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    What Is Payroll Tax in Australia?

    Key Takeaways
    • State-Based Tax Compliance: Helps organisations manage payroll tax obligations across Australian states and territories with different thresholds, rates and reporting requirements.
    • Accurate Wage Tracking and Reporting: Supports calculation of taxable wages, state allocations, grouping provisions and payroll tax reporting requirements.
    • Multi-State Payroll Control: Enables enterprises to monitor payroll tax liabilities across jurisdictions through automation, analytics and centralised payroll visibility.

    Payroll Tax

    Payroll tax is a state and territory tax levied on employers whose total Australian taxable wages exceed an annual threshold. Each state and territory administers its own payroll tax legislation, sets its own threshold and applies its own rate. The result is a state-based system that employers operating across borders must navigate jurisdiction by jurisdiction at every monthly return cycle.

    Payroll tax differs from income tax and GST in that the federal government plays no role in its administration. The state revenue offices in each jurisdiction collect, audit and enforce the tax. An employer who pays wages in three states must register, lodge and pay separately in each state where their wage bill triggers the threshold during the financial year.

    How Is Payroll Tax Calculated and What Are the Current State Rates?

    Payroll tax applies only to the amount of taxable wages that exceeds the threshold in each state. The employer pays the relevant state rate on wages above the threshold, with the threshold itself acting as a tax-free amount each financial year. Both rates and thresholds vary across the country.

    The following rates apply for the 2025-26 financial year according to state revenue office publications.

    • New South Wales: Threshold of $1,200,000 and a rate of 5.45%, with a monthly threshold of $100,000 triggering the registration obligation when wages exceed it.
    • Victoria: Threshold of $900,000 and a standard rate of 4.85%, with regional employers paying a reduced rate and a tapering structure for some employer bands.
    • Queensland: Threshold of $1,300,000 and a standard rate of 4.75%, rising to 4.95% for employers with Australian wages exceeding $6.5 million.
    • Western Australia: Threshold of $1,000,000 and a rate of 5.5%, with monthly registration triggered at $83,333 in wages during any month.
    • South Australia and other jurisdictions: South Australia applies a $1,500,000 threshold with rates up to 4.95%, and Tasmania, the ACT and the Northern Territory each maintain their own threshold and rate structure.

    What Counts as Taxable Wages for Payroll Tax?

    The definition of taxable wages extends well beyond base salary. This is one of the most common areas where employers underestimate their payroll tax liability because they exclude payment categories that state revenue offices include in the threshold calculation in every jurisdiction in the country.

    • Gross wages and salaries: Full-time, part-time and casual wages count toward the threshold across every state and territory in the country.
    • Superannuation contributions: Employer super contributions count as taxable wages in every state, which means the move to the 12% super guarantee rate from 1 July 2025 increases the payroll tax base for affected employers.
    • Allowances and bonuses: Sales commissions, car allowances, bonuses and similar payments count toward the threshold across all jurisdictions.
    • Fringe benefits values: The grossed-up taxable value of fringe benefits the employer provides to employees counts toward the payroll tax threshold.
    • Certain contractor payments: Contractors who meet the deemed employee test under state legislation produce payments that count as wages for payroll tax purposes.

    How Do Grouping Provisions Affect Payroll Tax?

    Grouping provisions are one of the most misunderstood aspects of payroll tax. State revenue offices group related entities for threshold purposes, meaning a business operating through multiple companies may share a single payroll tax threshold rather than receiving a separate threshold for each entity. This can move a business into payroll tax liability that the entity-level wage bill alone would not have triggered.

    Groups arise through common ownership, common employees, common control or commonly used resources. An employer with three separate Australian companies under the same parent group does not receive three thresholds. Instead, all three companies share a single threshold across the group, and the relevant state allocates portions of that threshold based on each entity's share of the group's total wages.

    The grouping rules apply within each state separately. A business may form one group in New South Wales and a different group in Victoria depending on the entities operating in each state. This makes group analysis a state-by-state exercise rather than a single national assessment for the business.

    How Does Payroll Tax Apply to Multi-State Employers?

    Multi-state employers face the most complex payroll tax obligations because each state apportions the threshold based on the share of wages paid in that state. Revenue NSW explains the apportionment formula as the state threshold multiplied by the ratio of state wages to total Australian wages. An employer with $1 million of NSW wages in a $2 million total wage bill receives a $600,000 NSW threshold rather than the full $1.2 million.

    The general rule is that payroll tax is payable in the state where the employee performs the work. For remote workers, this is the state where the employee is physically located. An employee working from home in Victoria for a New South Wales-based employer is subject to Victorian payroll tax on that employee's wages, not NSW payroll tax.

    Some states apply a principal place of employment test as a secondary rule when the work location is ambiguous. Employers with hybrid and remote workforces must maintain accurate records of each employee's work location across the financial year to apply the correct state's rate to each portion of the wage bill.

    What Surcharges and Levies Apply to Payroll Tax in Australia?

    Several states apply additional surcharges and levies on top of the standard payroll tax rate for large employers. These additional charges fund specific government programmes and increase the effective payroll tax rate for employers whose wage bill exceeds defined surcharge thresholds across the country.

    • Victoria: A combined surcharge of 1% applies to Victorian taxable wages for employers with Australian wages above $10 million. The surcharge increases to 2% for employers with Australian wages above $100 million.
    • Queensland: A mental health levy applies to large employers in addition to the standard payroll tax rate, with the levy structure scaling based on the employer's total Australian wages.
    • ACT: The territory applies a higher 8.75% rate to employers with Australian wages exceeding $150 million, well above the standard ACT rate for the threshold range.
    • Surcharge structures change: State budget announcements alter surcharge thresholds and rates from year to year, which means employers must verify current rates with the relevant state revenue office before each annual reconciliation.

    What Are the Payroll Tax Registration and Lodgement Obligations?

    Payroll tax is a self-assessed tax, which means the employer is responsible for registering, lodging, and paying it once their wages exceed the relevant state threshold. Employers must register with each state revenue office within the registration window specified by that jurisdiction, typically within seven days of monthly wages first exceeding the monthly threshold or when they expect their annual wages to exceed the annual threshold.

    Monthly returns are due in most states by the seventh of the following month. An annual reconciliation return is due by 28 July for the financial year ending 30 June, reconciling the monthly returns with the actual annual wage bill and adjusting the final liability. Penalties and interest apply to late registrations, late lodgements and late payments, with state revenue offices using cross-jurisdictional data sharing to identify unregistered employers operating across borders.

    Ramco Payce tracks state wage allocations and produces state-specific payroll tax reports from a single platform. BInGO delivers state payroll tax analytics that finance teams use to model the impact of headcount changes on payroll tax liability before they affect a monthly return cycle.

    How Does Ramco Payce Support Payroll Tax Compliance?

    Ramco Payce manages state payroll tax obligations across multiple Australian jurisdictions from a single payroll platform. The system tracks each employee's work location, allocates wages to the correct state and produces the data inputs each state revenue office requires for monthly returns and annual reconciliation. Payroll Workspace provides payroll operators with visibility into all state allocations and flags inconsistencies before they affect a state return lodgement.

    For multi-entity employers operating under grouping provisions, the platform tracks group-wide wages and applies the apportioned threshold to each entity's state liability calculation. Daily HR provides employees with self-service access to their work location records, helping payroll teams maintain accurate location data required for correct state allocation across hybrid and remote workforces.

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    FAQs

    Do Payroll Tax Rules Apply to Contractors as well as Employees?

    Contractor payments may be subject to payroll tax when the worker meets the deemed-employee rules in the relevant state. Revenue offices usually assess the working arrangement, labour component, client dependence and contract terms before treating payments as taxable wages. Employers should review each engagement before excluding contractor payments from payroll tax calculations.

    What Payroll Tax Exemptions and Rebates are Available?

    Some states offer payroll tax exemptions or rebates for specific companies, including charities, religious entities, education providers, apprentices and trainees. The relief offered varies on the jurisdiction, the status of the company, the type of worker and the training arrangement. Employers should get confirmation of eligibility from the appropriate revenue agency before decreasing taxable pay or claiming any rebate.

    What Happens if an Employer Fails to Register for Payroll Tax on Time?

    Revenue authorities can recover payroll tax back to the date the employer should have registered. They also can levy interest and penalties, with greater exposure if the delay appears wilful. Employers with a gap in registration might pursue the voluntary disclosure process, as several jurisdictions decrease fines for prompt remedial action and cooperation.

    How Does Payroll Tax Interact with Redundancy and Termination Payments?

    When employers process redundancy and termination compensation the payroll tax treatment vary by state. Normally genuine redundancy payments below the tax-free threshold are tax free but payments above-threshold or non-genuine payouts may be taxed as wages. Payroll staff have to check local regulations before they complete the termination payments and report taxable salaries properly every cycle.