Best Payroll Software for Australian Small Businesses in 2025

Why Payroll Software Matters for Small Businesses

Processing payroll manually is one of the most time-consuming and error-prone tasks a small business owner can face. Between calculating PAYG withholding, superannuation guarantee contributions, leave entitlements and overtime rates, there are dozens of places where mistakes can creep in — and those mistakes can mean underpaying staff, overpaying tax, or falling out of compliance with the ATO.

Payroll software automates these calculations, ensures accuracy, and handles regulatory reporting like Single Touch Payroll (STP). For Australian businesses, having the right payroll system isn't just a convenience — it's a compliance necessity.

Essential Features to Look For

Not all payroll software is built the same. When evaluating options for your Australian small business, these are the features that matter most:

STP Phase 2 Compliance

Since January 2022, all employers in Australia must report through STP Phase 2. Your payroll software must be able to submit pay events to the ATO automatically, categorise income types correctly, and handle year-end finalisation declarations. This is non-negotiable — any software that doesn't support STP Phase 2 is not suitable for Australian payroll.

Automatic Tax Calculations

The software should calculate PAYG withholding based on current ATO tax tables, taking into account the tax-free threshold, Medicare levy, HELP/HECS repayments, and any salary sacrifice arrangements. These rates change periodically, so the software needs to stay updated automatically.

Superannuation Management

With the super guarantee rate at 11.5% (as of 1 July 2024, rising to 12% from July 2025), your payroll system should calculate super on ordinary time earnings, track employer contributions, and ideally submit payments directly to super funds via a clearing house or SuperStream-compliant gateway.

Leave Tracking

Accurate leave management covers annual leave, personal/carer's leave, long service leave and any other entitlements under the relevant Modern Award or enterprise agreement. The software should accrue leave automatically based on hours worked and make it easy to process leave payments.

Employee Self-Service

A self-service portal lets employees view their payslips, check leave balances, update personal details, and access income statements at tax time. This reduces the administrative burden on business owners and gives employees direct access to their information.

Common Payroll Challenges for Small Businesses

Even with software in place, small business owners often encounter these payroll issues:

• Award interpretation — Australia has over 120 Modern Awards, each with different pay rates, penalty rates, overtime rules, and allowance structures. Configuring your payroll correctly for the relevant award is critical.
• Mixed employment types — Many small businesses employ a mix of full-time, part-time and casual staff, each with different entitlements and calculation methods.
• Changing regulations — Tax rates, super guarantee percentages, and reporting requirements change regularly. Your payroll system needs to keep pace.
• Contractor vs employee classification — Misclassifying workers is a common and costly error. Payroll software can help by clearly separating employee and contractor payment workflows.

What Does Payroll Software Cost?

Pricing for payroll software in Australia varies widely. Most products charge a base monthly fee plus a per-employee fee. Typical costs range from $10 to $30 per month as a base fee, plus $3 to $10 per employee per month. Some platforms bundle payroll with broader accounting features, which can represent better value if you also need invoicing, BAS preparation and financial reporting.

There are also free options available. Gimbla, for example, offers a fully-featured accounting and payroll platform at no cost for small businesses. It includes STP Phase 2 reporting, super calculations, leave tracking and employee self-service — all the essentials without a subscription fee.

Setting Up Payroll for the First Time

If you're setting up payroll for a new business or switching from manual processing, here's a practical checklist:

1. Register as an employer with the ATO — You'll need an ABN, a PAYG withholding registration, and a TFN for your business entity.
2. Collect employee details — Tax File Number declarations, superannuation choice forms, bank details and employment contracts for each employee.
3. Identify the relevant Modern Award — Determine which award (if any) covers your employees and configure pay rates, allowances and penalty rates accordingly.
4. Choose your pay cycle — Weekly, fortnightly or monthly. The choice may be influenced by your award or cash flow considerations.
5. Configure your payroll software — Enter business details, set up employee profiles, configure tax settings, and link your super fund or clearing house.
6. Run a test pay cycle — Before your first real pay run, process a test to verify that calculations are correct and STP reporting works as expected.

How Payroll Integrates with Accounting

Payroll doesn't exist in isolation. Wages are typically the largest expense for any business, so accurate payroll data needs to flow into your financial reports, BAS calculations and cash flow projections. Using a platform that combines payroll and accounting — rather than separate tools — avoids double entry, reduces reconciliation effort, and gives you a complete view of your financial position.

When payroll is integrated with your accounting software, each pay run automatically creates journal entries for wages expense, PAYG liability, super liability and net pay. This keeps your books accurate in real time and simplifies BAS preparation at the end of each quarter.

Summary

Choosing the right payroll software sets the foundation for accurate employee payments, regulatory compliance, and efficient business operations. For Australian small businesses, the non-negotiable requirements are STP Phase 2 compliance, automatic tax and super calculations, and reliable leave tracking. Whether you choose a paid platform or a free solution like Gimbla, the important thing is to move away from manual processing and let software handle the complexity.