The youngest daughter of Paddy and Mary Payne, Payne grew up on a farm at Miners Rest, a locality near Ballarat in central Victoria, Australia. Her mother Mary died in a motor vehicle crash when Payne was six months old, leaving her father Paddy to raise their ten children as a single father. Payne dreamt of being a winning jockey as a child, and, aged seven, told friends she would one day win the Melbourne Cup. She attended Lady Help of Christians primary school and Loreto College, Ballarat, and entered racing aged 15, the eighth of the Payne children to do so. She has Irish Australian heritage.
She won in her first race at Ballarat, aboard Reigning—a horse trained by her father. In March 2004, Payne fell heavily at a race in Sandown Racecourse in Melbourne, fracturing her skull and bruising her brain. As a result of her prolonged recovery period—including a further fall where she fractured her wrist—Payne was granted a three-month extension to her apprenticeship to allow her time to ride out her claim.
Payne won her first Group One race, the Toorak Handicap at Caulfield Racecourse aboard Allez Wonder on 10 October 2009, and trainer Bart Cummings offered her the ride at the Caulfield Cup the following week. Payne was the third female jockey to ride in the Caulfield Cup. As a first-timer in the 2009 Melbourne Cup, she rode Cummings' Allez Wonder with a riding weight of 50.5 kg. The horse was placed 16th in the field of 23. In 2010 Payne rode Yosei to victory in the Thousand Guineas at Caulfield.
In 2015, she gained national attention when she rode the winning horse in two races at Melbourne Cup carnival at the Flemington Racecourse. One of them was the Hilton Hotels Stakes and the other was the Melbourne Cup itself. Payne said she was "floating on the cloud and it's a nice feeling".
Payne won the Melbourne Cup on 3 November 2015, riding Prince of Penzance, a six-year-old gelding with which she had a long-term association.
The training strategy she used in the lead-up to the race included a focus on galloping, and a consistent horse-jockey relationship. "...'you know what?' Payne asked. "It's not all about strength, there is so much more involved, getting the horse to try for you, it's being patient."
Payne was the first woman to win the Melbourne Cup in its 155-year history. She was also the fourth woman to ride in the race and was coincidentally wearing the colours of the suffragette movement: purple, green and white. In an interview shortly after her Melbourne Cup win, Payne said that horse racing is a "chauvinistic sport". Her short speech about the capability of women in sport was described as "unambiguous and galvanising". She later stated that she hopes her win "helps female jockeys".
The victory was a surprise for bookmakers and speechmakers. The horse, bought for $50,000 (a figure described by sportswriters as "pocket change" for horseflesh) was a long odds chance at 100–1, and afterwards Governor-General Sir Peter Cosgrove and other speechmakers were criticised for failing to adapt their pre-prepared congratulations to acknowledge the historic nature of the win.
In May 2016, Payne suffered severe abdominal injuries in a race fall at Mildura. She underwent urgent surgery for a torn pancreas, with surgeons saving the organ, otherwise she would have become a diabetic. She returned to racing in September of 2016, though noted that her future goals included a move from being a jockey to becoming a trainer.
In October 2016, she was awarded the Don Award at the Sport Australia Hall of Fame awards. The Don Award is "awarded to a sportsperson who, through their achievements and example over the last 12 months, is considered to have most inspired the nation".
In May 2017, Payne received international recognition when awarded the Longines Ladies Award in Washington U.S. The award paid tribute to "distinguished women whose careers have shown a positive influence and exceptional commitment to the equine cause"
On 23 June 2017, Payne was stood down from racing after she had tested positive for the drug Phentermine, an appetite suppressant banned under Australian Rule of Racing 81B. The traces were found in Payne's urine from a test taken on 11 June 2017, at the Swan Hill Cup meeting. Payne faced an inquiry by Racing Victoria stewards on 29 June 2017. Payne pleaded guilty of taking the weight suppressant Phentermine and was banned for four weeks until 21 July 2017. Payne said after the investigation "The onus is 100 per cent with me … I regret not seeking more guidance, I wasn’t thorough, and that is completely my fault. My sincere apologies to everyone."