Payroll tax is one of the most commonly misunderstood taxes in Australia — not because it's conceptually complex, but because it is levied by eight different state and territory governments, each with their own thresholds, rates, grouping rules, and exemptions. A business operating in multiple states faces a different payroll tax calculation in each, and the interaction between jurisdictions can be genuinely tricky.
This guide covers the 2026 position across all states and territories, with notes on the key issues bookkeepers should watch for.
Why Payroll Tax Falls to Bookkeepers
Payroll tax is based on total Australian taxable wages. For a single-jurisdiction business, the calculation is straightforward: if annual wages exceed the threshold, tax is payable on the excess at the applicable rate. For multi-state businesses, the calculation involves pro-rating the threshold across jurisdictions based on the wages paid in each.
Most payroll tax obligations are self-assessed and lodged monthly (with an annual reconciliation). This means the bookkeeper — or payroll manager — needs to calculate and remit payroll tax each month, not wait for a tax agent at year-end.
2026 Thresholds and Rates
| State | Annual threshold | Rate |
|---|---|---|
| New South Wales | $1,200,000 | 5.45% |
| Victoria | $900,000 | 4.85% |
| Queensland | $1,300,000 | 4.75% |
| Western Australia | $1,000,000 | 5.5% |
| South Australia | $1,500,000 | 4.95% |
| Tasmania | $2,000,000 | 4.0% |
| Australian Capital Territory | $2,000,000 | 6.85% |
| Northern Territory | $1,500,000 | 5.5% |
New South Wales
According to Revenue NSW for the 2026 financial year, the threshold is $1,200,000 per annum ($100,000 per month) and the rate is 5.45% on wages above the threshold.
- Threshold: $1,200,000 per annum ($100,000 per month)
- Rate: 5.45% on wages above threshold
- Notes: Reduced threshold of $150,000–$1.2M for businesses with annual wages between $150,000 and $1.7M (tapered relief). Lodgement: monthly, due 7th of the following month.
Victoria
- Threshold: $900,000 per annum ($75,000 per month)
- Rate: 4.85% (regional employers: 1.2125% on regional wages)
- Notes: Regional employer concession applies where >85% of employees are based in regional Victoria. Threshold is lower than most states — catches mid-sized businesses early.
Queensland
- Threshold: $1,300,000 per annum
- Rate: 4.75% (up to $6.5M); 4.95% above $6.5M
- Notes: Apprentice and trainee wages are exempt. QLD has a more generous threshold than VIC but the tiered rate bites for larger employers.
Western Australia
- Threshold: $1,000,000 per annum
- Rate: 5.5% (thresholds apply for businesses between $1M–$7.5M)
- Notes: WA has a complex tapering system. Businesses with taxable wages between $1M and $7.5M receive a partial deduction from the threshold. Above $7.5M, the full 5.5% applies with no threshold offset.
South Australia
- Threshold: $1,500,000 per annum
- Rate: 4.95%
- Notes: SA has one of the more generous thresholds. Apprentice wages are 50% exempt. Monthly lodgement due by the 14th.
Tasmania
- Threshold: $2,000,000 per annum
- Rate: 4.0%
- Notes: Tasmania's threshold is the highest in the country. Very few small-to-medium businesses in Tasmania are liable. Lower rate than most mainland states.
Australian Capital Territory
- Threshold: $2,000,000 per annum
- Rate: 6.85%
- Notes: ACT has one of the highest rates despite the high threshold. Apprentices and trainees are exempt. Lodge and pay monthly, due 7th.
Northern Territory
- Threshold: $1,500,000 per annum
- Rate: 5.5%
- Notes: NT payroll tax has historically been the least-common obligation (due to the relatively small employer base) but applies on the same principles.
The Grouping Rules — the Most Common Trap
If related entities — companies under common ownership or control — operate in the same or different states, the grouping provisions require their wages to be aggregated for threshold purposes. A single threshold is shared across the group.
This catches a very common structure: a business owner who runs several companies (e.g., a trading company, a property company, and a trust employing staff). Even if each entity individually falls below the threshold, the group as a whole may be liable — and each state applies its own grouping rules.
The practical effect: bookkeepers acting for a group of related entities should aggregate wages across all entities before determining whether payroll tax applies.
Contractor Wages
One frequently overlooked area: contractor labour can be treated as wages for payroll tax purposes. The contractor provisions vary by state but generally capture payments to contractors who:
- Work substantially full-time for the principal
- Are not genuinely running an independent business
- Provide labour rather than a result
This means that businesses using large numbers of sub-contractors (construction, labour hire, IT services) may have a payroll tax obligation on those payments even if they have no direct employees. Many bookkeepers — and clients — are unaware of this.
Interstate Workers
Where an employee works across multiple states (e.g., a fly-in fly-out worker, a travelling salesperson, or a remote worker who lives in NSW but is employed by a VIC company), wages must be allocated to the state where the work is performed. For remote workers, wages are generally attributed to the state where the employee is based (where they work from home).
Post-pandemic, remote work has made this genuinely complex. A company headquartered in Melbourne with staff working from home across three states has a payroll tax position in each.
Monthly Calculation Mechanics
For a business above the threshold, the monthly liability is calculated as:
Monthly taxable wages × (annual threshold / 12) — apply rate to excess
At year-end, an annual reconciliation is lodged which true-ups the total wages paid, applies any annual adjustments (new hires, termination payments, fringe benefits), and confirms the total annual liability.
Taxable wages include:
- Gross wages and salaries
- Directors' fees
- Annual leave payments, including leave loading
- Bonuses, commissions, allowances
- The grossed-up value of fringe benefits (using the type 2 gross-up rate)
- Contractor payments that meet the contractor provisions
Excluded:
- Apprentice and trainee wages (in states that exempt them)
- Wages paid to employees while on parental leave in some states
- Commonwealth government wage subsidies in some states
Practical Tips
- Register in each state where the threshold is breached — registration is not automatic; each state revenue office requires separate registration
- Aggregate related entity wages before assuming the threshold hasn't been reached
- Review contractor payments — particularly if the business uses labour-hire firms or long-term contractors
- Reconcile to payroll at year-end — the payroll tax annual reconciliation should tie to the payroll system's total wages figure, with an audit trail for any differences
- Update fringe benefits values — the grossed-up FBT value of benefits must be included in taxable wages; this should be sourced from the FBT return
Payroll tax is one of the taxes most likely to result in a compliance gap for growing businesses — especially those that cross state boundaries or bring on a large contractor workforce. Getting it right from the outset avoids the interest and penalties that come with late registration.