the setup checked before the first pay run rather than after the first year. We see this often, and payroll set up correctly from day one is one of the cheapest forms of insurance a small business can buy.

What do I need before running my first payroll in Australia?

PAYG withholding registration, the correct award classification for each employee, a TFN declaration and super choice form from each staff member, and payroll software with Single Touch Payroll enabled.

Do I have to use Single Touch Payroll for one employee?

Generally yes. STP reporting applies to employers of all sizes, with only limited exceptions, and each pay run is reported to the ATO on or before pay day through your payroll software.

What happens if I pay super late?

Late super triggers the super guarantee charge, which includes interest and administration components and is not tax deductible. Paying on time, well before the deadline so the fund receives it, is significantly cheaper.