Church Payroll Compliance Checklist for Australian Churches (2025–26)

Running payroll at a church is not the same as running payroll at a small business. The rules are different, the staff categories are different, and the consequences of getting it wrong — underpaid staff, ATO penalties, or ACNC compliance issues — can fall directly on your board and leadership.

The good news? With the right foundations in place, church payroll can be straightforward. This checklist walks you through what Australian churches need to have sorted for the 2025–26 financial year.

Why church payroll is uniquely complex

Churches in Australia typically employ a mix of staff that don't fit neatly into standard employment categories:

• Ordained ministers — whose remuneration often includes a Minister's Expense Account (MEA), housing allowance, and other non-cash benefits

• Administration and support staff — covered under the Clerks — Private Sector Award or Social, Community, Home Care and Disability Services Industry Award, depending on the role

• Youth workers, chaplains, and community workers — often falling under the Social, Community award

• Casual or part-time volunteers who become employees — a common grey area in growing churches

Each category carries different obligations. Treating all staff the same is one of the most common and costly mistakes we see.

The checklist

1. Confirm your employment classifications

• [ ] Every paid staff member has been classified correctly (employee vs contractor vs volunteer)

• [ ] Ordained ministers have a formal letter of appointment that distinguishes their ministerial role from an employment relationship where applicable

• [ ] Casual staff receive the 25% casual loading on top of the base rate

• [ ] You have checked which Modern Award applies to each role

Note: Misclassifying a volunteer as a contractor — or an employee as a volunteer — creates significant legal exposure under the Fair Work Act. If you're unsure, it's worth getting a professional review.

2. Set up your Minister's Expense Account (MEA) correctly

For ordained ministers, the MEA is one of the most misunderstood and misapplied tools in church finance. When structured correctly, it allows ministers to be reimbursed for genuine ministry expenses — books, travel, conferences, hospitality — without those amounts being treated as taxable income.

• [ ] The MEA is formally documented in the minister's letter of appointment

• [ ] Reimbursements are made against actual receipts (not as a flat allowance)

• [ ] MEA payments are clearly separated from salary in your payroll system

• [ ] The board has approved the MEA policy and it is reviewed annually

3. Understand your FBT obligations

Australian churches registered as Public Benevolent Institutions (PBIs) or Health Promotion Charities can access FBT (Fringe Benefits Tax) exemptions and rebates — but only if the benefit is structured correctly.

• [ ] Your church has confirmed its FBT concession status with the ATO

• [ ] You are using the $30,000 grossed-up FBT exemption cap for eligible staff (if a PBI)

• [ ] Salary packaging arrangements are documented in writing before the benefit is received

• [ ] Your payroll system or provider can report Reportable Fringe Benefits Amounts (RFBAs) correctly on payment summaries

4. Superannuation

• [ ] All eligible employees (including those earning over $350/month) are enrolled in a compliant super fund

• [ ] Super is calculated on Ordinary Time Earnings (OTE) — not just base salary

• [ ] Super Guarantee contributions are paid on time each quarter (due 28 days after quarter end)

• [ ] You have a process for handling super choice forms for new starters

The Super Guarantee rate is 11.5% for 2024–25, rising to 12% from 1 July 2025. Make sure your payroll system is updated.

5. Single Touch Payroll (STP)

All Australian employers — including churches of any size — are required to report payroll information to the ATO via Single Touch Payroll Phase 2 (STP2).

• [ ] Your payroll software is STP2 compliant

• [ ] You are reporting each pay run to the ATO in real time (not at year end)

• [ ] You have completed your STP finalisation by 14 July each year

• [ ] Your payroll software is set up to report disaggregated income types (salary, MEA, FBT, etc.) as required under STP2

6. Leave entitlements

• [ ] Annual leave is accruing at 4 weeks per year for all full-time employees

• [ ] Part-time and casual employees have correct leave entitlements configured

• [ ] Long service leave obligations are being tracked (entitlements vary by state)

• [ ] Parental leave obligations are understood, including government-funded parental leave pass-through

7. Record keeping

The ATO requires employers to keep payroll records for a minimum of 7 years. These include:

• [ ] Pay slips issued to all employees for every pay run

• [ ] Payroll records including hours worked, rates paid, super contributions, and leave balances

• [ ] Records of any salary packaging arrangements

• [ ] Evidence of super payments made to employee-nominated funds

8. End of financial year tasks

• [ ] STP finalisation submitted to the ATO by 14 July

• [ ] Payment summaries provided to any contractors not reported through STP

• [ ] Super contributions for Q4 (April–June) paid by 28 July to be deductible in the current year

• [ ] Payroll records archived and backed up securely

A note on software

Many Australian churches use Xero, MYOB, or KeyPay for payroll. All three are STP2 compliant, but setup matters — particularly for minister's remuneration, FBT salary packaging, and award-based pay rates. A system that hasn't been configured correctly for church-specific categories will produce inaccurate STP reports and incorrect employee entitlements.

If you're unsure whether your payroll setup reflects your current team structure, a payroll review is a worthwhile investment before 30 June.

Need help getting this right?

At For Kingdom Breakthrough, we work exclusively with churches, ministries, and Christian schools across Australia. Payroll is one of the areas where we see the most stress — and the most avoidable mistakes. We'd love to come alongside your team and make sure your people are paid correctly and your church is protected.