A foreign parent can incorporate an Australian subsidiary quickly, but getting payroll right takes longer. Before the first pay run, the subsidiary needs:
A gap in any of these can create a compliance problem that the parent's auditors find later.
Published: October 2026
Rules current as at: October 2026 (2026-27 financial year)
Who this applies to: Australian companies owned by an overseas parent that are about to employ staff in Australia. It does not cover contractors engaged from overseas, or entity setup. For entity setup, see setting up an Australian subsidiary.
The subsidiary needs an ACN and an ABN before it registers for payroll obligations.
The employer must register for PAYG withholding before it first pays an amount it has to withhold tax from. Register through the Business Registration Service or the ATO's Online services for business.
To use ATO online services for the entity, a person needs a myID (formerly myGovID) linked to the business in Relationship Authorisation Manager (RAM). Directors based overseas can find identity verification difficult, so start early. See how to set up myID and RAM.
Employers report payroll to the ATO through Single Touch Payroll. STP Phase 2 has been mandatory since 1 January 2022, and new employers report from their first pay run. Xero Payroll, Employment Hero and other Australian platforms support it. See our STP compliance guide.
Workers compensation is arranged per state, not nationally. In NSW, for example, a policy is required if you expect to pay more than $7,500 in wages a year, or as soon as you employ an apprentice or trainee. Arrange cover before the first employee starts.
Pay employees in AUD from an Australian account. Fund it so it always covers wages, PAYG withholding and super.
Rule: If a modern award covers the work, its minimum pay and conditions apply, whoever owns the employer.
Employer action: Classify each role by its duties, autonomy and responsibilities, not its job title. For example, administrative roles may fall under the Clerks - Private Sector Award, and some engineering and IT roles under the Professional Employees Award. Paying above the award minimum doesn't remove the award's other conditions.
Use a contract that complies with the Fair Work Act and the National Employment Standards. Overseas templates often miss Australian requirements on notice, leave and termination.
Every new employee must receive the Fair Work Information Statement. Casual employees also receive the Casual Employment Information Statement, and fixed-term employees the Fixed Term Contract Information Statement.
Collect the tax file number declaration, bank details and super choice. If an employee doesn't choose a fund, check for a stapled super fund before using a default fund. See super stapling at onboarding.
Use the ATO tax tables built into your payroll software.
Report each pay run to the ATO through STP on or before payday.
Rule: From 1 July 2026, super must be received by the employee's fund, with enough information to allocate it, within 7 business days after payday. For a new employee, the first contribution has 20 business days.
Employer action: Pay super in the same payment run as wages, so fund processing time doesn't push you past the deadline. See Payday Super is now live.
Small withholders usually pay with their BAS or IAS. Medium and large withholders pay more often.
Each state and territory has its own payroll tax threshold and rate. A subsidiary with three employees might assume it is well below any threshold, but that may not be true.
Under the grouping rules, related entities can form a group that shares one threshold. In NSW, the threshold is tested against total Australian wages, including those paid in other states. It is apportioned if the business also pays wages interstate, and pro-rated if it starts employing partway through the year.
Who pays the wages, and from where, does not settle the question. Wages for services performed in Australia can be taxable wages even when the payer is overseas.
So an overseas parent that pays someone working in Sydney may have its own NSW payroll tax obligations, and those wages can count toward the group's threshold. Sources: Revenue NSW, nexus provisions and Revenue Ruling PTA 002. Other states have similar, but not identical, rules. See payroll tax grouping and state-by-state payroll tax thresholds and rates.
Assumptions: a US software company employs five staff in Sydney for a full year at $150,000 each. The 12% super guarantee applies. The subsidiary is not grouped with any other Australian employer, and NSW is the only state where it pays wages.
The NSW threshold for 2026-27 is $1,200,000 and the rate is 5.45% (Revenue NSW). At $840,000, the subsidiary is below the threshold.
If the team doubles to ten:
Assumptions: on top of the ten-person team above, the US parent seconds an employee to Sydney for 8 months and keeps paying them through its US payroll, at the equivalent of A$180,000 a year. In each of those months the secondee performs services mainly in NSW. For simplicity the example ignores any super or other benefits paid for the secondee, and assumes the parent and subsidiary are grouped.
Superannuation contributions count as taxable wages in NSW. Run your own numbers in our employee cost calculator.
See the Australian reporting calendar for foreign-owned subsidiaries.
Parent companies usually want payroll in their own chart of accounts, currency and reporting calendar. Map payroll accounts at the start so wages, super, payroll tax and leave accruals report cleanly into group results. See the monthly finance function for an Australian subsidiary.
Does an Australian subsidiary need to register for PAYG withholding?
Yes. An employer must register before it first withholds tax from employees' pay.
What super does a subsidiary pay for Australian employees?
The super guarantee rate is 12% (it has been since 1 July 2025), paid on top of wages. From 1 July 2026, Payday Super calculates it on qualifying earnings, and the fund must receive it within 7 business days after each payday.
Do modern awards apply to employees of a foreign-owned company?
Yes. Award coverage depends on the work performed and the industry, not on who owns the employer.
When does a subsidiary have to pay payroll tax?
When its taxable wages, or those of its payroll tax group, exceed the threshold in a state or territory with a nexus to those wages. In NSW for 2026-27, the threshold is $1.2 million and the rate is 5.45%.
Are wages paid by the overseas parent subject to payroll tax?
They can be. Revenue NSW treats wages paid outside Australia as taxable in NSW for any month the employee performs services mainly in NSW (Revenue Ruling PTA 002).
What is STP finalisation?
The annual declaration through STP confirming each employee's year-end payroll data. It is due by 14 July.
Scale Suite runs payroll, reporting and compliance for foreign-owned Australian entities, with CA oversight, as registered BAS Agents. Packages start from $1,500 per month with no lock-in.
Australian subsidiary finance | Outsourced payroll services | Pricing
This guide was current when written (October 2026) and is reviewed periodically. Scale Suite is a registered BAS Agent. We are not a licensed tax adviser or financial adviser. This content is general information only. It is not professional tax, financial or legal advice.
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