What Award covers tradespeople in Melbourne?

Most trades employees in Melbourne are covered by the Building and Construction General On-site Award or the Electrical, Electronic and Communications Contracting Award, depending on the trade. These Awards set minimum pay rates, overtime, allowances (including tool allowance, travel allowance, and dirty work allowance), and leave entitlements. A bookkeeper can ensure your Xero Payroll is configured with the correct Award rates for your specific trade.

Do I need to register with WorkSafe Victoria when I hire my first employee?

Yes. Once you employ someone in Victoria, you are required to register with WorkSafe Victoria for WorkCover insurance. Registration is required before the first day of employment. Your WorkCover premium is calculated based on your industry classification and total remuneration. Correct payroll setup in Xero ensures your remuneration figure is accurate at year end.

What is Single Touch Payroll (STP) and does it apply to a Melbourne tradie with one employee?

Yes. Single Touch Payroll (STP) is mandatory for all Australian employers, regardless of size. You must report each employee's wages, PAYG withholding, and superannuation to the ATO every time you run payroll. STP Phase 2 — which expanded the reporting requirements — has been mandatory since 1 January 2022. Xero Payroll handles STP Phase 2 reporting automatically when set up correctly.

What is the payroll tax threshold for Melbourne businesses?

In Victoria, payroll tax applies once your total wages exceed the annual threshold — currently $900,000 per year (as at 2025/26). For most small Melbourne trades businesses with one or two employees, payroll tax will not apply. However, if you engage labour hire workers or contractors who are treated as employees for payroll tax purposes, the threshold can be reached sooner than expected.

When does superannuation need to be paid for a Melbourne employee?

Superannuation must currently be paid quarterly — by 28 October, 28 January, 28 April, and 28 July. From 1 July 2026, the payday super change requires super to be paid on each payday. Late super attracts the Superannuation Guarantee Charge (SGC), which is more expensive than the underlying super amount and is not tax deductible.

Hiring Your First Employee — Melbourne Trades Business Guide

Published May 2026By True Tally Bookkeeping7 min read

The Jump from Sole Trader to Employer

Hiring your first employee is a significant milestone for a Melbourne trades business. It's also the moment that most small operators discover they have more compliance obligations than they expected — and that getting them wrong has real consequences.

This guide covers everything a Melbourne tradie needs to set up before the first pay run.

1. Obtain a Tax Withholding Obligation

As soon as you have an employee, you are required to withhold PAYG (Pay As You Go) tax from their wages and remit it to the ATO. The amount withheld depends on the employee's annual income and their tax file declaration. To do this legally, you need to:

Register for PAYG withholding with the ATO (if you haven't already — most businesses already have this through their ABN registration)
Collect a Tax File Number declaration from your employee before their first pay
Use the ATO's withholding tables (or Xero Payroll) to calculate the correct withholding amount

2. Register with WorkSafe Victoria

Once you employ someone in Victoria, you must register with WorkSafe Victoria for WorkCover insurance. This is a legal requirement that must be completed before the employee starts work — not after.

Your WorkCover premium is calculated as a percentage of your industry classification rate applied to your total remuneration. For trades businesses in Melbourne, the construction industry rate is one of the higher classifications.

At the end of each financial year, you declare your actual wages to WorkSafe Victoria and your premium is adjusted. Correct payroll setup in Xero ensures this figure is accurate.

        Melbourne-specific: WorkSafe Victoria is the relevant regulator for all Victorian businesses. If you're doing work interstate — particularly in NSW — you may need to register with icare (NSW) as well, depending on where the work is performed.
      

3. Confirm the Correct Award

Most trades employees in Melbourne are covered by a Modern Award under the Fair Work Act. The Award sets:

Minimum pay rates (by classification and level)
Overtime and penalty rates
Allowances — tool allowance, travel allowance, dirty work allowance, height allowance
Leave entitlements

The most common Awards for Melbourne trades businesses:

Building and Construction General On-site Award — builders, carpenters, concreters, plumbers (domestic)
Electrical, Electronic and Communications Contracting Award — electricians
Plumbing and Fire Sprinklers Award — plumbers and gas fitters (commercial/industrial)

Underpaying Award rates — even accidentally — is a Fair Work violation. The Fair Work Ombudsman actively investigates the construction industry. Getting the classification right from the start protects you from back-pay claims later.

4. Set Up Single Touch Payroll (STP) in Xero

Single Touch Payroll is mandatory for all Australian employers, including sole traders with one employee. Every pay run must be reported to the ATO in real time through STP-enabled software.

STP Phase 2 — mandatory since January 2022 — requires expanded reporting including income type, disaggregated gross, and more detailed super information. Xero Payroll handles all of this automatically when configured correctly by a Xero Certified Advisor.

5. Set Up Superannuation — and Mark Your Calendar for Payday Super

The Superannuation Guarantee (SG) rate is currently 11.5% of ordinary time earnings. You are required to:

Calculate super correctly on ordinary time earnings (not overtime)
Lodge via SuperStream — the ATO's electronic super payment system
Pay by the quarterly due dates: 28 October, 28 January, 28 April, 28 July

From 1 July 2026, Payday Super requires super to be paid on each payday — not quarterly. This is a significant change for businesses with manual payroll processes. Xero Payroll handles super calculation and lodgement, making the transition manageable.

Late super attracts the Superannuation Guarantee Charge (SGC) — which includes the unpaid super, interest, and an administration fee. Unlike regular super, SGC is not tax deductible. It is expensive to get wrong.

6. Understand the Payroll Tax Threshold for Victoria

Victorian payroll tax applies once your total wages exceed the annual threshold — currently $900,000 per year. For most Melbourne trades businesses with one or two employees, payroll tax won't apply. However:

If you engage labour hire contractors who are treated as employees for payroll tax purposes, their payments may count toward the threshold
If your business is part of a group (related entities), the threshold is shared across the group

Most small trades businesses don't need to worry about payroll tax initially. It's worth knowing the threshold so you're not caught off-guard as you grow.

7. Set Up Payroll in Xero Before Day One

Don't run your first pay in a spreadsheet and promise to put it into Xero later. Set Xero Payroll up correctly before the first pay run:

Employee record with TFN, start date, pay rate, and classification
Correct Award pay template (or manual rates confirmed against Award)
Leave entitlements configured
Super fund selected and SuperStream connected
STP Phase 2 enabled

True Tally — payroll setup for Melbourne trades businesses

We set up Xero Payroll for Melbourne trades businesses before the first pay run — Award rates, STP Phase 2, super, and WorkSafe Victoria. Book a free call to get started.

Book a Free 20-Minute Call

Hiring Your First Employee as a Melbourne Tradie — What You Must Set Up First