Payroll Tax, Super and PAYG for Small Building Companies
Running a small building company isn’t just about finishing on time and on budget. You also have strict obligations for payroll tax, superannuation, and PAYG withholding, and directors can be personally liable if these are ignored.
Payroll Tax (state/territory based)
Payroll tax kicks in once your Australian taxable wages exceed your local threshold. In NSW, the threshold is $1.2m, and the rate is 5.45%. The tax applies only to wages above the threshold.
What counts as wages? Salaries, allowances, super contributions, director fees and, in many cases, payments to contractors. In the building and construction industry, contractor payments are often withheld unless a specific exemption applies.
Director risk: Underpayments attract interest and penalties. Failing to fulfil payroll tax obligations can increase solvency risks for directors.
Practical moves
Monitor rolling 12-month wages and register before you cross the threshold.
Review contractor arrangements annually to confirm whether exemptions apply.
Superannuation (SG) | Non-negotiable
From 1 July 2024, the Super Guarantee (SG) rate is 11.5% of ordinary time earnings, increasing to 12% on 1 July 2025.
You must ensure contributions reach the fund by the quarterly due dates: 28 October, 28 January, 28 April, and 28 July. If they arrive late, you must lodge a Superannuation Guarantee Charge statement, pay interest and administration charges, and you lose the tax deduction for those contributions. Using a clearing house early is best practice, as processing can take days.
Contractors and super: If you pay a contractor mainly for their labour, they’re considered an employee for SG purposes, and you must pay super for them.
Director risk: Unpaid super can result in a Director Penalty Notice (DPN), which makes directors personally liable.
PAYG Withholding | Keep the ATO satisfied
Employers must withhold PAYG from employee wages and remit it via the Business Activity Statement (BAS) either monthly or quarterly. Some contractors may agree to PAYG withholding through a voluntary agreement, but otherwise they withhold and pay their own tax. Use Single Touch Payroll (STP) to report each pay run.
Director risk: Directors can be personally liable under a DPN for unpaid PAYG, net GST and superannuation.
Director red flags in building companies
Promising to “sort super next quarter”, late super means charges and no deduction.
Paying “contractors” who work like employees, you may owe both super and payroll tax.
Crossing the payroll tax threshold without registering.
Lodging BAS but not paying, DPN exposure grows each period.
A simple compliance checklist
Forecast wages quarterly; register for payroll tax if nearing the threshold.
Set reminders so super hits funds before due dates.
Review contractor roles annually for both super and payroll tax obligations.
Reconcile PAYG and GST for each BAS; act early if cash flow is tight.
Use accounting software for STP, payroll tax reporting and super payments.
Bottom line: Tight payroll tax, super and PAYG processes protect your business and your personal assets.
Disclaimer: The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. All content relates to the current financial year only. Future changes to tax laws, thresholds or administrative requirements may affect the accuracy or relevance of this information, so you should always confirm that the guidance remains current. While every effort has been made to ensure accuracy at the time of publication, Dolman Bateman accepts no responsibility or liability for any loss or damage arising from reliance on this information. You should seek professional advice tailored to your circumstances before making any financial or tax decision.
