Payroll tax in Victoria is one of the key obligations for employers, and understanding how it works can help businesses remain compliant while avoiding penalties. Victoria has its own thresholds, surcharges, exemptions, and rules that employers must follow carefully. Below is a detailed guide covering everything you need to know as an employer operating in Victoria.
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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, since payroll tax is administered by the state government, there are differences and state-specific rulings, which should be studied and adhered to.
First, let’s go through the most recent changes to the payroll tax in Victoria.
The latest changes to payroll tax in Victoria offer some relief for smaller businesses, while also tightening rules for larger employers. The key updates include:
These changes mean more small businesses will now be exempt from payroll tax, while larger businesses will face stricter rules and pay more tax.
You are liable for payroll tax in Victoria if you employ in Victoria and your total Australian wages go above the set threshold. Liable employers should register with the State Revenue Office (SRO) Victoria. This includes businesses based in Victoria as well as interstate employers who pay wages to employees in Victoria.
From 1 July 2025 to 30 June 2026, payroll tax applies if you pay wages in Victoria and your total taxable Australian wages are:
Employers should also be mindful of payroll tax grouping rules, which combine the wages of related businesses. Even if a single business does not reach the threshold, it may still be liable if the group’s combined wages exceed it.
The registration process is straightforward and can be completed online through PTX Express. You will need:
Once registered, you can create a login in PTX Express, where you will lodge returns, make payments, and manage records. Not registering when required can result in penalties and interest, so employers should register as soon as they are liable.
To register - PTE Express - Registration
To login - PTE Express - Login
In addition to the standard payroll tax, Victoria applies two surcharges to large employers. They apply if your Australian wages exceed $10 million annually ($833,333 monthly), with an additional higher rate applying if wages exceed $100 million annually ($8,333,333 monthly).
The two surcharges are:
The surcharges are calculated on the same basis, and combined, they add
Therefore, depending on your wages, you’ll be paying an extra 1% or 2% on top of the standard rate. Surcharges are paid concurrently with payroll tax, either monthly or annually, and no separate return is required.
Payroll tax in Victoria is self-assessed, which means employers calculate and report their own liability. If you are registered, you must lodge a return every month using PTX Express, even if no payroll tax is payable for that month. The steps include:
Payment must be made by the 7th of the following month or the next business day. The payroll tax rate is 4.85% except for regional Victorian employers.
Each year, employers must reconcile all their taxable wages and payroll tax payments through the electronic annual reconciliation system in PTX Express. This ensures the total amount of payroll tax paid during the year matches the wages declared. The annual reconciliation must be lodged by 21 July or the next business day each year. The deadline should be strictly adhered to, as missing it will result in a penalty tax and interest.
Key details needed include:
Employers can prepare calculations using worksheets provided by the State Revenue Office to avoid errors - Actual wages worksheet document | State Revenue Office
Victoria offers a lower payroll tax rate for regional employers. From 1 July 2021, the rate is 1.2125%. To qualify, at least 85% of your Victorian taxable wages must be paid to employees who work mainly in regional Victoria. To claim the reduced rate, you must meet the 85% rule over the entire financial year.
Wages include more than just salaries. For payroll tax purposes, they cover a wide range of payments, such as:
These payments are taxable whether employees are permanent, temporary, or casual.
Certain types of wages are exempt from payroll tax in Victoria. These include:
Refer to this list of taxable and exempt wages - Payroll tax A-Z of taxable or exempt items | State Revenue Office
Payments to contractors can be treated as wages and subject to payroll tax. Contractors may be sole traders, partnerships, companies, or trusts, and exemptions apply in some cases. If no exemption is available, the employer engaging the contractor is responsible for payroll tax.
Employment agencies also fall under payroll tax rules. Where an agency places workers with a client, the agency is deemed the employer and liable for payroll tax on the payments made to the worker. Exemptions that apply to contractors do not apply to employment agency contracts.
For more on Contractors - Contractors | State Revenue Office
For more on Employment Agencies - Employment agencies | State Revenue Office
Payroll tax grouping ensures that businesses with common control or shared operations cannot avoid liability by splitting wages across multiple entities. Businesses are grouped if:
In a group, all wages are added together, and only one threshold is available for the group. Each member must still register and lodge returns, but the designated group employer is responsible for claiming the threshold.
For more on grouping provisions - Grouping | State Revenue Office
Payroll tax in Victoria can feel complicated, with its thresholds, phase-outs, surcharges, exemptions, and grouping rules. But with the right knowledge and systems in place, employers can stay compliant and avoid unnecessary costs. What matters most is keeping accurate payroll records, registering on time, and lodging your monthly and annual returns without delay.
For HR teams and business owners, understanding these obligations is not just about compliance; it is about protecting your business from penalties and building confidence in the way you manage employees. Taking the time to get payroll tax right means one less headache for your business, and more time to focus on growth and people.
Always check the State Revenue Office Victoria website - Payroll tax | State Revenue Office regularly to stay updated with the latest payroll tax rules and requirements.