What should a payroll audit checklist cover?

A payroll audit checklist should cover award or agreement classification and pay rates, time and wages record-keeping under the Fair Work Regulations 2009, compliant payslips, superannuation guarantee calculation and payment timing, Single Touch Payroll reporting accuracy, leave accrual and payment, and whether anyone treated as a contractor actually meets the legal test for that status. Each item should be checked against the specific award or agreement that applies, not a generic industry assumption.

How often should a payroll audit be done?

The Fair Work Ombudsman recommends businesses review their payroll practices on a regular basis rather than only when a problem surfaces. In practice, a full self-assessment against this checklist once or twice a year, plus a check whenever an award rate changes, a new classification is used, or a new pay structure is introduced, catches most issues before they compound across multiple pay cycles.

What happens if a payroll audit finds an underpayment?

Where a genuine underpayment is found, it generally needs to be back-paid to the affected employee, including any flow-on effect on superannuation and leave accruals calculated on the correct rate. Employers who identify and voluntarily correct an underpayment are treated differently to those who ignore one, and the Fair Work Ombudsman's cooperation agreement process gives employers who self-report a way to address a mistake without automatic referral for prosecution.

Is wage theft a criminal offence in Australia?

Yes. Since 1 January 2025, the Fair Work Act 2009 has included a criminal offence for intentional wage theft, where an employer knowingly and deliberately fails to pay an employee's wages, superannuation or other required entitlements in full and on time. It applies to intentional conduct, not honest payroll mistakes, which is why a documented, regularly repeated audit process is one of the clearest ways to demonstrate an error was accidental rather than deliberate.

Do I need a professional to run a payroll audit?

This checklist is designed as a self-assessment starting point, but award interpretation, particularly under complex instruments like the SCHADS Award or the Health Professionals and Support Services Award, and superannuation guarantee shortfall calculations are areas where a registered BAS agent or payroll specialist typically finds issues a self-check misses. A professional configuration review is worth commissioning where the self-assessment raises a genuine doubt rather than a clear-cut item to fix.

Payroll Audit Checklist: A Practical Self-Assessment for Australian Employers

Most payroll problems don't show up as one dramatic error. They build up quietly, a classification that was never revisited after a role changed, a pay item mapped incorrectly two years ago, a contractor arrangement that's drifted into something closer to employment. A payroll audit checklist is a way to catch those before they compound, whether you're running it yourself as a self-assessment or using it to brief a professional review.

Award Classification & Pay Rates

Misclassification is the single most common source of underpayment, and it usually isn't deliberate. A role changes, someone gets promoted informally, or a modern award or enterprise agreement is updated and the payroll system isn't. Check each of the following against the award or agreement that actually applies to the role, not the one that applied when the person was hired.

Every employee is mapped to the correct award, agreement, or award-free classification for the work they currently perform, not the role they were originally hired into
Classification levels within an award, for example Schedule B support worker levels under the SCHADS Award, reflect actual duties and qualifications, not just job title
Base rates, casual loadings, and any above-award margins have been updated for the most recent annual wage review and award variation
Penalty rates, overtime, and allowances specific to the award (shift, broken shift, on-call, travel, uniform) are switched on and calculating correctly in the payroll system
Junior, apprentice, or trainee rates are applied correctly and reviewed as employees age or progress through a training contract

Record-Keeping & Payslips

The Fair Work Regulations 2009 set specific requirements for what employee records must contain and how long they must be kept. Records need to be in a form that's legible, in English, and readily accessible to a Fair Work Inspector, and the Fair Work Ombudsman expects most employee records to be retained for seven years.

Record type	What to check
Time and wages records	Hours worked, pay rate applied, gross and net pay, and any deductions are recorded for every pay period
Payslips	Issued within one working day of payment, and include the employer's ABN, pay period, gross and net pay, super contribution amount, and the applicable pay rate
Leave records	Accrued and taken leave balances are accurate and reconcile with what's shown on payslips
Retention period	Employee records kept for a minimum of seven years, including for employees who've left

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Superannuation Guarantee

The superannuation guarantee rate reached its final scheduled increase of 12% on 1 July 2025, and it now applies to ordinary time earnings paid on or after that date, regardless of which pay period the earnings relate to. Check the following as part of any audit.

Super is calculated at 12% of ordinary time earnings for every eligible employee, including eligible contractors paid principally for their labour
Contributions are paid by the quarterly due date (28 days after each quarter ends) at minimum, and ideally on a same-cycle or more frequent basis ahead of Payday Super from 1 July 2026
Every employee's super fund details are current, and default fund contributions are directed to a stapled or nominated fund correctly
Ordinary time earnings mapping in the payroll system correctly includes allowances and loadings that count as OTE, and excludes genuine overtime that doesn't

Where a shortfall is found, it isn't simply back-paid at the correct rate. A missed or late super payment triggers the Superannuation Guarantee Charge, which includes the shortfall amount calculated on salary rather than OTE, interest, and an administration fee, and it is not tax deductible, which is one reason super discrepancies are usually the most expensive item on any payroll audit to leave unresolved.

STP & ATO Reporting

Single Touch Payroll reporting should be checked as a distinct item from the underlying pay calculation, since a pay run can be calculated correctly and still be reported incorrectly. Confirm pay events are lodged on or before payday, income types and cessation reasons are coded correctly under STP Phase 2, and that the annual finalisation declaration was made by the 14 July deadline (or 30 September where that later date applies) for every completed financial year.

Leave & Entitlements

Leave accrual errors tend to surface only when an employee takes leave or leaves the business, by which point they can be hard to unwind. Check that annual leave, personal leave, and any award-specific entitlements such as NDIS Award-linked allowances are accruing on the correct base, that leave loading is applied where the award requires it, and that termination payments correctly calculate any unused leave owing at the final pay rate rather than a historical one.

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Contractor vs Employee Status

A payroll audit should also look outside the payroll system itself, at anyone engaged as a contractor. Whether an arrangement is genuinely a contractor relationship depends on the totality of the relationship under the relevant Fair Work Act and superannuation guarantee tests, not just what a contract states. Check whether the person works set hours dictated by the business, uses the business's equipment and systems, can't subcontract or delegate the work, and is economically dependent on this one engagement, all of which point toward an employment relationship regardless of the label used. Getting this wrong exposes the business to back-paid entitlements, superannuation guarantee shortfalls, and, for medical practices specifically, has been the subject of active state revenue office payroll tax rulings following the Thomas and Naaz line of cases.

Why Getting This Right Matters More Since 2025

Since 1 January 2025, the Fair Work Act 2009 has included a criminal offence for intentional wage theft, where an employer knowingly and deliberately underpays wages, superannuation, or other required entitlements. The offence carries penalties of up to $8.25 million for a company and, for an individual, fines of up to $1.65 million or up to ten years' imprisonment. Intent is a required element, so a genuine payroll error corrected promptly doesn't meet the criminal threshold, but it does still attract civil penalties, and the absence of a documented audit process makes it harder to demonstrate an error was accidental rather than wilfully ignored. Running this checklist regularly, and keeping a record that you did, is now a meaningful part of managing that risk, not just a compliance nicety.

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