ACT Payroll Tax 2026: New Rates and What Employers Must Know

ACT Payroll Tax 2026: New Rates and What Employers Must Know
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ACT Payroll Tax 2026: New Rates and What Employers Must Know

In a move aimed at refining payroll tax obligations for large employers, the Australian Capital Territory (ACT) Government introduced the Payroll Tax Amendment Bill 2025 to the Legislative Assembly on September 3, 2025. The Bill proposes significant changes to payroll tax rates, targeting businesses with substantial wage bills across Australia. These changes are scheduled to take effect in two phases - starting January 1, 2026, and again from July 1, 2026.

Let’s break down the key updates and what they mean for employers operating in the ACT and beyond.

Phase 1: Changes Effective January 1, 2026:

From January 1 to June 30, 2026, the ACT Government will implement a tiered payroll tax structure based on annual Australia-wide wages. The changes are designed to impose higher rates on employers with larger wage bills, while maintaining the general rate for smaller businesses.

Here’s how the rates will apply:

Annual Australia-wide Wages General Rate Surcharge Rate
More than $2 million but not more than $50 million 6.85% Nil
More than $50 million but not more than $100 million 6.85% 0.5%
More than $100 million but not more than $150 million 6.85% 1.0%
More than $150 million 8.75% Nil

This structure introduces a surcharge for employers with wages exceeding $50 million but not more than $150 million, effectively increasing their payroll tax burden. However, employers with wages above $150 million will be subject to a flat rate of 8.75%, without any surcharge.

Exemptions for Universities:

Importantly, the surcharge does not apply to eligible universities with a campus in the ACT. These include:

  • Australian Catholic University
  • Charles Sturt University
  • The Australian National University
  • The University of New South Wales
  • University of Canberra

For these institutions, the general payroll tax rate remains capped at 6.85%.

Phase 2: Changes Effective July 1, 2026:

As part of the 2025-26 Budget, the ACT Government has announced further adjustments to payroll tax rates, effective from July 1, 2026, through June 30, 2027. These changes introduce a more granular rate structure, impacting a broader range of employers.

Here’s the updated rate schedule:

Annual Australia-wide Wages General Rate
More than $1.75 million but not more than $20 million 6.75%
More than $20 million but not more than $50 million 6.85%
More than $50 million but not more than $100 million 7.35%
More than $100 million but not more than $150 million 7.85%
More than $150 million 8.75%

This revised structure lowers the threshold for payroll tax liability, starting at $1.75 million in annual wages. It also increases the tax rate progressively for employers with wages exceeding $50 million, with the highest rate remaining at 8.75% for those above $150 million.

What Employers Should Do:

These changes represent a significant shift in payroll tax policy, particularly for large employers operating across multiple jurisdictions. To ensure compliance and avoid penalties, businesses should:

  • Review wage structures: Assess total Australia-wide wages to determine applicable tax rates.
  • Update payroll systems: Ensure systems are configured to apply the correct rates from the respective effective dates.
  • Consult tax advisors: Seek professional guidance to understand the financial impact and explore potential strategies for managing increased tax obligations.
  • Monitor legislative updates: While the Bill has been tabled, further amendments may occur before it becomes law.

Conclusion

The ACT Government’s payroll tax reforms reflect a broader trend toward progressive taxation for high-wage employers. By introducing surcharge rates and adjusting thresholds, the government aims to balance revenue generation with fairness in tax policy. Employers should act early to understand the implications and prepare for the phased changes beginning in 2026.

Frequently Asked Questions (FAQs)

In 2026, the Australian Capital Territory (ACT) will introduce significant changes to payroll tax rates. These include a tiered structure based on annual Australia-wide wages, starting on January 1, 2026. Employers with wages exceeding $50 million will face a surcharge, and rates will increase for larger employers. Additionally, new rates will be implemented in a second phase starting July 1, 2026, with lower thresholds and higher rates for businesses with larger wage bills.

Large enterprises with significant Australia-wide wage bills will face higher payroll tax rates under the new ACT changes in 2026. Employers with wages exceeding $50 million will incur a surcharge, with rates increasing for those with wages above $100 million. Enterprises must assess their payroll to determine the impact of these new tiered rates and surcharge structures.

Employers can prepare for the ACT payroll tax changes by taking several steps:

  • Review wage structures to determine how the new tax rates will apply.
  • Update payroll systems to ensure the correct rates are applied from the effective dates.
  • Consult with tax advisors to assess the financial impact of the changes and explore potential strategies to manage increased tax obligations.
  • Stay informed about further legislative updates to ensure full compliance before the changes take effect.

B2B enterprises should begin by reviewing their total Australia-wide wages to determine how the new rates and surcharges will apply. It’s critical to update payroll systems to reflect the changes and consult with tax advisors to manage financial impacts. Proactively preparing for the changes will ensure compliance and avoid penalties when the new rates come into effect.

For enterprises with annual Australia-wide wages over $50 million, the ACT will apply a payroll tax surcharge starting January 1, 2026. Employers earning between $50 million and $100 million will face a 0.5% surcharge, and those with wages exceeding $100 million will pay a 1% surcharge. These changes will directly affect large companies with substantial payrolls.

Enterprises with over $150 million in annual wages will see a flat payroll tax rate of 8.75% under the new system, starting July 1, 2026. These businesses will be exempt from the surcharge but will face a significant tax burden. It’s essential for large enterprises to evaluate how these changes will affect their overall tax liabilities and plan accordingly.

B2B enterprises can manage the increased payroll tax burden by carefully reviewing and adjusting their wage structures. Working with tax advisors to explore potential strategies such as salary packaging or structuring wages across multiple entities may help mitigate the financial impact. Additionally, enterprises should regularly update payroll systems to ensure compliance with the new tiered rates.

Yes, universities and certain non-profit organizations in the ACT are exempt from the payroll tax surcharge. Institutions such as the Australian National University and University of Canberra will continue to pay the standard 6.85% rate without the additional surcharge, even if their wages exceed the $50 million threshold. B2B enterprises in these sectors can benefit from this exemption.

The phase-in of the new payroll tax rates, beginning in January 2026 and continuing in July 2026, gives enterprises time to adjust their tax planning strategies. Enterprises should align their fiscal year projections to account for the tiered payroll tax rates and ensure their payroll systems are updated before the new rates take effect. It’s also a good time to assess potential risks and adjust compensation strategies to manage the impact.

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