Hiring your first employee as a sole trader: the ATO, super and Fair Work checklist

Employee or contractor: decide this first

The label on the agreement does not decide it. The ATO and the Fair Work system look at the whole relationship: who controls how, when and where the work is done, whether the person can send someone else, who supplies the tools, who carries the commercial risk, and whether they are running a business of their own or working in yours. Someone doing set hours you direct, with your tools, on an hourly rate, with no other clients, is almost always an employee whatever the paperwork says.

Getting it wrong means back pay under an award, unpaid super with interest, and penalties, and a contractor paid mainly for their labour can be owed super even with an ABN. If the person is a genuine business, see TPAR for what some industries must report about contractor payments. The rest of this guide assumes an employee.

Before the first shift: registrations and paperwork

• Register for PAYG withholding in Online services for business or through your tax or BAS agent, against your existing ABN, before you pay anyone.
• Check the right to work. Citizens and permanent residents are fine; anyone else, check their visa conditions through the Department of Home Affairs VEVO service.
• Tax file number declaration. The employee completes it, most easily through their own myGov account, which sends it to you and the ATO. On paper, you lodge it within 14 days.
• Super choice. Give them the standard choice form. If they do not nominate a fund, request their stapled fund from the ATO before paying into your default fund.
• Fair Work paperwork. Give every new employee the Fair Work Information Statement, and casuals the Casual Employment Information Statement as well. Put the offer in writing: award classification, employment type, hours, rate, start date.

Pay: the award, the minimum wage and pay slips

Nearly every job in Australia is covered by a modern award (Clerks, Hair and Beauty, Building and Construction, Cleaning Services, Fitness, Hospitality, and so on), which sets the minimum rate for the classification, casual loading of 25%, penalty rates, allowances, breaks and minimum shift lengths. Where no award applies, the national minimum wage does. The Fair Work Ombudsman’s Pay and Conditions Tool gives the rate for a role; use it rather than guessing from what mates pay.

Pay slips must be issued within one working day of payday, and wage and time records kept for seven years. Permanent staff accrue four weeks of annual leave and ten days of personal leave a year, pro rata for part time; casuals get the loading instead.

Single Touch Payroll

Every pay run is reported to the ATO on or before payday through Single Touch Payroll software: gross pay, tax withheld and the super liability for each employee. Free and low-cost STP products exist for employers with one to four staff. At the end of the financial year you finalise the STP data by 14 July so each employee’s income statement is ready in their myGov. FlowFi is not payroll software; you will want a dedicated STP product for the pay runs, and FlowFi picks up the payments from your bank statement.

Super guarantee and Payday Super

Super guarantee is 12% of ordinary time earnings, paid into the employee’s fund; check the ATO for the current rate. Until 30 June 2026 it was due quarterly by the 28th of the month after each quarter. From 1 July 2026 Payday Super applies: the contribution has to reach the fund within seven business days of each payday, so the super leaves your account with the wages. Late super attracts the superannuation guarantee charge, which includes interest and an administration fee and is not deductible, whereas super paid on time is deductible in the year the fund receives it. Employees under 18 need to work more than 30 hours in a week to be owed super for that week.

Workers compensation and other insurance

Workers compensation insurance is compulsory the moment you employ someone, in every state and territory, through the state scheme or its agents: icare in New South Wales, WorkSafe Victoria, WorkCover Queensland and their equivalents elsewhere. A few schemes exempt very small payrolls, so check your own state before assuming you qualify. Tell your public liability insurer you now have staff as well.

What changes on your BAS and in your bookkeeping

Once you are registered for PAYG withholding, your BAS gains two labels: W1, the total wages paid in the period, and W2, the tax withheld from them. You pay the withheld amount to the ATO with the BAS, quarterly for small withholders and monthly once you withhold more than $25,000 a year. Wages, super and PAYG payments have no GST and must stay out of 1B.

Budget for on-costs: super at 12%, workers compensation at roughly 1% to 5% of wages depending on the industry, leave accruals for permanent staff, and your time. Payroll tax thresholds are high enough that a sole trader with one or two staff will not meet them. FlowFi categorises the wages, super and ATO payments as they leave your account, keeps GST off them, and shows what the new hire is costing next to what they bring in. For paying yourself alongside them, see how to pay yourself as a sole trader.