Payroll tax is a state and territory tax levied on employers whose total Australian wages exceed a jurisdiction-specific annual threshold. Each state and territory sets its own rate and threshold, meaning the tax burden varies significantly depending on where your business operates. No federal payroll tax exists — it is entirely a state responsibility.
Payroll Tax Rates and Thresholds by State (FY2025–26)
| State/Territory | Annual threshold | Tax rate | Administered by |
|---|---|---|---|
| New South Wales (NSW) | $1,200,000 | 5.45% | Revenue NSW |
| Victoria (VIC) | $700,000 | 4.85% | State Revenue Office VIC |
| Queensland (QLD) | $1,300,000 | 4.75% | Queensland Revenue Office |
| Western Australia (WA) | $1,000,000 | 5.5% | WA Department of Finance |
| South Australia (SA) | $1,500,000 | 4.95% | RevenueSA |
| Tasmania (TAS) | $1,250,000 | 4.0% | State Revenue Office TAS |
| Australian Capital Territory (ACT) | $2,000,000 | 6.85% | ACT Revenue Office |
| Northern Territory (NT) | $1,500,000 | 5.5% | NT Revenue |
Rates and thresholds are subject to state budget changes. Always verify current figures with the relevant state revenue authority before calculating your liability.
Notes on Selected Jurisdictions
Victoria: The general threshold applies to metropolitan businesses. Regional employers in designated areas may qualify for a reduced rate. Victoria has also applied temporary mental health and homelessness levies on large employers.
Queensland: QLD has a tiered rate structure — the 4.75% rate applies to businesses with taxable wages between the threshold and $6.5M. Larger businesses pay a higher rate.
Western Australia: WA has a graduated rate structure — the rate reduces for smaller businesses close to the threshold, with the full 5.5% applying to the amount exceeding the threshold.
How Payroll Tax Is Calculated
Payroll tax applies to the amount of wages above the threshold. The threshold is not a “cliff” — you don’t owe tax on all wages once you exceed it, only on the amount above.
$$\text{Payroll tax} = (\text{Total wages} - \text{Threshold}) \times \text{Rate}$$
Example — NSW
A business pays $1,800,000 in total wages in NSW:
$$\text{Payroll tax} = ($1,800,000 - $1,200,000) \times 5.45% = $600,000 \times 5.45% = $32,700$$
Example — VIC
A business pays $1,200,000 in total wages in VIC:
$$\text{Payroll tax} = ($1,200,000 - $700,000) \times 4.85% = $500,000 \times 4.85% = $24,250$$
What Counts as “Wages”?
Payroll tax applies to a broad definition of wages, not just base salaries:
Included in wages:
- Salaries and wages (including overtime)
- Bonuses and commissions
- Allowances
- Director fees
- Payments to some contractors (see grouping provisions)
- Fringe benefits (taxable value for payroll tax purposes)
- Superannuation contributions (above the SG rate in some states)
- Termination payments (in some jurisdictions)
Generally excluded:
- Payments to genuine independent contractors (subject to grouping rules)
- Wages to apprentices or trainees (concessions vary by state)
- Parental leave payments (state-specific)
Multi-State Operations — Threshold Apportionment
If your business operates in more than one state, you cannot claim a full threshold in each state. The threshold is apportioned based on the proportion of wages paid in each state.
Example: A business pays $3,000,000 total wages — 60% in NSW, 40% in VIC.
- NSW wages: $1,800,000 — NSW threshold proportion: $1,200,000 × 60% = $720,000
- NSW payroll tax: ($1,800,000 − $720,000) × 5.45% = $58,860
The exact apportionment rules vary slightly between states. See Payroll Tax Thresholds and Rates for a full comparison across states.
Lodgement and Payment
Payroll tax is generally lodged monthly using the state’s online portal, with an annual reconciliation submitted after 30 June. Most states require monthly returns regardless of the size of your payroll tax liability once you are registered.
Registration: You must register for payroll tax in each state where you have a liability — registration is not automatic. Penalties apply for late registration.
Related Articles
- What Is Payroll Tax and Who Pays It?
- Payroll Tax Grouping Provisions
- Small Business Tax Concessions Australia
- GST and Business Tax hub
Frequently Asked Questions
Is payroll tax deductible for income tax purposes? Yes. Payroll tax paid by an employer is a deductible business expense for income tax and company tax purposes.
Does payroll tax apply to super contributions? It depends on the state. Most states include employer super contributions above the SG rate (11.5% for FY2024–25) in the wages definition. Some states include all SG contributions. Check with your relevant state revenue office.
If I’m under the threshold now but growing, when do I need to register? You must register as soon as you become liable — i.e., when your wages (including those paid to related entities) exceed the threshold in a given state. Waiting until after you have exceeded the threshold is an offence and results in back-dated liability and penalties.
This article provides general tax information. Payroll tax rules differ materially between states and are subject to frequent change. For advice tailored to your business, speak with a registered tax agent. Find one through the Tax Practitioners Board register.