Payroll FAQs for Growing Australian Businesses Using Xero (2025 Edition)
Confident Payroll Starts With the Right Systems
Running a business with a growing team comes with serious obligations, your payroll accuracy and compliance aren’t negotiable, they’re essential.
Most established businesses across Australia rely on Xero payroll because it takes care of the details: from automated super payments and leave tracking, to Single Touch Payroll (STP) compliance and real-time reporting to the ATO.
With the ATO increasing audits and issuing more Superannuation Guarantee Charge (SGC) penalties and interest in 2025, now is the time to make sure your payroll process isn’t just working, it’s bulletproof.
Let’s answer the top payroll questions we get from clients using Xero, and highlight why it’s the preferred tool for employers serious about getting it right.
Payroll FAQs for Employers Using Xero in Australia
1. What do I do when an employee resigns?
When someone finishes up with your business:
Finalise their last day and calculate final entitlements,
Use the “End Employment” feature in Xero to handle all final pay, including leave payouts,
Submit the final pay via Single Touch Payroll (STP) directly to the ATO.
This ensures a compliant and professional offboarding process that protects both the business and the employee.
For more about the Fair Work Ombudsman's expectations around notice and final pay, click here.
2. How do I set up a new employee?
Xero makes onboarding new team members streamlined:
Enter all personal, tax, super and bank details in the employee profile,
Assign appropriate employment status and pay templates,
Make sure TFN declarations and super choice forms are collected and filed.
This level of setup ensures accuracy in payroll and helps you stay aligned with Fair Work and ATO requirements. If you’re not yet using Xero, this kind of control and compliance is a strong reason to make the move.
Also worth mentioning, the new Xero app Xonboard which is a solution for Xero employee onboarding. It's free, and it aims to resolve issues that arise through manual data entry, such as errors & mistakes.
New employee didn’t provide their super details? Read this.
3. When do I need to pay my employee superannuation?
From 1 July 2025 the super rate changes from 11.5% to 12% and it must be paid quarterly at a minimum. These are the ATO-mandated dates:
Missing a deadline, even by a day, can trigger an SGC liability—which includes interest and admin penalties and is non-deductible. With Xero’s Auto Super feature, you can schedule payments well in advance to avoid unnecessary risk.
If the due date happens to fall on a weekend or public holiday, the payment must be received by the next business day.
Next year, from 1 July 2026, employers will be required to pay their employees' super at the same time as their salary and wages.
4. How do I handle reimbursements?
Reimbursements for business-related expenses (like travel, supplies, or equipment) are easy to manage in Xero:
Add them as a Reimbursement pay item—this ensures they are excluded from PAYG and super calculations,
Attach documentation as needed for internal recordkeeping or audit support.
This keeps your payroll clean and ensures reimbursements are processed properly without distorting taxable income or super liability.
5. Is super paid on all earnings?
No—super is only required on Ordinary Time Earnings (OTE). This includes:
Base hours,
Paid leave,
Commissions and certain allowances.
Super is not required on:
Overtime (above contracted hours),
Reimbursements,
Some termination payments.
Xero automatically calculates super based on ATO definitions, but understanding the rules helps you ensure that custom pay items are set up correctly.
6. What is a travel allowance?
A travel allowance is a set amount paid to employees who need to work away from their usual location (e.g. interstate meetings, regional site visits). It may cover:
Meals,
Accommodation,
Transport.
If the allowance is within ATO's reasonable limits, it may be tax-free and excluded from reporting. If it exceeds those limits or lacks documentation, it must be included in assessable income. In Xero, you can configure this under Pay Items > Earnings > Allowance.
Growth Demands Compliance, and Xero Delivers
For growing businesses with expanding teams and greater complexity, payroll isn't a side task—it’s a strategic function. Using Xero puts you in control of payroll, compliance, and superannuation—without wasting hours on admin or risking fines.
If you're already using Xero, now’s the time to review your setup to ensure it’s aligned with the latest ATO changes. If you're still relying on spreadsheets or outdated systems, Xero is the clear step forward for professional payroll management.
At Kindred Accounting, we work with growth-focused businesses across Australia who need confidence and clarity around payroll. If you want to optimise your processes or delegate them entirely, we’re here to help.
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