Who needs to pay payroll tax in Australia?
Employers who pay wages above a certain wage threshold in a particular state or territory are required to pay payroll tax. Each state and territory has its own payroll tax legislation, rates, and thresholds. Payroll tax is calculated as a percentage of the total wages paid.
If you’re part of a group of companies, the combined wages of the group might exceed the threshold, requiring registration for the entire group. Some organisations, like charities or religious institutions, might be exempt from payroll tax.
Payroll tax vs PAYG withholding: what’s the difference?
Payroll tax and PAYG withholding are both tied to the wages you pay, but they’re different taxes with different rules. Payroll tax is a state tax that your business pays out of its own pocket, and only once your wages pass a threshold. PAYG withholding is your employees’ income tax, which you hold back from their pay and send to the ATO, whatever the size of your business.
| Question | Payroll tax | PAYG withholding |
|---|---|---|
| Whose tax is it? | Your business’s cost | Your employees’ income tax |
| Who collects it? | Your state or territory revenue office | The ATO |
| Who has to deal with it? | Employers whose total Australian wages exceed the state threshold | Every employer paying wages |
| How is it worked out? | A state rate on wages above the threshold; some states use tiers or phase-ins | ATO tax tables, based on each employee’s pay |
| How is it reported? | Monthly returns and an annual reconciliation with the state | Each pay run through Single Touch Payroll, then paid via your activity statement |
| Does it reduce employee pay? | No | Yes, it comes out of their gross pay |
Most small businesses will never pay payroll tax, but every business with staff handles PAYG withholding from its first pay run. For step-by-step help with the PAYG side, see our guide on how to pay tax for employees.
How much is payroll tax? Payroll tax by state & territory
See our small business summary below of the different payroll tax rates and thresholds for each state and territory. We also include links to official government sources so you can check the most up-to-date payroll tax rates and legislation.
Payroll tax thresholds by state, 2026–27
Thresholds are based on your total Australian wages, including any group members, not just wages paid in that state.
| State or territory | Annual tax-free threshold | Rate on wages above it | How the threshold works for larger employers | Source |
|---|---|---|---|---|
| New South Wales | $1,200,000 | 5.45% | Flat threshold at every wage level | Revenue NSW |
| Victoria | $1,000,000 | 4.85% (1.2125% for eligible regional employers) | Phases out between $3m and $5m of Australian wages; none above $5m. Surcharges apply above $10m | SRO Victoria |
| Queensland | $1,300,000 | 4.75%, or 4.95% above $6.5m | Falls by $1 for every $7 of wages above $1.3m; none at $10.4m. Mental health levy above $10m | QRO rates, QRO deductions |
| Western Australia | $1,000,000 | 5.5% | Tapers between $1m and $7.5m; none at $7.5m | RevenueWA |
| South Australia | $1,500,000 Liability threshold, not a tax-free amount | 4.95% (rate phases in from 0% between $1.5m and $1.7m) | Registration threshold is $1.5m; the deduction is capped at $600,000 | RevenueSA |
| Tasmania | $1,250,000 | 4% from $1.25m to $2m, 6.1% above $2m | Two flat bands | SRO Tasmania |
| Australian Capital Territory | $1,750,000 Was $2m until 30 June 2026 | 6.75% up to $20m of Australian wages, rising in steps to 8.75% above $150m | One rate, set by your Australia-wide wage bracket | ACT determination, ACT Revenue Office |
| Northern Territory | $2,500,000 | 5.5%, or 6.5% where Australia-wide wages are $100m or more | Deduction settings unchanged for 2026–27 | Territory Revenue Office |
Important payroll tax payment due dates
Payroll tax is paid through monthly returns, with an annual reconciliation at the end of the financial year. Due dates are set by each state and territory.
Monthly returns and payments are due on the 7th of the following month. Some states and territories offer other lodging periods. If a due date falls on a weekend or public holiday, you can lodge and pay on the next business day (payrolltax.gov.au).
Payroll tax annual reconciliation deadline dates by state and territory
- NSW (New South Wales) annual reconciliation due date: 28th July
- Victoria annual reconciliation due date: 21st July
- QLD (Queensland) annual reconciliation due date: 21st July
- SA (South Australia) annual reconciliation due date: 28th July
- WA (Western Australia) annual reconciliation due date: 21st July
- NT (Northern Territory) annual reconciliation due date: 21st July
- Tasmania annual reconciliation due date: 21st July
- ACT (Australian Capital Territory) annual reconciliation due date: 28th July
How to calculate payroll tax: a worked example
To calculate payroll tax, follow these steps:
- Check if you owe payroll tax: Determine if your business’s total Australian wages exceed the payroll tax threshold set by your state or territory.
- Calculate your taxable wages: Add up all wages, salaries, commissions and bonuses paid to employees, plus employer super contributions and taxable fringe benefits. Some payments to contractors also count as wages.
- Find your payroll tax rate: Each Australian state and territory has its own payroll tax rate. Check the relevant government website for the most current rate.
- Identify any deductions or exemptions: Some businesses might qualify for payroll tax deductions or exemptions. Check with your state’s revenue office.
- Calculate the tax: Subtract your threshold deduction and any exempt wages from your taxable wages, then multiply what’s left by the payroll tax rate.
- Lodge and pay: File your payroll tax return and make the payment on time according to your state’s requirements.
Here’s how a single-state business works out its annual payroll tax, using NSW rates for 2026–27.
Add up taxable wages
Wages $1,300,000, bonuses $44,000 and employer super $156,000. Taxable fringe benefits count too.
Compare to your state’s threshold
Use total Australian wages, including any group members. $1,500,000 is over the NSW threshold.
Subtract the threshold
Only wages above the threshold are taxed.
Apply your state’s rate
$300,000 × 5.45%
Pay monthly, reconcile yearly
Monthly returns use a monthly threshold. The annual return, due 28 July in NSW, corrects any difference.
The formula behind steps 3 and 4 of the example:
Payroll tax = (Total taxable wages − Threshold) × Rate
South Australia doesn’t fit this formula. No tax is payable until total Australian wages pass $1.5 million; after that, employers deduct up to $600,000, and the rate phases in from 0% to 4.95% between $1.5 million and $1.7 million (RevenueSA).
When the formula changes
Several states shrink the threshold for bigger payrolls. In Victoria, the $1,000,000 threshold reduces by 50 cents for every dollar of Australian wages over $3,000,000 (SRO Victoria). A Victoria-only business paying $4,000,000 in wages gets a $500,000 threshold, so it pays 4.85% on $3,500,000, which is $169,750. Queensland, WA and the NT also taper the threshold, Tasmania and the ACT use rate tiers, and businesses paying wages in more than one state get a reduced share of each state’s threshold.
Run your own numbers in the payroll tax calculator, which handles tapering thresholds and wages in more than one state.
What are the consequences of not paying payroll tax?
Failure to comply to payroll tax can result in penalties and interest charges being imposed by your relevant state or territory revenue authority. Legal action may be taken against the employer in serious cases. If you require further information regarding payroll taxes in Australia, it’s best that you contact your state or territory revenue authority or consult with a qualified tax professional.
Are there any exemptions or deductions available for payroll taxes in Australia?
Yes, there are some exemptions and deductions specific to a state or territory. Some states provide exemptions for specific types of wages, like those paid to apprentices or trainees. Some also exempt wages paid to new employees with a disability: in Western Australia, for example, the exemption covers their first two years of employment (RevenueWA).
What is the payroll tax threshold?
Payroll tax threshold is the total amount of wages an employer can pay their Australian employees in a financial year without incurring payroll tax. Each state and territory in Australia has a specific annual payroll tax threshold.
For example, Victoria’s threshold is $1,000,000. A business paying $950,000 in total Australian wages in a year isn’t liable for Victorian payroll tax. If total wages reach $1,100,000, it pays tax on the $100,000 above the threshold, not on the full amount. Some states also reduce the threshold for larger employers, so check your state’s rules in the table above.
The government aims to ease the financial burden of small businesses and encourage entrepreneurship by exempting businesses below a certain size from payroll tax. For smaller businesses, payroll tax administration can be complex. The threshold reduces the number of businesses that need to register and comply with payroll tax regulations.
Can your business claim the full payroll tax threshold?
Not always. The full annual threshold applies only if your business pays wages in one state for the whole financial year and isn’t part of a group. Three things reduce it.
You pay wages in more than one state
Each state gives you a share of its threshold based on the share of your Australian wages paid there. In NSW, a business paying $900,000 of its $3,000,000 total wages in NSW gets 30% of the $1,200,000 threshold, which is $360,000 (Revenue NSW).
You only employed for part of the year
If you started or stopped employing staff mid-year, the threshold is pro-rated by the number of days you paid wages.
Your business is grouped
Related businesses, such as companies with common owners, are grouped for payroll tax. The group shares one threshold, and only one member can claim it.
Because of these rules, a business can owe payroll tax in a state even when its wages there are well under the headline threshold.
What are payroll tax exemptions and concessions?
Even if your business payroll exceeds the threshold, you may still be eligible for exemptions or concessions that reduce your payroll tax liability. These rules vary significantly between states and territories.
Exemptions
Certain types of employers or wages may be completely exempt from payroll tax. These can vary by state but may include:
- Charities and other non-profits with a charitable purpose, for staff doing that charitable work
- Religious institutions, for staff engaged in religious work
- Wages paid by foreign consular and other official representatives
- Wages paid to apprentices and, in some states, trainees (WA doesn’t exempt trainees under contracts registered from 1 July 2019)
- Wages paid to new employees with a disability, in some states
- Wages paid to employees on leave for Defence Force service or emergency services volunteering, in some states
Concessions
Some states offer concessions that reduce the amount of payroll tax payable. These can include:
- Lower rates for regional employers: 1.2125% in Victoria for eligible regional employers, and a 1% discount in Queensland until 30 June 2030
- Apprentice and trainee exemptions or rebates, which vary by state
Concessions change often, so check your state or territory revenue office for what applies to your business.
Frequently asked questions about payroll tax
What is payroll tax?
Payroll tax is a state tax on employers based on the total wages paid to their employees. Each state has its own rates and thresholds, and in most states the tax is calculated on the amount exceeding the threshold.
What changed for payroll tax on 1 July 2026?
Two territories changed their settings from 1 July 2026:
- ACT: the threshold fell from $2 million to $1.75 million, and the flat 6.85% rate plus surcharges was replaced by rates from 6.75% to 8.75%, based on Australia-wide wages.
- Northern Territory: a new 6.5% rate applies to employers and groups with Australia-wide wages of $100 million or more. The $2.5 million threshold and 5.5% rate are unchanged for everyone else.
NSW, Victoria, Queensland, WA, SA and Tasmania kept their 2025–26 rates and thresholds.
How do I find my small business’s payroll tax liability?
To determine your payroll tax liability, you need to calculate total taxable wages, including salaries, bonuses, superannuation contributions, and any contractor payments treated as wages. Then, check your state’s threshold to see if you exceed the amount, making you liable for payroll tax on the excess.
How do I calculate total taxable wages?
To find your total taxable wages, include all forms of remuneration: salaries, bonuses, commissions, superannuation contributions, and any fringe benefits paid to employees.
Are there any exemptions from payroll tax?
Yes, certain payments may be exempt from payroll tax, including wages paid to apprentices and trainees, wages paid by charities and other eligible non-profits, and certain fringe benefits may also qualify for exemptions depending on state regulations.
How do I lodge and pay my payroll tax return?
To lodge and pay your payroll tax return:
- Register for payroll tax. If your total wages exceed the threshold, register with your state’s revenue office.
- Lodge returns online. Most states allow you to lodge returns online through their respective portals.
- Follow the payment schedule. Payroll tax is generally paid monthly based on your taxable wages for that period. Ensure you meet payment deadlines to avoid penalties.
What happens if I miss a payroll tax payment or lodgement?
If you fail to lodge or pay your payroll tax on time, you may incur penalties and interest charges. It’s crucial to stay up-to-date with your obligations to avoid these additional costs.
Where can I find more information about my state’s payroll tax regulations?
For detailed information about payroll tax in your state, visit the official website of your state’s revenue office. They provide resources, guides, and updates about current rates and regulations. This resource aims to clarify common concerns regarding payroll tax in Australia and assist employers in navigating their responsibilities effectively.
