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1.1ÌýÌýÌýÌý Introduction: overview of the domestic payroll system

Australia is a federation, governed by nine jurisdictions: six States, two Territories and the Federal or Commonwealth Government. The Territories are constitutionally controlled by the Federal Government but at a practical level, they function like States. Each jurisdiction operates its own legislature. The scope of the Federal Government's legislative domain is confined by the Australian Constitution. The State legislatures have no such restrictions, though where a conflict arises between Federal and State law, Federal law prevails.

In the following discussion, references to 'States' are intended to include references to Territories.

The system by which employment income is regulated in Australia imposes a number of obligations on employers under both Federal and State laws.

Federal taxes include:

1. Ìý

   •ÌýÌýÌýÌý income tax – levied on employees but collected by employers, and

2. Ìý

   •ÌýÌýÌýÌý fringe benefits tax – levied on and paid by employers

Under Federal law, employers are required to make contributions on behalf of each employee to the employee's nominated superannuation fund.

Under State law, employers