Payroll tax is administered by state and territory revenue offices, not the ATO — which means the rules, rates, thresholds, and grouping provisions differ across eight jurisdictions. For businesses operating in multiple states, or for accounting practices with clients across state lines, understanding the differences is essential.
Current thresholds and rates (2026-27)
| Jurisdiction | Annual threshold | Rate |
|---|---|---|
| NSW | $1,200,000 | 5.45% |
| VIC | $700,000 | 4.85% (+ mental health levy 0.5% over $10M) |
| QLD | $1,300,000 | 4.75% (4.95% over $6.5M) |
| SA | $1,500,000 | 4.95% |
| WA | $1,000,000 | 5.5% (scaling 5.5%–6.5%) |
| TAS | $1,250,000 | 4.0% |
| ACT | $2,000,000 | 6.85% |
| NT | $1,500,000 | 5.5% |
Always verify current thresholds with the relevant state revenue office — they are adjusted periodically.
What counts as wages?
Payroll tax applies to a broad definition of wages, including:
- Ordinary wages and salaries
- Superannuation contributions (most states include employer super above the SG rate)
- Allowances (with some exemptions for genuine expense reimbursements)
- Fringe benefits (the grossed-up value in most states)
- Director fees
- Contractor payments in certain circumstances
The grouping provisions
Grouped businesses are treated as a single employer for payroll tax purposes. If multiple entities are grouped, they share one threshold between them — often eliminating the threshold benefit entirely.
Entities are grouped if they are:
- Related corporations (under the Corporations Act definition)
- Entities where a person controls both
- Entities that share common employees, equipment, or premises (in some states)
This is the most common trap for multi-entity business structures. A business owner with three separate companies (a trading entity, a property entity, and a holding company) may assume each gets its own threshold. If they are grouped, the three wages are added together and the threshold applies once.
Contractor provisions
Most states have provisions that deem contractor payments as wages for payroll tax purposes in certain circumstances. The general rule: if a contractor provides services predominantly involving the labour of one person, and provides those services principally to one client, the payments may be deemed wages.
Exceptions typically include:
- Contractors who provide services to the public generally (not principally to one client)
- Contractors who provide services through an incorporated company with multiple employees
- Contractors engaged for specific tasks (not ongoing)
The contractor provisions operate independently of the ATO employee/contractor distinction. A worker classified as a genuine contractor for ATO purposes may still generate payroll tax liability for the client in some states.
Monthly vs. annual lodgement
- Monthly lodgement: Required for businesses paying annual payroll tax above a threshold (typically $150,000 per year in most states). Monthly lodgements are due 7 days after the end of the month (varies by state).
- Annual reconciliation: All registered businesses must lodge an annual return reconciling total wages for the year, even if lodging monthly.
For businesses that grow past the monthly lodgement threshold during the year, failing to switch to monthly returns results in late payment penalties.
Common compliance mistakes
Not registering when the threshold is exceeded. Payroll tax registration obligations arise when wages exceed the threshold, not when they are discovered. Businesses that have been exceeding the threshold without registering face back-payments for all open years (typically 5 years) plus interest and penalties.
Not grouping related entities. As discussed above, grouping can eliminate the threshold benefit for multiple related entities.
Missing contractor payments. Not identifying which contractor payments are caught by the contractor provisions is common.
Incorrectly treating super contributions. Most states include employer super contributions above the mandatory SG rate as wages. Some bookkeepers only include the SG contributions and miss additional super paid to directors.
Practical workflow for bookkeepers
- Determine whether the client is registered for payroll tax in each applicable state
- Identify all related entities and apply the grouping test
- Confirm which payments constitute wages in each state
- Track monthly wages against the threshold
- Lodge monthly returns where required
- Prepare the annual reconciliation and lodge by the due date in each state
For businesses near the threshold, monitoring wages monthly and advising the client before they cross is a high-value service.