A glossary of Australian payroll terms
Reviewed by Mellow Editorial Team, HR & payroll content team
Every Australian payroll process involves a specific set of legal and administrative terms. Knowing what they mean — and how they connect — saves time, reduces errors and helps you stay compliant.
Core payroll and tax terms
PAYG withholding (Pay As You Go)
The system under which employers deduct income tax from employee wages before paying them. You remit those amounts to the ATO on the employee's behalf — weekly, fortnightly or monthly depending on your withholding obligations. Income tax in Australia is progressive, meaning higher earners pay a higher marginal rate.
Tax file number (TFN)
A unique identifier issued by the ATO to individuals and businesses. Employees should provide their TFN when they start. If they don't, you're required to withhold tax at the highest marginal rate. Never store TFNs insecurely — they're sensitive personal data.
Tax withheld certificate (formerly group certificate)
Replaced by income statements generated through Single Touch Payroll. Employees access their income statement via myGov once you finalise payroll.
Medicare levy
A 2% levy applied to most taxable income, withheld through payroll alongside income tax. Some low-income earners qualify for a reduction or exemption, and there is a separate Medicare levy surcharge for higher earners without private hospital cover — though that surcharge is not collected through payroll.
Withholding declaration
A form an employee completes to claim tax offsets (such as the tax-free threshold) or advise of a second job. It adjusts how much PAYG you withhold each pay run. Always keep a signed copy on file.
Superannuation terms
Superannuation Guarantee (SG)
The mandatory employer contribution to a complying superannuation fund on behalf of eligible employees. From 2026, the rate is 12% of ordinary time earnings. SG contributions are due at least quarterly, though many payroll systems facilitate more frequent payments.
Ordinary time earnings (OTE)
The base on which you calculate SG contributions. It generally includes regular wages, commissions and allowances for ordinary hours — but not overtime. Getting this classification right matters: underpaying super attracts the Superannuation Guarantee Charge, which is more expensive than paying correctly in the first place.
Complying fund
A superannuation fund that meets ATO requirements and can legally receive SG contributions. Most retail, industry and corporate super funds are complying funds. Your obligation is to pay into a complying fund — typically the employee's chosen fund, or your default fund if they don't nominate one.
Stapled super fund
When a new employee doesn't nominate a super fund, you must request their stapled fund details from the ATO before defaulting to your own default fund. A stapled fund is an existing super account that follows ("staples to") an employee as they move between employers.
Employment entitlements
National Employment Standards (NES)
The minimum employment entitlements set out in the Fair Work Act. They apply to all national system employees regardless of any award or agreement. Relevant payroll obligations include: 4 weeks of paid annual leave per year for full-time employees (pro-rated for part-time), and redundancy pay calculated on a scale based on years of continuous service.
Modern award
An industry- or occupation-specific document that sets minimum pay rates, penalty rates, allowances and leave conditions above or alongside the NES. Awards are maintained by the Fair Work Commission. Your payroll setup needs to correctly apply whichever award (if any) covers each employee.
Ordinary hours vs overtime
Ordinary hours are the standard hours defined under an award or contract. Hours beyond that threshold attract penalty rates. The distinction also affects OTE for super purposes.
Reporting and compliance terms
Single Touch Payroll (STP)
The ATO's real-time payroll reporting framework. You — or your payroll software — must submit a pay event to the ATO each time you run payroll. This replaces the old end-of-year payment summary process. Finalisation must be completed by 14 July each year so employees can lodge their tax returns.
STP finalisation
The formal declaration you submit through your STP-enabled software at year end, confirming that the year-to-date figures for each employee are correct. Once you finalise, the employee's income statement is marked "tax ready" in myGov.
Pay event
A single payroll run submitted to the ATO via STP. Each pay event updates cumulative year-to-date figures for gross income, tax withheld and super.
Study debt terms
HECS-HELP (and other study loans)
Employees with a Commonwealth study debt repay it through the payroll system. Repayments are calculated on a banded scale applied to the employee's repayment income — not a flat rate. Employees with a HECS-HELP debt should indicate this on their TFN declaration or withholding declaration so you can withhold the correct additional amount alongside their PAYG.
Compulsory repayment
The amount withheld from an employee's pay to service their study debt. It is separate from income tax and is not an employer cost — you are simply collecting it on the ATO's behalf, exactly as you do with PAYG.
---
Run HR and payroll in Australia with Mellow
Mellow brings HR, payroll and 12 AI agents into one platform — built to handle Australia properly, with payroll included, from £4 per employee per month. The AI agents don't just answer questions; they generate contracts, run cost estimates and draft letters for you.
[Start a free trial →](/register)