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:

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:

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.