How Does Nanny Tax Work in Australia?
Last updated: September 23rd, 2026.
If you are hiring a nanny, one of the most common questions parents ask is:
Do I need to pay tax for my nanny in Australia?
Many families assume that paying someone privately in their home means the nanny handles the nanny tax, or it doesn’t apply. The truth is that most nannies are classified as employees, so PAYG tax, lodgements, and reporting obligations fall to the parent who is the employer.
Understanding how nanny tax works helps ensure your arrangement is compliant with Australian employment and tax law.
Quick Answer
In most cases, a nanny hired directly by a family in Australia is considered an employee. This means the family may need to withhold PAYG tax, pay superannuation and report wages through Single Touch Payroll (STP). These obligations are similar to those of any employer or business paying staff.
When Tax Applies to a Nanny
Nanny tax obligations for a family hiring a nanny apply when the nanny is classified as an employee rather than a contractor.
If you are unsure about this distinction, you can read our guide:
Is My Nanny an Employee or Contractor in Australia?
Most nannies working in private homes are treated as employees because:
- The family sets the hours
- The nanny works in the family home
- Duties are directed by the household
- The family provides the resources
- The nanny is unable to replace themselves
- The family is the nanny’s only (or main) source of income
When these factors exist, the arrangement usually falls under employment law, and tax obligations apply.
A contractor Nanny will invoice a family through an ABN and manage their own PAYG. It’s important that the choice to run under an ABN is made by the nanny and not suggested by the family. This is because operating as a contractor is a decision a taxpayer should make after discussing it with their accountant and/or the ATO.
What Tax Responsibilities Families Have
If your nanny is an employee, families may need to manage several tax-related responsibilities.
These can include:
- PAYG withholding – withholding tax from wages
- Single Touch Payroll reporting – reporting wages to the ATO
- Payslips – providing clear payment records
- Superannuation payments – to the Nanny’s super fund
These requirements exist to ensure workers receive the correct tax treatment and entitlements.
For many parents, this is the point where they realise that employing a nanny is similar to running payroll, rather than simply making a private payment.
This is exactly where many families choose to use a payroll service designed for household employment.
At NannyPay, we help families manage nanny payroll, tax withholding, superannuation, and reporting obligations so everything is handled correctly from the start.
You can learn more about how this works on our Parents page here, where we outline the services NannyPay provides for families employing a nanny.
How Nanny Pay Rates Fit In
Before calculating tax, families usually begin by researching typical nanny pay rates in Australia.
Hourly wages can vary depending on experience, responsibilities, and location. Ensuring the agreed pay meets minimum employment standards is an important first step.
You can review average wages in our guide:
Nanny Pay Rates Australia 2026: Average Hourly Wages by State
Understanding pay expectations helps families structure employment arrangements correctly from the start.
Can nanny tax be managed and lodged through a family’s business?
Yes, you can employ a nanny through an existing entity and manage their PAYG through the company’s ATO lodgements and reporting; however, nannies are not tax-deductible. As a result, families who manage their nanny tax via their company or business payroll often have to employ the nanny on a different payroll schedule.
As a result, we see most families with an existing business payroll not only run their nanny on a separate payroll but also lodge and report the nanny PAYG on a separate line for their BAS and EOQ reporting.
If you are going to employ your nanny through a company or business, we encourage you to discuss this with an accountant to avoid payroll admin and the need to reverse it at EOFY.
Do Families Need to Pay Superannuation?
In many situations, yes.
If your nanny is an employee and meets the eligibility requirements, families may need to pay superannuation in addition to wages.
Super obligations can apply depending on:
- The nanny’s age
- Weekly working hours
- Income thresholds
- Nanny’s individual tax preferences
You can learn more in our guide:
Do I Have to Pay Super for My Nanny in Australia?
Superannuation is one of the most commonly overlooked obligations when hiring someone to work in your home.
While it’s not always required, we strongly advise including it in your offer to help set your nanny up for future financial security.
Why Employment Documentation Matters
Because nanny arrangements usually create an employment relationship, it is important to document the agreement clearly.
A written contract helps define:
- Pay and hours
- Employment type
- Duties and expectations
- Leave entitlements
- Notice periods
Our guide: Do You Need a Nanny Employment Contract in Australia? explains how written agreements help protect both families and nannies.
The Risks of Paying a Nanny Incorrectly
Some families are unaware that tax obligations apply when hiring a nanny. Paying cash without handling tax or super can create compliance risks.
Potential issues may include:
- Back payment of nanny tax for the employee
- A back pay of superannuation for the family
- ATO penalties
- Interest on unpaid obligations
- Back payment of wages if Fair Work deems the pay didn’t meet award minimums
Understanding the correct structure from the beginning helps avoid these problems.
The Easiest Way to Manage Nanny Tax
Handling tax, super and payroll requirements can feel complex for families who have never employed someone before.
Instead of managing PAYG withholding, reporting and payments yourself, many families choose to use a payroll service designed specifically for nanny employment.
Our nanny payroll service supports families across Australia by managing tax withholding, superannuation and reporting obligations in line with Australian requirements.
Common Questions About Nanny Tax
Do I need an ABN to employ my nanny?
No, NannyPay can register you as an individual PAYG registration. Allowing us to manage your nanny’s PAYG in your ATO portal alongside your Tax File Number. Nanny tax runs completely separate from all other ATO activity.
Do I have to pay tax for a nanny in Australia?
If your nanny is an employee, families generally need to withhold PAYG tax from wages and report payments to the ATO through Single Touch Payroll.
Can I pay a nanny cash?
Cash payments do not remove tax obligations. If the nanny is an employee, tax and super requirements still apply. Paying a worker cash creates risk and liability for all parties and is deemed illegal in most ongoing nanny roles.
Does nanny tax apply to casual nannies?
Yes. Casual employees are still employees. Tax withholding and superannuation obligations may still apply depending on the circumstances.
The Bottom Line
In most cases, hiring a nanny in Australia means becoming an employer. This usually involves:
- Withholding PAYG tax
- Paying superannuation where required• Reporting wages correctly
- Providing payslips
- Meeting award rate minimums and entitlements
Understanding nanny tax obligations helps ensure your arrangement is structured correctly and protects both families and nannies.
If you are unsure how to manage these requirements, reviewing current nanny pay rates in Australia and setting up payroll correctly are the best places to start.