If you’re a sole trader looking to employ someone in Australia, congratulations on taking a step towards growing and scaling up your business! By now you’ll likely already know that as a sole trader, you don’t pay yourself a wage per se, and there is no legal requirement to pay your own super (though this is highly recommended). As a sole trader, you have just 1 tax return – your personal tax return, which contains a “business schedule” listing your income and expenses. Tax is paid on any net profits and, depending on the circumstances, losses can either be carried forward to be offset against profits in future years or (in some cases) offset against other tax return income.
Now, just because you don’t pay yourself a formal wage as a Sole Trader, doesn’t mean that you can’t pay wages to staff. If you’re considering hiring workers in your sole-trader business, we recommend first stepping through the below checklist (which can be applied to any other of the Australian business structures also).
Determine the Worker’s Classification
Decide if the worker is an employee or a contractor. It may be easier to pay a worker as a contractor, thus bypassing tax, super and single touch payroll obligations, though this isn’t always the correct course of action. Misclassifying an employee as a contractor can lead to legal repercussions, including penalties and charges from the ATO and Fair Work Australia.
Confirm Work Rights in Australia
Ensure that you verify that the worker has the legal right to work in Australia. This may involve checking their visa status if they are not an Australian citizen or permanent resident.
Register for PAYG Withholding (wages)
You’ll need to register for Pay As You Go (PAYG) withholding with the ATO to withhold tax from your employee’s wages. You can organise this either via your accountant, via the ATO’s business portal or online services for businesses, or via your MyGov ID. You can also arrange this with the ATO by phone.
Set Up Superannuation
Obtain the superannuation fund details for your new employee. You’ll need their fund name, ABN / SPIN, and fund member number. If your employee does not have a superfund, you can select a default fund on their behalf. You can either make superannuation payments via a dedicated clearing house, or, more common these days, directly via your online bookkeeping file.
Provide a Fair Work Information Statement
It’s a legal requirement to provide every new employee with a Fair Work Information Statement before, or as soon as possible after, they start employment.
Complete Employment Paperwork
Have your new employee fill out a Tax file number declaration form and a Superannuation standard choice form. If using Single Touch Payroll (STP), these forms can be completed online. In order to get your employee set up on your payroll system, we recommend you have them complete a dedicated “New Employee” form – such as the one available within the resources section on our website.
Determine Pay and Conditions
Check the relevant award or agreement where relevant to determine the correct pay rates, including casual loading and penalty rates, and other conditions of employment.
Set Up Payroll
Ensure your payroll system is STP-enabled to report payments, tax, and super information to the ATO each time you pay your employees. Take extra care to ensure that you withhold the correct amount of tax from your employee’s wages. If this is your employee’s second job, then likely they won’t be electing to claim the tax-free threshold, meaning that you’ll need to withhold additional super on their wages.
Maintain Records
Keep accurate and up-to-date records of all payments, withholdings, and super contributions for each employee.
Understand Your Obligations
Familiarise yourself with your obligations regarding workplace health and safety, workers’ compensation insurance, and anti-discrimination laws.
Issue Payslips
Provide your casual employee with a payslip within one working day of their pay day, even if they are on leave.
Report and Pay Superannuation
Pay super contributions for eligible casual employees at least quarterly by the due dates (28th day after the end of each quarter). Note – from 1 July 2026, employers will be required to pay their employees’ super at the same time as their salary and wages.
Report to the ATO
Report wages, PAYG withholding, and super information to the ATO through your STP-enabled payroll software each time you pay your employees.
Stay Informed!
Keep up to date with any changes in employment law, tax obligations, and superannuation requirements.
By following the above steps, you’ll ensure that you’re meeting your responsibilities as an employer while also providing a fair and legal work environment for your employees. Always seek professional advice if you’re unsure about any of these steps or visit the ATO and Fair Work Ombudsman websites for more information. When in doubt, ask your accountant. We are here to help!
