Payroll Changes in 2025: Comprehensive Year-End Review

In 2025, Australian payroll reached a turning point. Compliance has become a daily priority, driven by technology, legislation, and award updates. Payroll now plays a central role in business decisions, influencing efficiency and planning. This year has made it clear: payroll is more critical than ever, and compliance is key. 

Change #1: Criminal wage theft laws

From 1 January 2025, intentional underpayment officially became a criminal offence under the Fair Work Act—and we're not talking about civil penalties anymore.

The penalties

• For corporations: Up to $8.25 million for corporations (or three times the underpayment amount)
• For individuals: Up to 10 years imprisonment, plus fines of $1.65 million

What counts as criminal: Only intentional underpayment. Genuine mistakes remain civil matters, which is critical to understand. The legislation recognises that payroll is complex and errors happen—but deliberate wage theft is now treated like the serious crime it is.

Safe harbours exist: Businesses demonstrating good-faith compliance efforts have protections available. The Voluntary Small Business Wage Compliance Code and self-reporting to the Fair Work Ombudsman both provide pathways for businesses working to get it right.

What this means for employers: Strong internal controls, regular payroll audits and accurate recordkeeping have become standard practice. These aren't just compliance requirements. They're practical steps that protect businesses and ensure employees are paid correctly.

Change #2: Superannuation guarantee reaches 12%

After gradual yearly increases, superannuation contributions have reached 12%. This is the final scheduled increase to the Super Guarantee rate, making it the highest in Australian history. From 1 July 2025 onward, employers contribute 12% of ordinary time earnings, up from 11.5%.

What this means for employers: Combined with the July minimum wage increase, this created budget considerations for many businesses, particularly in labour-intensive industries.

Change #3: Payday Super becomes law

On 4 November 2025, the Treasury Laws Amendment (Payday Superannuation) Bill 2025 passed Parliament, making Payday Super law. This is a big change for 2026, as Super processing will change to be on pay day. 

Effective date: 1 July 2026

Whats the big change? Instead of paying super quarterly or monthly, employers will have to pay superannuation every payday, within seven business days of wages being paid. 

Who it affects: All employers. All employees.

Why the government introduced this: The ATO estimates around $6.25 billion in super went unpaid in the most recent financial year, meaning countless employees missed out on retirement entitlements. Payday Super makes super payments more visible and timely. When super is paid every payday, gaps are immediately visible to the employer, employee and the ATO. 

The ATO's enforcement approach: For the first year, the ATO will use risk-based compliance zones (low, medium, high). The focus is on good-faith preparation and effort rather than immediate perfection.

What this means for employers: The clock is ticking. Payroll systems, cash flow models and super payment workflows need to be ready by 1 July 2026. Businesses have seven months to prepare and implement the necessary changes. 

The Small Business Super Clearing House also closes on 1 July 2026, so businesses currently using this service need an alternative solutions in place.

Change #4: Minimum wage increased to 3.5%

The Fair Work Commission delivered a 3.5% increase to modern award minimum rates, effective from the first full pay period on or after 1 July 2025.

The new rates: National Minimum Wage lifted to $24.95 per hour (or $948 per week), up from $24.10 per hour.

Who it affected: Approximately 20.7% of the Australian workforce, representing the most significant wage adjustment of the year for award-covered employees.

What this means for employers: Combined with the super rate increase to 12% in the same month, employers have had to adjust payroll budgets and update systems. Award-covered employees received proportionate increases across all classification levels, including junior, apprentice and supported wages.

Change #5: STP Phase 1 Shutdown

The ATO officially switched off STP Phase 1 on 27 February 2025, completing the transition to Phase 2 for all Australian employers.

What changed: Phase 2 delivers enhanced reporting including disaggregated gross pay, specific income types and detailed leave classifications. The reporting is more granular, which means the ATO has better visibility into payroll data, requiring higher accuracy from employers.

The enforcement shift: The ATO moved from education mode to active enforcement. Penalties for non-compliance became more likely. For payroll teams still adjusting to Phase 2 compliance, this shift increased the urgency to get systems right.

What this means for employers: Businesses can no longer report payroll to the ATO via STP 1, only via STP2.

Paid parent leave superannuation

From 1 July 2025, eligible parents with children born or adopted on or after that date receive a 12% superannuation contribution on government‑funded Paid Parental Leave. The ATO pays this as a lump sum after the end of the financial year. 

This change, which particularly benefits primary carers (predominantly women), helps reduce the retirement savings gap. Super is now paid during parental leave rather than leaving that entitlement behind.

Casual conversion pathway expanded

The Employee Choice Pathway commenced on 26 February 2025 for most employers, and 26 August 2025 for small businesses with fewer than 15 employees. This shifts casual conversion responsibility from employers to employees, who can now request permanent status after six months (or 12 months for small businesses).

‘Right to disconnect’ for small businesses

From 26 August 2025, small businesses came under Right to Disconnect laws, allowing employees to refuse to monitor, read, or respond to work contact outside working hours unless refusal is unreasonable.

Entry-level award classification time limits

37 modern awards were varied from 1 January 2025 to introduce maximum time limits for entry-level classifications, generally no longer than six months. This prevents workers from remaining in lower-paid introductory roles indefinitely.

Aged care and healthcare pay rises

Direct care aged care workers and nurses received their final staged increase on 1 October 2025 as part of the Fair Work Commission's Aged Care Work Value Case. This marked the fourth increase for aged care workers, with nurses scheduled for one additional increase on 1 August 2026.

Lump sum caps adjusted

From 1 July 2025, Employment Termination Payment caps increased to $260,000 (from $245,000), and genuine redundancy base amounts rose to $13,100 plus $6,552 per year of service. This ensures payouts remain fair and aligned with wage growth.

As we close the books on 2025, it's clear this year fundamentally reshaped Australian payroll with countless changes acorss the industry. For 2026, the message is clear: proactive preparation is essential.

2026 brings the biggest operational shift in modern payroll history: Payday Super in just seven months away. The businesses that will thrive won't just comply—they'll modernise, automate, and build a seamless payroll operation that is time saving and compliant.

Looking for deeper insights into what's ahead? Download our latest report:

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