Navigating Payroll Tax in Australia: A State-by-State Guide

Tax Compliance•8 min read•By Single Touch Plus Team•Published on April 28, 2025

Payroll tax is a significant business cost in Australia, levied by each state and territory government. It's essentially a tax on the wages paid by employers to their employees. Understanding how it works and, crucially, how it's calculated in each jurisdiction is vital for businesses operating across state lines or even within a single state.

The Basics of Australian Payroll Tax

Think of payroll tax as a state-based income tax on employers. It's not deducted from employees' wages; instead, it's an additional cost borne by the employer. The revenue generated from payroll tax is used by state and territory governments to fund various public services.

Generally, payroll tax becomes payable once an employer's total wages exceed a certain tax-free threshold within a financial year (July 1st to June 30th). This threshold and the tax rate vary significantly between states and territories.

Key Concepts to Understand:

Taxable Wages: This includes gross salaries and wages, allowances, bonuses, commissions, employer contributions to superannuation, and the value of certain fringe benefits.
Threshold: This is the annual amount of taxable wages above which payroll tax becomes payable. Many states also have a monthly threshold.
Tax Rate: This is the percentage applied to the taxable wages exceeding the threshold to calculate the payroll tax liability.
Financial Year: In Australia, the financial year runs from July 1st to June 30th. Payroll tax calculations and thresholds are typically based on this period.
Grouping: In some cases, related businesses (e.g., companies under common control) are grouped together for payroll tax purposes. This means their combined wages are considered when determining if the threshold is exceeded, although each entity remains individually liable for their portion of the tax.

State-by-State Breakdown of Payroll Tax

Let's delve into the specifics of each Australian state and territory as of the 2024-2025 financial year. Keep in mind that these rates and thresholds can change annually, so it's crucial to refer to the relevant state revenue office for the most up-to-date information.

1. New South Wales (NSW)

Threshold (Annual): $1,200,000
Tax Rate: 5.45%
Calculation: If your annual taxable wages exceed $1,200,000, the payroll tax is calculated at 5.45% of the amount above the threshold.
Example: If your annual taxable wages are $1,500,000, the taxable amount is $300,000 ($1,500,000 - $1,200,000). The payroll tax payable would be $300,000 * 0.0545 = $16,350.
NSW also offers various exemptions and concessions for eligible employers.

2. Victoria (VIC)

Threshold (Annual): $700,000
Tax Rate: 4.85% (general rate). A higher rate applies to businesses with national payrolls above a certain level.
Calculation: Similar to NSW, the tax is calculated on the taxable wages exceeding the annual threshold.
Example: If your annual taxable wages are $900,000, the taxable amount is $200,000 ($900,000 - $700,000). The payroll tax payable at the general rate would be $200,000 * 0.0485 = $9,700.
Victoria also has specific rules regarding grouping and offers some exemptions.

3. Queensland (QLD)

Threshold (Annual): $1,300,000
Tax Rate: Progressive rates apply, ranging from 4.75% to 6.45% depending on the total annual taxable wages.
Calculation: Due to the progressive nature, the calculation is more complex. Generally, there's a formula that takes into account the total wages and the applicable rate band.
Example: For the 2024-2025 financial year, for employers with total wages between $1,300,000 and $6,500,000, the rate is 4.75%. For wages above this, the rate increases incrementally.
Queensland offers various deductions and exemptions.

4. Western Australia (WA)

Threshold (Annual): $1,000,000
Tax Rate: 5.5%
Calculation: Payroll tax is calculated on the taxable wages exceeding the annual threshold.
Example: If your annual taxable wages are $1,400,000, the taxable amount is $400,000 ($1,400,000 - $1,000,000). The payroll tax payable would be $400,000 * 0.055 = $22,000.
WA also has provisions for grouping and exemptions.

5. South Australia (SA)

Threshold (Annual): $1,500,000
Tax Rate: 4.85%
Calculation: Calculated on the taxable wages exceeding the annual threshold.
Example: If your annual taxable wages are $1,800,000, the taxable amount is $300,000 ($1,800,000 - $1,500,000). The payroll tax payable would be $300,000 * 0.0485 = $14,550.
SA provides some exemptions and concessions for eligible businesses.

6. Tasmania (TAS)

Threshold (Annual): $1,250,000
Tax Rate: 4.0%
Calculation: Calculated on the taxable wages exceeding the annual threshold.
Example: If your annual taxable wages are $1,650,000, the taxable amount is $400,000 ($1,650,000 - $1,250,000). The payroll tax payable would be $400,000 * 0.04 = $16,000.
Tasmania generally has a simpler payroll tax system compared to some other states.

7. Australian Capital Territory (ACT)

Threshold (Annual): $2,000,000
Tax Rate: Progressive rates apply, ranging from 0% to 6% depending on the total annual taxable wages.
Calculation: Similar to Queensland, the calculation involves applying different rates to different portions of the taxable wages. Employers with wages below the threshold pay no payroll tax.
Example: For the 2024-2025 financial year, employers with total wages between $2,000,000 and $3,000,000 pay a rate of 2.0%, with increasing rates for higher wage brackets.

8. Northern Territory (NT)

Threshold (Annual): $1,750,000
Tax Rate: 5.5%
Calculation: Calculated on the taxable wages exceeding the annual threshold.
Example: If your annual taxable wages are $2,150,000, the taxable amount is $400,000 ($2,150,000 - $1,750,000). The payroll tax payable would be $400,000 * 0.055 = $22,000.
The NT also offers some exemptions and concessions for certain industries and employers.

Important Considerations for Businesses:

Registration: Once your business's wages exceed the threshold in a particular state or territory, you are required to register for payroll tax with the relevant revenue office.
Lodgement and Payment: Payroll tax is typically lodged and paid monthly. Deadlines vary between jurisdictions.
Record Keeping: Maintaining accurate records of wages and other relevant information is crucial for payroll tax compliance.
Interstate Operations: If your business operates in multiple states or territories, you'll need to understand the payroll tax obligations in each jurisdiction where you have employees. You may need to apportion wages across different states.
Exemptions and Concessions: Be sure to investigate any potential exemptions or concessions that may apply to your business, such as those for apprentices, trainees, or specific industries.

Staying Compliant

Payroll tax is a complex area, and it's essential to stay informed about the specific rules and regulations in each state and territory where your business operates. Regularly check the websites of the relevant state and territory revenue offices for the latest updates on thresholds, rates, and any legislative changes. Consulting with an accountant or payroll specialist can also help ensure your business remains compliant.

By understanding the nuances of payroll tax in each Australian jurisdiction, businesses can effectively manage their financial obligations and contribute to the public services that benefit the entire community.