Payroll errors aren't just embarrassing — they're expensive, legally risky and surprisingly common. After a decade of managing payroll across multiple industries, here are the five mistakes I see most often, what they actually cost, and how to make sure you're not making them.
Payroll is one of those things that feels straightforward until it isn't. You pay people what you owe them, on time — how hard can it be? But Australian payroll sits at the intersection of Fair Work, the ATO, superannuation legislation and award rate complexity, and getting any one of those wrong can be costly.
The good news: every single mistake on this list is preventable.
Australia has over 120 Modern Awards covering different industries and roles — each with their own base rates, penalty rates, allowances and overtime rules. Many small business owners either don't know which award applies to their staff, or they're using outdated rates that haven't been updated since the annual Fair Work minimum wage review.
Underpaying staff — even accidentally — is wage theft under Australian law. The consequences range from back-paying all affected employees with interest, to significant fines and public naming by the Fair Work Ombudsman.
Super must be paid at the correct rate (currently 11.5% of ordinary time earnings) and on time — within 28 days of the end of each quarter. Many businesses pay super late without realising it, or calculate it on the wrong earnings base.
Late super doesn't just attract the Superannuation Guarantee Charge (SGC) — which is calculated differently and costs more than just paying on time — it also means your employees' retirement savings are being eroded. And the ATO takes it seriously.
Since Single Touch Payroll became mandatory, every pay event needs to be reported to the ATO in real time. This means your employees' income and tax information flows directly to the ATO — and discrepancies between what you report and what you pay get noticed.
Common STP errors include reporting the wrong YTD figures, failing to finalise employee records at year end, or not updating the system when an employee leaves. These errors create problems for your employees when they lodge their tax returns, and trigger ATO queries for you.
This is one of the most common and costly payroll mistakes in Australia. Businesses often engage workers as contractors to avoid payroll obligations — but if the working arrangement looks and feels like employment, the ATO and Fair Work will treat it that way.
Get it wrong and you're potentially liable for unpaid super, entitlements, PAYG withholding and penalties — often going back years. The legal test is about the substance of the arrangement, not just what the contract says.
Under Fair Work, you're required to keep detailed payroll records for 7 years — including hours worked, pay rates, leave balances, super contributions and more. Many small businesses either don't keep these records at all, or keep them in a way that's incomplete or inaccessible.
If an employee ever disputes their pay, or Fair Work conducts an audit, incomplete records shift the burden of proof onto you — and the assumption is that you got it wrong.
The bottom line
None of these mistakes are the result of bad intentions — they're the result of busy business owners doing their best with complex obligations and not enough time. The answer isn't to stress about it. It's to put the right support in place so payroll just works, every time, without you having to think about it.
That's exactly what good payroll management looks like — accurate, compliant and completely off your plate.
Want payroll you never have to think about?
Kept HQ handles payroll for small businesses across Australia — STP, super, award rates and all. Get in touch and let's sort it out.
