Key facts at a glance
Super Guarantee
12%
every employee, no threshold
NSW payroll tax
5.45%
only above A$1.2M payroll
Workers' comp
~0.6%
representative office/tech rate
A A$120,000 Software Engineer hire in NSW costs A$135,120/yr, a 1.13x multiplier on gross salary, if your company's total payroll sits below the state's A$1,200,000 payroll tax threshold. If your payroll is above that threshold, the same hire costs A$141,660/yr, a 1.18x multiplier, once payroll tax is added.
The gap between those two numbers is entirely payroll tax, a cost that depends on your company's total wage bill, not on this one hire in isolation. Below is exactly where every dollar of both figures comes from, and why gross salary alone is never the number you should be budgeting against.
Model your own state, salary, and payroll size instead of the NSW example.
Open the employer cost calculatorWhy the quoted salary is never the real cost
A job ad's salary figure is a single line item. On top of it, three separate cost lines apply to hiring in Australia, and only one of them, the Super Guarantee, is guaranteed to apply the same way to every employer regardless of size. The other two, payroll tax and workers' comp, depend on your company's total payroll and industry risk profile respectively, which is exactly why a hiring budget built purely off gross salary consistently understates what a role actually costs, sometimes by a meaningful margin once a business crosses the payroll tax threshold.
For a Software Engineer specifically, this matters more than it might for a lower-paid role, simply because the dollar amounts involved are larger: at the national median of A$118,000, or the Sydney benchmark of A$120,000, the compulsory Super Guarantee alone adds well over A$14,000 a year before anything else is counted.
The three cost lines, explained
Super Guarantee (12%).Compulsory the moment you hire anyone, no threshold, no exceptions by company size. On a A$120,000 salary, that's A$14,400 a year, the single largest on-cost line in almost every case.
Workers' compensation (~0.6% for this example).Compulsory in every state, but priced per business based on industry classification and claims history, not a flat national figure. Office-based technology roles like software engineering sit at the low end of the risk scale, which is why the representative rate used here is well under 1%. On A$120,000, that's A$720 a year.
Payroll tax (5.45% in NSW, conditional).The only one of the three that doesn't apply to every employer. It's assessed on your business's total Australian wage bill, and only once that total crosses your state's threshold, A$1,200,000 in NSW. Below the threshold, it doesn't apply at all; above it, it applies to your whole payroll. On a A$120,000 role, that's A$6,540 a year, but only if you're already over the line.
Worked example: A$120,000 Software Engineer, NSW
Same salary, same state, two different totals, depending entirely on whether your company payroll is above or below the NSW threshold.
| Cost line | Under threshold | Over threshold |
|---|---|---|
| Gross salary | A$120,000 | A$120,000 |
| Super Guarantee (12%) | A$14,400 | A$14,400 |
| Workers' comp (~0.6%) | A$720 | A$720 |
| Payroll tax (5.45%) | Not applicable | A$6,540 |
| Total annual cost | A$135,120 | A$141,660 |
| Cost multiplier | 1.13x | 1.18x |
NSW payroll tax threshold: A$1,200,000/yr company-wide. Rates and thresholds vary by state and are indexed periodically; always confirm the current figure with your state revenue office before budgeting.
Payroll tax is a company-wide threshold, not a per-hire cost
It's easy to mentally treat payroll tax like a per-employee cost, since it's shown that way in a per-hire worked example. It isn't. Payroll tax is assessed once, on your company's total Australian wage bill, and only if that total crosses your state's threshold. A small business well under the threshold pays nothing, on any hire. A larger employer already over the threshold effectively carries that cost on every additional hire, because each new hire pushes the total wage bill (and therefore the payroll tax liability) higher. Where your company sits relative to that one threshold determines which of the two worked-example totals above actually applies to you.
How this compares internationally
Australia's employer on-costs sit in similar territory to comparable markets, but the structure is different. Ireland's Employer PRSI runs at 11.05% with no upper cap, a single flat rate applying to every employer regardless of size. The UK's Employer National Insurance runs at 15% above the Secondary Threshold, again a flat structure once you're over that line. Australia's Super Guarantee, at 12%, sits between the two on its own, but payroll tax, which neither Ireland nor the UK has as a direct equivalent, is the piece that makes Australia's true employer load size-dependent in a way those two markets aren't: a small Australian employer can end up with a lighter total load than an equivalent Irish or UK employer, while a larger one, once well over its state's payroll tax threshold, can end up carrying a comparable or heavier one.
Model your own state, salary, and payroll size
The NSW example above is one scenario. Enter your own state, salary, and whether your business is over the payroll tax threshold to get an exact figure, plus optional recruitment and equipment costs.
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Frequently asked questions
How much does it really cost to hire a A$120,000 Software Engineer in Australia?
It depends on whether your company's total payroll is above or below your state's payroll tax threshold. In NSW, a A$120,000 hire costs A$135,120/yr (a 1.13x multiplier) if your total payroll is under the A$1,200,000 threshold, since you only carry the 12% Super Guarantee (A$14,400) and workers' comp (roughly 0.6%, or A$720). If your payroll is over the threshold, add payroll tax at 5.45% (A$6,540), bringing the total to A$141,660/yr, a 1.18x multiplier.
Why isn't the quoted salary the real cost of a hire?
A quoted salary is only the gross wage line. On top of it, every Australian employer carries at least two compulsory costs regardless of company size: the Super Guarantee at 12% of ordinary time earnings, and workers' compensation insurance, which is compulsory in every state but priced per business based on industry risk classification. A third cost, payroll tax, applies once your total company-wide wage bill crosses your state's threshold. None of these show up in a job ad's salary figure, which is exactly why budgeting off gross salary alone understates true hiring cost.
Is payroll tax charged per employee or per company?
Per company, not per employee. Payroll tax is assessed on your business's total Australian wage bill, and it only applies once that total crosses your state's annual threshold (A$1,200,000 in NSW). A small team well under that threshold pays no payroll tax at all. Once you're over it, though, the rate applies to your whole payroll, which means every additional hire effectively carries that extra cost, since it pushes your total wage bill (and therefore your payroll tax liability) higher.
What is the Super Guarantee and is it compulsory?
The Super Guarantee is the compulsory employer superannuation contribution, currently 12% of an employee's ordinary time earnings. It applies to every employee, from the smallest business to the largest, with no threshold to cross first, unlike payroll tax. It's the one cost line in this guide that applies identically no matter your company size or state.
How is workers' compensation insurance priced for a Software Engineer role?
Workers' comp is compulsory in every Australian state, but the actual premium is set per business, based on your industry classification (ANZSIC code), total wages, and claims history, rather than one flat national rate. Office-based technology roles like software engineering sit at the low end of the risk scale, typically well under 1% of wages; the 0.6% figure used in the worked example here is a representative office/tech estimate, not a fixed statutory rate, so your actual premium will come from your state scheme or insurer.
How does the NSW payroll tax threshold compare to other states?
Thresholds and rates vary by state and are indexed periodically, so always confirm the current figure with your state revenue office before budgeting. NSW's threshold and 5.45% rate are used in the worked example here because it's Australia's largest tech employment market; other states set their own thresholds and rates, which can shift the payroll tax line meaningfully for a multi-state employer.
Does the total cost include recruitment fees?
No, the A$135,120 and A$141,660 figures in the worked example are the ongoing annual employment cost only: Super Guarantee, workers' comp, and (where applicable) payroll tax. A recruitment agency fee, typically 15-20% of first-year gross salary for a permanent tech hire, is a separate one-time Year 1 cost on top of the ongoing figure, not part of the recurring annual load.
How does the Software Engineer salary benchmark compare to this worked example?
The national median Software Engineer salary in Australia is A$118,000/yr, with a typical range of A$100,000 to A$135,000, and Sydney specifically benchmarks around A$120,000, which is exactly why A$120,000 is used as the worked example gross salary here. It sits close to both the national median and the Sydney figure, making the resulting 1.13x to 1.18x multiplier a realistic starting point for budgeting a mid-to-senior engineering hire in Australia's largest tech market.
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