If you are here to know how to handle your payroll tax in the Australian Capital Territory (ACT), you are in the right place. This article will help you break down everything you need to know about payroll tax in the ACT. From registration to paying your tax, let's discuss the procedure specific to ACT.
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What is Payroll Tax?
Payroll tax is a state or territory tax charged on the wages paid to your employees. It depends on the total taxable wages you pay. Payroll tax is a responsibility of the employer, and it is self-assessed, which means that you are responsible for calculating, lodging returns and paying your own tax. Therefore, it is essential to be informed about the correct information and rulings regarding payroll tax in your area.
In 2007, efforts were made to harmonise payroll tax rulings across Australia and most rulings generally apply to all states. However, there still exist differences and state-specific rulings that should be studied and adhered to.
Registering for Payroll Tax in the ACT?
In ACT, you must register for payroll tax if your total Australian taxable wages exceed the monthly threshold set by the ACT Revenue Office. The monthly threshold for payroll tax in ACT is $166,666.66, or $2 million per year. This means that employers with taxable wages that exceed these amounts on a monthly or annual basis will be liable for payroll tax. In the case of a group of companies, liability depends on the combined wages of the group.
As an employer liable for payroll tax in the ACT, you are legally required to apply for registration within seven days from the end of the month during which the wages exceeded the threshold. It is important to know that failure to apply within seven days is considered an offence. You can register for payroll tax through the online registration portal on the ACT Revenue Office’s Website.
Employer Status
This is unique to ACT Payroll tax rulings. Employer status defines and declares whether an employer is or is not a part of a group. When registering for payroll tax as well as lodging returns in the ACT, you must declare your employer status. This is important as the employer status not only affects the possibility of claiming the threshold but also how much of the threshold can be claimed.
There are three employer status types:
- Independent - An employer that is not a part of a group, operates as a single entity and therefore can claim the threshold.
- Designated Group Employer (DGE) - In a group of employers, one member should be nominated as DGE, and only the DGE can claim the payroll tax threshold.
- Ordinary Group Employer - This is a member of a group who is not the DGE and therefore cannot claim the threshold.
Incorrectly declaring your employer status may lead to overpayments or underpayments, and such underpayments will result in unnecessary legal troubles, such as penalty tax and interest.
Payroll Tax Rate
As of the 2025–26 financial year:
- The payroll tax rate is 6.85% on taxable wages over the threshold ($2 million per year).
- This rate applies to all taxable wages above the relevant tax-free threshold amount. The tax-free threshold is the same as the annual threshold.
- From 1 July 2025, a payroll tax surcharge rate applies for large businesses, at an additional.
- 0.5% on Australia-wide wages above $50 million per annum
- 1.0% on Australia-wide wages above $100 million per annum
- Therefore, the payroll tax rate for an employer with annual Australia-wide wages
- Under $50 million is 6.85%
- Between $50 million and $100 million is ( 6.85% + 0.5% ) = 7.35%
- Over $100 million is ( 6.85% + 1.0% ) = 7.85%
Lodging Returns and Payments
Employers in the ACT who exceed the monthly tax-free threshold must lodge payroll tax returns each month through the ACT Revenue Office’s Self Service Portal, except for June. Instead of a separate June return, June wages are included in the annual reconciliation, which is due by 28 July.
This annual return ensures that the figures reported throughout the year are accurate and allows for any necessary adjustments, such as when an employer unexpectedly exceeds the Australia-wide wages threshold and becomes subject to a different surcharge rate.
Monthly returns and payments are normally due on the seventh day of the following month, although the December return is given extra time and is due by 14 January to account for the Christmas and New Year shutdown period. If a due date falls on a weekend or public holiday, lodgement and payment can be made on the next working day.
After receiving access to the self-service portal, you should log in to the service to lodge monthly returns and annual reconciliation. It provides a personalised tax calculation based on your employer status.
What Counts as Taxable Wages?
Payroll tax applies to a wide range of employee-related payments, including:
- Salaries and wages
- Superannuation contributions
- Bonuses and commissions
- Allowances (excluding exempt ones)
- Fringe benefits (grossed-up)
- Eligible termination payments
- Payments to contractors in certain circumstances
- Director’s fees
- Payments to employment agencies
- Wages paid to a sick or injured employee
- Employer contributions to employee share schemes
Exemptions and Deductions
Some payments are exempt from payroll tax. For example:
- Paid parental leave
- Paid maternity, adoption and primary career leave
- Genuine redundancy payments
- Apprentice or trainee wages (if part of an approved scheme)
- Workers' compensation payments made in accordance with workers' compensation schemes
Employers can also claim a deduction based on their wage levels. If you pay wages both in the ACT and other jurisdictions, your deduction entitlement is proportionally adjusted.
Contractors
In many cases, Australian businesses hire contractors or subcontractors instead of hiring permanent employees. The payments made to such contractors are considered taxable wages and, therefore, subject to payroll tax unless they are exempt. For this purpose, it is important to distinguish a worker as an employee or as an independent contractor.
In the ACT, payroll tax can apply to contractors if their working arrangement is considered similar to that of an employee. This is assessed on a case-by-case basis, looking at factors such as control over work, delegation rights, provision of tools, and who bears the business risk. Many contractor arrangements fall under what are called “relevant contracts,” meaning payments to those contractors (including superannuation and fringe benefits) are treated as wages and are subject to payroll tax, unless an exemption applies.
Exemptions are available in specific situations, such as when the contract is mainly for supplying goods rather than labour, when services are only required occasionally and the contractor serves the general public, when contractors deliver goods in their own vehicle, or when a contractor operates a genuine independent business.
Deductions may also apply to contracts that include both labour and materials. However, exemptions don’t apply if the contract is designed to avoid payroll tax or if non-exempt services are included.
Grouping Provisions
In the ACT, payroll tax grouping rules apply when businesses are connected through ownership, control, or the use of common employees. When a group exists, all wages are combined to determine payroll tax liability, and only one member can claim the tax-free threshold. Although each member must register separately, in some cases, one member may be allowed to lodge a single return for the group. Businesses can be grouped if they are,
- Related corporations
- Share employees
- Have the same person or entity holding a controlling interest
- If a person/entity belongs to more than one group
All members of a payroll tax group are jointly and severally liable for the group’s tax debts, meaning that if one defaults, others can be pursued for payment. Employers must notify the ACT Revenue Office when a business joins or leaves a group. Grouping provisions are harmonised across Australia and can even extend to overseas businesses linked to Australian operations.
Conclusion
Payroll tax in the ACT is a significant obligation for medium to large employers. While ACT follows common rulings for payroll tax, payroll tax in ACT also consists of elements like tax surcharge rate and employer status that are specific to the territory. The ACT provides a Self Service Portal that makes it convenient to handle payroll tax by registering your business and then logging in to your portal to lodge returns and make payments.
(Follow this link to know more about the Self Service Portal - Self Service Portal | ACT Revenue Office - Website
By understanding and being updated about the thresholds, rates, reporting requirements, grouping provisions and all relevant information, your business can handle payroll tax accordingly, avoid penalties and ensure smooth compliance. In addition to being aware of the most recent and state-specific information, it's always advisable to consult a tax adviser or contact the ACT Revenue Office for guidance if you're unsure about your liability, grouping status or to clarify any other doubts.
Follow this link to check on Payroll tax in the ACT - Payroll tax | ACT Revenue Office - Website
Always stay informed, register as soon as your wages approach the threshold, keep accurate and up-to date payroll records, submit monthly and annual returns and make payments on time to stay compliant.
