Tips for managing payroll compliance for businesses in WA

Helping WA businesses maintain accuracy and compliance in their payroll processes. Navigate award updates, superannuation obligations, STP reporting, and legislative changes to protect their businesses.

Payroll compliance in Australia has become a defining test of a business’s operational discipline. For organisations in Western Australia, the combination of federal and state industrial relations systems creates an additional layer of complexity. Each year brings new reporting requirements, rate changes, and Fair Work updates, with recent legislative shifts such as 'Payday Super' and court decisions demanding more frequent and detailed oversight than ever before.

As a result, staying compliant requires more than just processing payroll on time, it demands a structured, well-governed approach to employee management and recordkeeping. As payroll compliance practitioners in Perth, PKF regularly assists businesses navigating this evolving landscape. The key is to embed compliance into everyday processes, not treat it as a reactive exercise.

Why payroll compliance matters

Payroll compliance ensures that every employee receives the correct remuneration and entitlements, that superannuation contributions are accurate and made on time, and that all statutory reporting obligations are met.

Non-compliance exposes a business to more than just administrative penalties. The Fair Work Ombudsman can issue infringement notices or commence legal proceedings for serious contraventions, while the Australian Taxation Office (ATO) can impose penalties for late or incorrect Single Touch Payroll (STP) submissions and apply the Superannuation Guarantee Charge (SGC) for any shortfalls.

Beyond the financial imposts, findings of underpayment can attract public scrutiny, causing lasting reputational damage and impairing an employer's ability to attract and retain talent.

In Western Australia, navigating this compliance obligation is ever so more challenging because employers may be regulated by either the state-based industrial relations (IR) system or the national Fair Work system. Determining which jurisdictional framework applies is the foundational compliance checkpoint.

Where payroll compliance breaks down

Award interpretation and classification in WA

An employer must correctly determine if they fall under the national Fair Work system or the WA state IR system. Misclassifying the governing jurisdiction means the employer is applying the wrong set of awards, minimum wages, and leave entitlements, exposing them to systemic liabilities from the outset. Given that this can be a complex legal determination, involving specialist IR lawyers or consultants is highly recommended to establish the correct legal framework from day one.

Even when the correct system is identified, misclassifying employees under the correct Award or level remains a frequent compliance failure. Each Award prescribes mandatory minimum rates, allowances, penalty rates, and overtime entitlements. A misinterpretation here leads to systematic underpayments that require extensive and costly remediation.

A growing risk we’ve seen in the market is the potential ineffective application of annualised salary arrangements. As reinforced by a landmark Federal Court decision in 2025 (involving Coles and Woolworths – yet to be appealed), paying an over-Award salary may not, on its own, discharge the employer's statutory obligations imposed by a Modern Award. The rulings currently notes that, without good time and wages records and a regular reconciliation conducted per pay period, the employer will find it difficult to demonstrate the annual salary met the employee's notional Award entitlement in every pay cycle. This exposure can lead to underpayment and penalty claims. Consequently, the 'set and forget' approach is no longer a viable commercial or legally defensible strategy.

Recordkeeping and transparency 

Maintaining accurate and complete records is key to defending a payroll position.

The national Fair Work Act 2009 (and the WA IR equivalent for state system employers) mandates that businesses maintain comprehensive payroll records and issue payslips that meet strict formatting and content requirements. Records must be retained for at least seven years and be readily accessible for audit or inspection, and incomplete or inaccurate records can constitute a compliance breach in themselves. This means that even if all employees were correctly paid, a lack of documentation can limit the employer’s ability to legally defend the payroll position. As highlighted in the annualised salary cases, without good records to prove compliance, the default position often becomes the highest possible liability.

Superannuation and STP Reporting 

Under STP Phase 2, employers are required to report granular payroll data, including disaggregated gross salary components, tax withholding, and the calculated SG liability, to the ATO each pay cycle.

While the minimum SG contribution (12% for the 2025-26 financial year), is currently payable quarterly, the SG framework is undergoing a massive transformation. This change, driven by the upcoming 'Payday Super' reforms, is designed to align the employer's payment frequency with that of the real-time data reporting already established under STP Phase 2.

The 'Payday Super' bill, expected to commence from 1 July 2026, will mandate that employers ensure super contributions are received by the employee's fund within 7 business days of their Payday.

This shift will trigger two major operational and commercial risks:

1. Cash Flow Impact

   Current quarterly cash flow 'buffer' will be eliminated. Businesses will need to move from managing a large, periodic superannuation liability to forecasting and remitting payments in line with each pay cycle.

2. Data Integrity and Compliance Risk

   The window for data validation will significantly tighten. Super funds will have their processing deadline cut to just 3 business days to allocate or reject a contribution. A simple data mismatch (e.g., an incorrect Member Number or Unique Superannuation Identifier (USI)), which might once have been remediated within the quarterly cycle, could now cause a payment to be rejected. This will place the employer at risk of incurring a SG shortfall.

Discrepancies between STP-reported liabilities and actual superannuation payments are already a growing focus of ATO compliance activity, this new rule will make data validation an even higher compliance risk.

This SG transition is compounded by the ATO's decommissioning of the Small Business Superannuation Clearing House (SBSCH) from 1 July 2026, which will necessitate the migration of many businesses to new, compliant, STP-enabled software.

Legislative and award updates 

Given the pace of these changes, a reactive annual review is insufficient. Payroll configurations must be reviewed following each Federal and State update cycle to ensure all rate changes, allowances, and reporting requirements are correctly reflected in the system.

Each check and system update should be documented as part of the organisation’s compliance framework. This documentation provides evidence of due diligence, which is essential for supporting the business in the event of an external audit, FWO investigation, or employee enquiry.

Strengthening payroll governance in WA businesses

Implement structured payroll reviews 

Compliance is proven through documentation. Businesses must move from sporadic checks to implementing a formal, documented payroll review cycle:

• Conduct periodic, independent payroll audits to reconcile employee classifications, pay rates, and leave accruals against the latest Awards.
• These reviews should now include granular reconciliations for any employee on an annualised salary, ensuring their pay is sufficient against the Award entitlements for each specific pay period (not just annually).
• Document these reviews to demonstrate a proactive compliance culture that can serve as evidence of due diligence during audits or regulatory inquiries.

Invest in system and data integrity

Payroll systems are only as accurate as their initial configuration. Automation is an accelerator, not a safeguard. While modern systems automate calculations, their accuracy hinges on the underlying setup, including pay codes, award interpretations, and employee data.

Mandating a payroll review by an independent practitioner or a specialist adviser can validate that your system's configuration aligns with both Federal and State legislative requirements, mitigating the risk of systemic underpayments.

Maintain knowledge currency 

Given the continuous pace of legislative change, keeping up to date is key.

Payroll managers and finance teams need to monitor updates from the ATO (for tax and superannuation compliance), the Fair Work Ombudsman (for federal awards and entitlements), and the Department of Local Government, Industry Regulation and Safety (LGIRS) (for WA-specific awards and state employment laws).

When in doubt, businesses should partner with an experienced Australian tax adviser, payroll specialist, and Industrial Relations lawyers to ensure multi-disciplinary compliance.

Strategic pillars: Governance and control

Embedding compliance into the organisation's DNA requires a governance framework that integrates cross-functional accountability, enforces segregation of duties and controlled system access, and mandates continuous reconciliation of payroll records to proactively mitigate reputation, legal and financial risks. Here are some additional tips to achieve this:

FAQs about payroll compliance in Australia

• Why is payroll compliance particularly complex in Western Australia? WA operates under a dual system: some businesses are covered by the state industrial relations framework, while others fall under the federal Fair Work system. Determining which applies depends on the business structure and ownership.
• What is 'Payday Super' and how will it affect my business? 'Payday Super' is a new measure, expected to start from 1 July 2026, that will require employers to pay superannuation contributions on the same day they pay their employees' salary or wages. This removes the current quarterly payment model and will require businesses to adjust their payroll processes and cash flow management significantly.
• What are the consequences of non-compliance? Penalties can include fines, rectification payments, and potential legal action. The Fair Work Ombudsman can compel public disclosure of breaches, and the ATO can apply additional tax and superannuation charges.
• When should a business engage a payroll compliance practitioner in Perth? Businesses with multiple awards, high staff turnover, or complex remuneration structures benefit from periodic payroll reviews. A payroll compliance practitioner helps identify risks, strengthen internal processes, and ensure ongoing alignment with legislation.

The bottom line

Payroll compliance underpins trust, between employer and employee, and between businesses and regulators. It demands vigilant, continuous oversight and informed decision-making. As recent court rulings on annualised salaries and the move to Payday Super illustrate, the era of 'set and forget' payroll is over. 

At PKF Perth, our business advisory team assist businesses across Western Australia to build resilient payroll frameworks that minimise risk. 

To review your payroll systems and strengthen compliance governance, book a consultation with one of our advisers today