Payroll tax catches a lot of growing businesses by surprise. It is not the PAYG you withhold from staff, and it has nothing to do with the ATO. It is a separate tax, charged by each state and territory, on the total wages you pay once your payroll gets big enough. The employer pays it, on top of wages and super. It is never taken out of anyone’s pay.
Here is how it works, and the thresholds and rates for each state.
A state tax, not a federal one
There is no national payroll tax. Every state and territory runs its own, with its own threshold, its own rate, and its own revenue office. So the rules follow where your employees actually work, not where your head office sits.
The shape is the same everywhere. You pay nothing until your total Australian wages pass an annual threshold. Above that, you pay a percentage on the excess. The threshold is a deduction, not a cliff: cross it by a dollar and you are taxed on that dollar, not on the whole payroll.
What counts as wages
More than you might expect. Payroll tax wages take in salary and wages, superannuation, bonuses, commissions, allowances, and most fringe benefits. They can also pull in payments to contractors, where the contract is really for that person’s labour rather than a result, and they do not bring their own plant and equipment. That contractor rule catches a lot of businesses that assumed they had no payroll tax at all.
The thresholds and rates
Figure 1. Tax-free thresholds and rates by state and territory. Figures are set by each jurisdiction and generally reset around 1 July.
Two things make these numbers trickier than they look.
Grouping. If you run several related businesses, the revenue office treats them as one. They share a single threshold, not one each. Two companies you own, each paying $700,000 in wages, do not get two thresholds. The combined $1.4 million is measured against one.
Interstate wages. If you pay wages in more than one state, each state gives you only a slice of its threshold, worked out from the share of your wages paid there. Pay half your wages in NSW and you get roughly half the NSW threshold.
Registering and lodging
You register once your wages cross the monthly threshold, and most states want that within 7 days. After that you lodge monthly, usually by the 7th of the next month, and reconcile once a year. The annual return is due 21 July in most places, and 28 July in NSW, the ACT and South Australia.
Your wage figures are already in your payroll from Single Touch Payroll, so the numbers are not the hard part. Knowing which state, which threshold, and whether you are grouped is where people slip. Keep your payroll records so you can prove the split.
The technical detail
- Payroll tax is a state and territory tax on employer wages above an annual threshold. There is no federal payroll tax. Each jurisdiction has its own Payroll Tax Act, revenue office and returns, administered under largely harmonised rules.
- Thresholds and rates (2025-26, largely carried into 2026-27): NSW $1.2m at 5.45%; VIC $1.0m at 4.85% (regional 1.2125%); QLD $1.3m at 4.75%, rising to 4.95% above $6.5m; WA $1.0m at 5.5% (threshold tapers to $7.5m); SA $1.5m at 4.95% (phasing between $1.5m and $1.7m); TAS $1.25m at 4.0%, rising to 6.1% above $2.0m; ACT $2.0m at 6.85%; NT $1.5m at 5.5%. Set by each state and generally reset around 1 July.
- The threshold is deductible (tax applies only to wages above it) and, for grouped employers, shared once across the group. Interstate employers receive a threshold apportioned by the ratio of local wages to total Australian wages.
- Taxable wages include salary, superannuation, bonuses, commissions, allowances, most fringe benefits, and deemed wages for certain labour-based contractor arrangements unless an exemption applies.
- Registration is generally required within 7 days of monthly wages first exceeding the monthly threshold. Monthly returns are generally due by the 7th of the following month; the annual reconciliation is due 21 July, except NSW, the ACT and SA (28 July).
- Additional imposts in some jurisdictions: VIC mental health and wellbeing surcharge (0.5%) and COVID debt surcharge (0.5%) on national wages above $10m (to 30 June 2033), combined up to 2% above $100m; QLD mental health levy on national wages above $10m; QLD regional 1% discount and VIC regional rate.
Dated to 2 July 2026. Payroll tax is set by each state and territory and changes regularly; confirm the current threshold, rate and rules with the relevant state revenue office or your registered agent.
