2025 ANZ payroll compliance in review: What employers need to know

2025 introduced a range of focused regulatory updates across Australia and New Zealand that influenced how employers manage payroll and workplace obligations. While the changes may not have dominated headlines, they carry meaningful operational implications that employers should be prepared to navigate.

“Even small errors can compound into large amounts quite quickly,” explains Jason Low, CEO of The Association for Payroll Specialists (TAPS). “You might have only underpaid someone a few dollars, but when you apply that across your workforce and over several years, it can turn out to be a substantial amount of money.”

Here’s what defined payroll compliance in 2025, and what’s ahead in 2026.

Australia

Underpayment of wages is now considered a crime

From 1 January 2025, intentionally underpaying employees became a criminal offence in Australia.

This significant change followed years of investigations into wage underpayment. In the 2024–25 financial year alone, the Fair Work Ombudsman (FWO) recovered $358 million for over 249,000 underpaid workers, with 60% of recoveries coming from large corporate employers.

To support compliance, the FWO released a Payroll Remediation Program Guide in May 2025, helping organisations identify, correct, and self-report underpayments before enforcement action occurs.

Key takeaway: Employers must build a culture of payroll accuracy through proactive audits and strong remediation programs.

Why termination pay timing matters

The treatment of termination payments is subject to specific legal considerations, making it important for employers to apply the relevant requirements carefully and consistently.

Components of final pay may be governed by different legal frameworks, and obligations may vary based on the entitlement and the source of the obligation.

Recent court decisions have shown that even where an employer does not act intentionally or dishonestly, a failure to properly understand and apply relevant requirements may still result in penalties. This highlights the importance of being across the applicable rules for termination payments to be handled correctly.

Key takeaway: Termination pay components must be paid according to their specific deadlines, even if that means processing off-cycle payments. Delays may result in penalties.

Changes to back pay reporting

The Australian Taxation Office (ATO) updated its Lump Sum E reporting rules in 2025, tightening the requirements for reporting back pay for tax purposes.

Previously, only back pay older than 12 months and exceeding $1,200 was reported as Lump Sum E. Now, any back pay related to work completed more than 12 months ago, regardless of the amount, must be categorised and reported this way.

This change ensures taxes are applied accurately and places greater responsibility on payroll teams to maintain detailed historical records.

Key takeaway: Any back pay for work performed over 12 months ago must now be reported as Lump Sum E. Even minor corrections trigger the rule, so systems and processes must be equipped to identify, classify, and report accordingly.

New Zealand

Wage theft criminalisation

In 2025, New Zealand passed the Crimes (Theft by Employer) Amendment Bill, making it a criminal offence to intentionally withhold wages or entitlements without a reasonable excuse.

The law applies to employers and individuals, such as directors or payroll managers, who actively influence the decision to withhold payment. Individuals may face up to 1 year in prison and/or fines up to NZ$5,000, and companies may face fines up to NZ$30,000.

Key takeaway: Employers and decision-makers now face criminal penalties for intentionally withholding employee pay. While honest errors are excluded, strong payroll controls and accountability are essential to mitigate risk.

What to expect in 2026

While 2025 brought subtle but impactful changes, 2026 is set to bring changes that will reshape payroll processes in both Australia and New Zealand.

Australia prepares for real-time superannuation payments

From 1 July 2026, Australia’s Payday Super reform will require superannuation to be paid at the same time as wages, rather than quarterly. “At the same time you're paying the wages, you must pay the superannuation — there’ll be no more waiting until the end of the quarter,” confirms Low.

This change will:  

• Potentially increase payment frequency to 52 times per year (for weekly pay runs).
• Require real-time configuration of payroll systems.
• Elevate the importance of reconciliation and cash flow management.

“The ATO will match what you were meant to pay with what the fund says it received,” explains Low. “And if the numbers don’t line up, they’re planning to send nudges straight away.”

With automated compliance alerts, proactive enforcement, and tighter data matching, Payday Super represents a significant shift that payroll leaders must begin preparing for now.

New Zealand overhauls the Holidays Act

In August 2025, the New Zealand Cabinet agreed to repeal and replace the Holidays Act with a new Employment Leave Act, aimed at simplifying leave calculations while expanding entitlements.

The proposed changes, led by the Ministry of Business, Innovation and Employment (MBIE), include:  

• Hours-based accrual for sick and annual leave
• Pro-rata sick leave
• 12.5% leave compensation for casual employees and additional hours worked
• Access to bereavement and family violence leave from the first day of employment
• Mandatory pay statements
• Option to cash out a portion of their total annual leave balance each year

“The changes are still just proposals, and anything can change during the Parliamentary process until the Bill has been passed into law,” says Ben Kropman, Senior Manager for Solutions Advisory at Dayforce. “The current rules still apply, and right now, we will stay close to the announcements in 2026 as they are released by the MBIE to provide the maximum runway for our customers to implement and test changes to support their compliance.” Once the Bill has passed, there will be a 24-month implementation period to allow employers and payroll providers the opportunity to make changes to their business and payroll systems before the new law is enforced.

The time to prepare is now

Across Australia and New Zealand, enforcement is increasing, rules are tightening, and systems must adapt to keep up. With major reforms coming in 2026, now is the time to assess system readiness, audit processes, and build internal capability to prepare.

As 2026 brings sweeping payroll and compliance changes across Australia and New Zealand, now’s the time to stay informed and connected. Join us at the next Dayforce Coffee Collab, where our speakers will discuss how leading teams are rethinking HR to stay agile and aligned in 2026 and beyond. Register now.