Payroll Tax Australia 2026: State-by-State Thresholds & Rates for Employers
Complete 2026 guide to payroll tax in Australia. State-by-state thresholds (NSW $1.2M, VIC $900K, QLD $1.3M) and rates (4.85-6.85%), what's included in taxable wages, grouping rules, and how to register — everything employers need to know.
Payroll tax thresholds by state for 2025-26
Payroll tax is a state and territory tax levied on employers whose total Australian taxable wages exceed the annual threshold. Each state and territory sets its own threshold and rate, creating a patchwork system that employers operating across borders must navigate carefully. The approximate annual thresholds for 2025-26 are: New South Wales — $1,200,000 (monthly threshold $100,000); Victoria — $900,000 (monthly threshold $75,000); Queensland — $1,300,000 (monthly threshold $108,333); Western Australia — $1,000,000 (monthly threshold $83,333); South Australia — $1,500,000 (monthly threshold $125,000); Tasmania — $1,250,000 (monthly threshold $104,166); Northern Territory — $1,500,000 (monthly threshold $125,000); Australian Capital Territory — $2,000,000 (monthly threshold $166,666). These thresholds are the total wage bill at which payroll tax liability begins — if your total Australian wages are below the threshold for a particular state, you do not owe payroll tax in that state. Thresholds may be updated annually, so always verify current figures with the relevant state revenue office. The threshold applies to the total wages of all grouped entities, not each individual business — this is a common trap for employers with related businesses.
Payroll tax rates: 4.85% to 6.85%
Once your wages exceed the threshold, payroll tax is calculated on the amount above the threshold at the applicable state rate. The approximate rates for 2025-26 are: New South Wales — 5.45% (plus a 10% surcharge on wages above $10M for the COVID health levy if still in effect); Victoria — 4.85% (plus a 0.5% surcharge on wages above $10M, and a further 0.5% surcharge on wages above $100M under the mental health levy); Queensland — 4.75% (or 4.95% for employers with Australian wages over $6.5M); Western Australia — 5.5%; South Australia — 4.95% (reducing on a sliding scale for wages between $1.5M and $1.7M); Tasmania — 4.0% (increasing to 6.1% for wages above $2M); Northern Territory — 5.5%; Australian Capital Territory — 6.85%. These rates are applied to taxable wages above the threshold amount. For example, a NSW employer with $2,000,000 in taxable wages would pay 5.45% on $800,000 (the amount exceeding the $1,200,000 threshold), resulting in a payroll tax bill of $43,600. Rates and surcharges change periodically, so confirm current rates with your state revenue office or payroll tax advisor.
What is included in taxable wages
Taxable wages for payroll tax purposes are broader than just base salary. They include: gross salary and wages, superannuation contributions (employer SG contributions are included in all states except Western Australia), bonuses and commissions, allowances (unless they are genuine expense reimbursements), fringe benefits (the grossed-up taxable value), employer contributions to employee share schemes, termination payments (except genuine redundancy payments up to the tax-free limit), directors' fees, and payments to certain contractors (discussed below). Contractor payments are included in taxable wages if the contractor works primarily for one business, performs work that could be done by an employee, and does not employ others to perform the work — similar to the employee vs contractor test for other purposes. Exempt from taxable wages are: genuine redundancy payments (up to the tax-free limit), workers compensation payments, certain apprentice and trainee wages (some states offer exemptions or rebates), and wages paid to employees engaged in community service leave. The inclusion of super contributions in most states means your taxable wages figure is typically higher than your gross payroll — factor this in when assessing whether you will exceed the threshold. Use our Cost of Employment Calculator to see how payroll tax adds to your total employment cost.
Grouping rules: when related businesses are combined
Payroll tax grouping rules prevent employers from splitting their workforce across related entities to stay below the threshold. If two or more businesses are 'related' under the grouping provisions, their taxable wages are combined and assessed against a single threshold. Businesses can be grouped based on: common ownership (one entity owns or controls another, or both are owned or controlled by the same person), use of common employees (employees work across multiple related entities), and tracing provisions (indirect ownership through chains of entities). The practical impact is significant. For example, if an individual owns three companies each with $500,000 in annual wages, they would individually be below the NSW threshold of $1,200,000. But under grouping rules, the combined wages of $1,500,000 exceed the threshold, and the group owes payroll tax on $300,000. The designated group employer (DGE) is responsible for lodging returns and paying the tax for the entire group. Employers must notify their state revenue office of any grouping relationship. Failure to do so, or artificially structuring businesses to avoid grouping, can result in back-assessments, interest, and penalties. If you operate multiple businesses or have related entities, get payroll tax advice early — restructuring after a revenue office audit is far more expensive.
How to register and comply
If your total Australian taxable wages exceed (or are expected to exceed) the threshold in any state where you have employees, you must register for payroll tax in that state within 7 days. Registration is done through each state's revenue office portal: Revenue NSW (revenue.nsw.gov.au), State Revenue Office Victoria (sro.vic.gov.au), Queensland Revenue Office (qro.qld.gov.au), and equivalent offices in other states. Most states now offer online registration and lodgement. Once registered, you must lodge payroll tax returns — typically monthly (by the 7th of the following month) for larger employers, and annually for smaller employers in some states. Returns can be lodged through the state revenue office's online portal, and payment is typically due at the same time as the return. Many payroll software packages (Xero, MYOB, KeyPay, Employment Hero) include payroll tax calculation modules that automatically determine liability based on employee locations and wage levels. For businesses operating across multiple states, wages must be allocated to the state where the work is performed (not the state where the employer is based). If an employee works in multiple states, specific allocation rules apply. Interstate employers can claim a threshold deduction in each state, but the deduction is reduced proportionally based on the ratio of that state's wages to total Australian wages. Keep detailed records of wages by state and employee location, as payroll tax audits are common and state revenue offices share data.
Try these free tools
General information and estimates only — not legal, financial, or tax advice. Always verify with the Fair Work Ombudsman (13 13 94) or a qualified professional.
Related articles
Understand the payday super safe harbour provisions that protect employers from SGC penalties when super is paid on time. Covers the 7-day payment window, clearing house rules, what qualifies as safe harbour, and what actions break your protection under the new 2026 rules.
Payday Super Payroll Checklist: 10 Steps to Be Ready by 1 July 2026A practical 10-step payroll checklist for employers preparing for payday super starting 1 July 2026. Covers software updates, clearing house setup, cash flow planning, employee fund audits, testing, staff training, and STP reporting changes to ensure full compliance from day one.
Small Business Fair Dismissal Code: How Businesses with <15 Staff Can Legally Fire EmployeesThe Small Business Fair Dismissal Code protects employers with fewer than 15 employees from unfair dismissal claims — if they follow the correct process. Learn the checklist, common mistakes, and how it works in 2026.
Super Guarantee Due Dates 2025-26: Quarterly Deadlines & Late PenaltiesAll 4 super guarantee quarterly deadlines for 2025-26. Q1 due 28 Oct, Q2 due 28 Jan, Q3 due 28 Apr, Q4 due 28 Jul. Late payment triggers the Super Guarantee Charge — here's what employers owe and how employees can report.