Payroll tax in Australia is not governed by a single national system. Instead, it is administered by each state and territory, with distinct threshold-driven requirements, tax rates, exemptions, and rules. It is also a self-assessed tax, meaning businesses are responsible for calculating and reporting their own liability. This makes payroll tax compliance more complex, particularly for businesses that operate in multiple jurisdictions.
This guide serves as your starting point. It introduces the varying payroll tax systems across Australia and provides direction to state-specific resources. Whether you operate in one region or across many, understanding your obligations is essential to staying compliant, avoiding penalties, and managing your payroll efficiently.
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Payroll tax is a state and territory-based tax, meaning each jurisdiction has the authority to set its own rules. This decentralised approach is due to payroll tax revenue being used to fund state-level services such as healthcare, education, and transport.
While several areas of payroll tax have been harmonised between jurisdictions, important differences remain, especially in tax thresholds, rates, and exemptions. These differences are critical to understand when hiring staff, expanding to new locations, or engaging contractors across borders.
Despite the jurisdictional differences, many aspects of payroll tax have been harmonised to make compliance more manageable. A few examples are mentioned below.
The following components of payroll tax differ from state to state:
Understanding these variations is essential to ensure your business remains compliant wherever it operates.
Understanding general payroll tax procedures is essential, but it’s equally important to know the specific rules and thresholds that apply in each Australian state or territory where your business operates. This is because payroll tax is governed at the state level, and each jurisdiction has its own rates, exemption thresholds, registration criteria, lodgement schedules, and rules around items like contractor payments or regional discounts. Failing to consider these state-based variations can lead to underpayment, penalties, or missed opportunities for exemptions and rebates. For employers with operations across multiple states, knowing how to correctly apportion wages and apply group thresholds is critical for compliance and avoiding costly errors. In short, understanding both the national framework and local rules ensures accurate, efficient, and lawful payroll tax management.
Now, let’s look into some important state-specific details that show how rates, thresholds, and even other rulings can differ among states. The information below is up-to-date with the latest changes effective from 1 July 2025.
In NSW, the payroll tax threshold is $1.2 million, and the standard tax rate is 5.45%. One notable feature in NSW is the inclusion of payments to contractors as part of taxable wages, unless specific exemptions apply. NSW also enforces grouping provisions, which require businesses under common control or ownership to combine wages for payroll tax purposes.
Victoria applies a payroll tax threshold of $1,000,000 and a standard tax rate of 4.85%. However, eligible regional employers benefit from a reduced rate of 1.2125%. For employers whose total taxable wages lie between $3 million - $5 million, the deductions will be subject to a phase-out, while no deduction will be available for taxable wages above $5 million. Regional concession is designed to support employment outside metropolitan areas. As with other states, grouping and contractor provisions also apply.
Queensland has a higher tax-free threshold of $1.3 million and a standard rate of 4.75%. However, the rate of 4.75% will only apply to total taxable wages equal to or less than $6.5 million. For taxable wages above that, the tax rate is 4.95%. A distinguishing feature is the availability of rebates for apprentice and trainee wages. Employers may also benefit from regional concessions if they operate outside South East Queensland. Contractor payments and grouping are regulated under Queensland legislation.
In South Australia, the threshold is $1.5 million, and payroll tax is calculated on a tiered, progressive scale from 0% to 4.95%. The progressive rate system is unique to SA and means that employers pay different rates depending on their total taxable wages. However, this is only for total taxable wages upto $1.7 million and for wages above that, the tax rate is 4.95%. SA also applies grouping provisions and includes most contractor payments unless exempt.
WA has a threshold of $1 million and a fixed tax rate of 5.5%. Grouping rules are enforced, and employers with multiple businesses must aggregate wages across all entities. WA closely monitors contractor relationships, and employers must meet specific criteria to exclude contractor payments from taxable wages.
Tasmania uses a two-tier system for payroll tax. The threshold is $1.25 million, with tax rates ranging from 4% to 6.1%, depending on the size of the total wages. This stepped structure means higher wages attract higher tax rates. Tasmania also offers exemptions for maternity leave and certain charitable organisations.
The ACT offers the highest payroll tax threshold in the country at $2 million, with a flat rate of 6.85%. This high threshold provides relief for many smaller employers, but once exceeded, all taxable wages are subject to the full rate. Moreover, a payroll tax surcharge rate applies to large businesses in the ACT. The additions are 0.5% and 1.0% for businesses with total annual taxable wages above $50 million and above $100 million, respectively. ACT legislation includes standard grouping and contractor rules.
The NT has a tax-free threshold of $2.5 million (from 1 July 2025) and a flat tax rate of 5.5%. It also applies grouping provisions, and employers should appoint a Designated Group Employer (DGE) to manage filings, and NT also offers exemptions for apprentices and trainees as part of recent reforms. Most contractor payments are included unless exemptions apply under specific circumstances.
As each Australian state and territory administers its own payroll tax system, employers must understand that they’re paying payroll tax to the specific revenue office of the jurisdiction where wages are paid, not to a central authority. This means staying up to date with each state’s unique thresholds, rates, grouping rules, and exemptions is essential.
You must also self-assess your obligations accurately and lodge returns through the appropriate online portal to avoid penalties. Regularly checking your local state revenue office's website ensures you’re informed about legislative updates or changes affecting your compliance.
Whether you're operating in a single jurisdiction or across multiple ones, success lies in correctly applying each region’s rules and staying proactive with updates, empowering your business to manage payroll tax efficiently and confidently.