Christmas Close-Down Payroll Checklist & Key Dates

If your business closes over Christmas, you’ll need to prepare payroll in advance to meet obligations like paying staff correctly for public holidays and submitting final STP data to the ATO on time.

This guide walks you through the essential steps for holiday payroll, shutdown payroll obligations, and ensuring your holiday payroll period is met stress-free.

Why Christmas Payroll Needs Extra Attention

The Christmas and New Year period is the most complex time of year for payroll. Businesses often shut down, public holidays fall on standard paydays, and employees take paid leave. On top of that, the ATO expects timely STP reporting and end-of-year payroll finalisation.

If payroll isn’t managed correctly, you risk compliance penalties, underpayments, or delays in your employees’ income statements being available for their tax returns.

What are the changes in Single Touch Payroll 2025-26?

The 2025-26 financial year brings some major changes to STP that all employers need to prepare for. These updates aren’t just small tweaks; they affect how you finalise payroll, report backpay, and handle superannuation from 1 July onwards.

Start of the New Financial Year (From 1 July 2025)

Superannuation Guarantee Increase

The superannuation guarantee (SG) rate increases from 11.5% to 12%. Payroll systems and budgets need updating so the first pay run after 1 July reflects the new rate.

Parental Leave Super Contributions

Employers will also be required to pay super on government-funded parental leave pay. This is a big change that supports long-term savings for working parents. Payroll software and agreements must be updated so contributions are made correctly.

These updates mark one of the most significant phases of STP since its introduction. Employers who prepare early will avoid last-minute stress and ensure both compliance and accuracy for their employees’ income statements.

What Are the Rules for Holiday Pay in Australia?

In Australia, employees who would normally work on a public holiday are entitled to their base pay rate for their ordinary hours. If they actually work on the public holiday, they may be entitled to penalty rates, depending on the relevant award or enterprise agreement.

If your business shuts down for the Christmas period:

• Employees must still be paid for any public holidays that fall during the closure.
• Annual leave taken during the close-down is deducted from their accrued balance, not treated as penalty pay.
• Employers cannot lawfully “skip” a public holiday payment.

These rules ensure the Australian community of workers receive fair entitlements during festive periods.

Are Public Holidays 2x Pay?

Oftentimes, yes, but only if it’s covered by the award or employee agreement.

Most modern awards and enterprise agreements specify penalty rates for hours worked on public holidays. Commonly, this means double time (2x) or double time and a half (2.5x). However, salaried employees on all-inclusive agreements may not receive extra pay if penalty rates are already absorbed into their annual salary.

For business owners, the key is to check the correct information in the award or agreement that applies to your employees. Paying the right rate avoids disputes, complaints, or adverse impacts on staff morale.

What Happens When Your Payday Falls on a Public Holiday in Australia?

This is one of the most common challenges at Christmas. If your regular pay day falls on Christmas Day, Boxing Day, or New Year’s Day, you still need to ensure wages are processed on time.

Some practical steps include:

• Running payroll early so funds clear before the public holiday.
• Notifying employees that pay will arrive on an earlier date.
• Checking superannuation contribution schedules to stay compliant.

Payday should never be delayed. Employers who prepare correctly maintain trust with staff and avoid complaints to the Fair Work Ombudsman or Tax Office.

Is Holiday Pay 10%?

No. Holiday pay is not a flat 10%. Employees receive either their base rate for ordinary hours on public holidays, or applicable penalty rates if they work. Annual leave is paid at the employee’s base rate plus any applicable loading (usually 17.5%) if it’s provided for under their award or agreement.

Christmas Payroll Checklist for Employers

Here’s a step-by-step guide to managing payroll during the festive close-down:

1. Plan Public Holiday Payments

• Check which public holidays fall during your close-down period.
• Confirm entitlements under awards and agreements.

2. Adjust Pay Runs

• If payday falls on Christmas Day, Boxing Day, or New Year’s Day, process wages early.
• Communicate clearly with employees about payment dates.

3. Manage Leave Accruals

• Ensure staff taking annual leave have accrued enough leave.
• Apply annual leave loading where required.

4. Update Superannuation Payments

• Ensure super payments are processed before cut-off dates to remain compliant.

Common Mistakes to Avoid

• Missing the STP deadline due to the Christmas shutdown.
• Failing to adjust payroll dates when a public holiday falls on payday.
• Incorrect classification of closely held employees (e.g., family members).
• Not reconciling payroll software with ATO records before lodging.

How Shoebox Books and Tax Can Help

At Shoebox Books & Tax, we understand how stressful tax time and year-end payroll can be. From the immense expectations placed on small business owners to the need for accurate reporting, it’s no wonder the process feels daunting.

That’s where we come in. Our advisers provide guidance across all payroll phases, including:

• Reconciling payroll and preparing accurate income statements.
• Lodging STP finalisation by the correct date for the correct financial year.
• Supporting employers with fewer employees or closely held payees.
• Advising on public holiday pay, leave loading, and compliance deadlines.

With our help, payroll is prepared correctly, employees receive the right information, and you can focus on running your business, rather than chasing up your paperwork for the Tax Office. Book with your local expert today.