Payroll Tax, Super and PAYG for Small Building Companies
The building and construction sector is one of the ATO’s top audit targets, and small business owners can’t afford to get payroll compliance wrong.
If you're running a construction company, even with just a handful of workers, you need to understand your obligations around payroll tax, superannuation, and PAYG withholding. Non-compliance doesn’t just result in fines, it can expose you, as a director, to personal liability.
Let’s break down your responsibilities, and what’s at stake if you ignore them.
Payroll Tax: Who Needs to Register?
Payroll tax is a state-based tax on wages paid by employers once total wages exceed a certain threshold.
For NSW in 2024–25:
Threshold: $1.2 million annually
Rate: 5.45%
What counts as wages?
Salaries and wages
Superannuation contributions
Contractor payments (if applicable under relevant contract tests)
Bonuses, commissions, and allowances
Contractor Trap for Builders
Just because you call someone a “contractor” doesn’t mean you’re exempt from payroll tax. If they’re paid mainly for their labour, you may be required to include them in your payroll tax calculations, even if they have an ABN.
PAYG Withholding: No Room for Error
PAYG (Pay As You Go) withholding is your obligation to withhold income tax from employee wages and send it to the ATO.
Your responsibilities:
Register for PAYG withholding when hiring
Withhold the correct amount using ATO tax tables
Report and lodge through Single Touch Payroll (STP)
Pay withheld amounts to the ATO on time (monthly or quarterly)
Director Red Flag
Failure to pay PAYG can trigger a Director Penalty Notice (DPN), making you personally liable for unpaid tax, even if the business goes under.
Superannuation: It’s Not Optional
As an employer, you're required to pay the Superannuation Guarantee (SG) for eligible workers.
Key superannuation facts:
Rate: 11% from 1 July 2024
Due: Quarterly, 28 days after the quarter ends
Must be paid: To a complying super fund
Covers: Employees and contractors mainly paid for labour, even with an ABN
Super Penalties
If you're late, even by one day, you must:
Lodge a Super Guarantee Charge (SGC) statement
Pay penalties and interest
Lose the tax deduction on late super payments
Super non-compliance is a major ATO audit trigger, especially in the construction industry.
Director Penalty Notices: A Personal Risk
If your company fails to pay PAYG or super, the ATO can issue a Director Penalty Notice (DPN).
Two types of DPNs:
Non-lockdown DPN: Avoidable by placing the company into voluntary administration or liquidation within 21 days
Lockdown DPN: If you fail to lodge BAS or superannuation on time, the penalty is automatic and inescapable
This is one of the ATO’s most powerful enforcement tools, and it's increasingly being used against small construction company directors.
Your Payroll Compliance Checklist
Area | Action |
Payroll Tax | Check if your total wages exceed your state threshold |
PAYG | Register, withhold, report via STP, and pay on time |
Super | Pay 11% quarterly to all eligible workers—including contractors |
STP | Lodge each pay run and finalise at year-end |
DPN Risk | Lodge BAS and superannuation on time to avoid lockdown DPNs |
Work With Accountants Who Understand Construction
At Dolman Bateman, we work with builders, tradies and construction companies across Australia to:
Simplify payroll systems
Automate superannuation payments
Ensure ATO and state tax compliance
📞 to 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.