Payroll Tax by State (2026): Thresholds, Rates, Grouping and Contractors

Payroll tax is the state tax that arrives as a surprise when a growing business crosses an invisible line. It isn't run by the ATO, it isn't the same in any two states, and it counts more than wages — super, fringe benefits and some contractor payments all go into the total. This guide is for Australian employers approaching a seven-figure payroll, and for anyone with staff in more than one state. It sets out every state's threshold and rate for 2026-27, explains how thresholds shrink and get shared, covers grouping and the contractor rules, and compares what the same payroll costs from Sydney to Darwin.

Quick answer

Payroll tax is a state and territory tax on wages above an annual threshold. For 2026-27 the thresholds run from A$1 million (Victoria and WA) to A$2.5 million (NT), and the main rates from 4% (Tasmania's lower band) to 6.75% (ACT). The threshold is based on your — or your group's — Australia-wide wages and is split between the states you pay wages in.

• NSW: 5.45% above A$1.2 million — unchanged for 2026-27

• ACT: threshold cut to A$1.75 million from 1 July 2026, with new rate brackets

• Taxable wages include super, fringe benefits, directors' fees and some contractor payments

• Related businesses are grouped and share one threshold

• Returns are usually monthly, with an annual reconciliation after 30 June

What payroll tax is and who pays it

Each state and territory has its own Payroll Tax Act. Since 2007 most have progressively harmonised the definitions of wages, grouping and contractors, but each sets its own threshold, rate and concessions — and those differ a lot. The tax is paid by the employer, never deducted from staff pay, and it's on top of PAYG withholding and super guarantee.

You're liable in a state when your taxable wages there, combined with your wages in other states and those of your group, exceed the threshold. "Wages" is wide. It includes salaries, bonuses, commissions, leave payments, allowances above exempt rates, employer super contributions (including salary-sacrificed super), the grossed-up value of fringe benefits, directors' fees, termination payments and, in many cases, payments to contractors and through employment agencies.

Some wages are exempt across most states — for example, wages of eligible apprentices and trainees (under conditions that vary by state), parental leave pay, and wages paid by certain charities and public hospitals. Each state's exemptions list is worth reading before you assume a payment is taxable.

How a state works out your payroll tax

Step 1

Total Australian wages (incl. group)

Step 2

Threshold / deduction

may taper as wages grow

Step 3

Share for this state

state wages ÷ Australian wages

Step 4

Tax

(state wages − state deduction) × rate

Payroll tax thresholds and rates by state for 2026

The table below shows the position for the 2026-27 financial year. "Threshold" is the annual tax-free amount (some states call it a deduction) for an employer paying wages only in that state for the whole year.

What changed for 2026-27

The biggest change for small and mid-sized employers is in the ACT. From 1 July 2026, under the Taxation Administration (Amounts and Rates—Payroll Tax) Determination 2026, the tax-free threshold fell from A$2 million to A$1.75 million, and the old surcharge for large employers was folded into a set of brackets based on Australia-wide wages: 6.75% up to A$20 million, 6.85% to A$50 million, 7.35% to A$100 million, 7.85% to A$150 million and 8.75% above that. An ACT employer with A$1.9 million of wages that paid nothing last year now pays on A$150,000.

The Northern Territory announced in its May 2026 Budget a 6.5% rate for employers and groups with Australia-wide wages of A$100 million or more, from 1 July 2026; smaller employers keep 5.5% and the A$2.5 million threshold, which rose from A$1.5 million on 1 July 2025. NSW, Victoria, Queensland, WA, SA and Tasmania kept their thresholds and rates for 2026-27. South Australia's June 2026 Budget left its payroll tax rates unchanged.

State notes worth knowing

Victoria adds two surcharges for big employers: a mental health and wellbeing surcharge and a temporary COVID-19 debt surcharge (until 30 June 2033). Together they add 1% on Victorian wages where national wages exceed A$10 million, and 2% above A$100 million. Regional Victorian employers — those with at least 85% of their Victorian wages paid to regional employees — pay 1.2125%.

Queensland offers regional employers a 1% discount on the rate until 30 June 2030, and charges its own mental health levy on large payrolls. WA and Queensland both shrink the threshold as wages grow, so a WA business with A$7.5 million of Australian wages pays 5.5% on everything.

South Australia works on a maximum deduction of A$600,000 with a sliding rate that produces no tax up to A$1.5 million of Australian wages, phases up to the full rate by A$1.7 million and charges 4.95% above that. RevenueSA's online system calculates the variable rate for you.

Tasmania has two thresholds: wages between A$1.25 million and A$2 million are taxed at 4%, and wages above A$2 million at 6.1%. Employers who don't want to claim a threshold can pay the higher rate on all Tasmanian wages.

How the threshold is shared across states and groups

Payroll tax looks at the whole Australian payroll, not each state in isolation. If you pay wages in more than one state, each state lets you claim only the share of its threshold that matches its share of your Australian wages. Revenue NSW's formula, for example, is the NSW threshold × NSW wages ÷ Australian wages. The other states use the same idea.

That's why opening a small office interstate can trigger payroll tax there even when the local wages are modest — the test is whether your Australian wages exceed the threshold, not the local wages. You must register in each state where you pay wages and your Australian wages exceed that state's threshold.

Part-year employers get a pro-rated threshold. A business that starts employing in January claims roughly half the annual amount: NSW's own example shows A$1.2 million × 184 ÷ 365 = A$604,931.51 for an employer that employed for 184 days.

Grouping

Grouping stops a business owner splitting one operation into several entities, each with its own threshold. Businesses are grouped if:

• they are related bodies corporate under the Corporations Act;
• they use common employees — staff of one entity working in the business of another;
• the same person or set of people has a controlling interest in each (generally more than 50%, including through trusts); or
• a "tracing" rule links them through chains of ownership.

A group gets one threshold, based on the group's combined Australian wages, and nominates a designated group employer to claim it; every other member pays tax from the first dollar of its wages in that state. Each member remains jointly liable for the group's payroll tax. A state can exclude an entity from a group if its business is carried on independently, but you have to apply and prove it.

Check whether you're in a payroll tax group

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• Do you control more than 50% of another company, partnership or trust that pays wages?
• Do any employees work in the business of a related entity, even part-time?
• Is a family trust you control a shareholder in another employing business?
• Are two of your businesses related bodies corporate (parent and subsidiary)?
• If yes to any: add up the group's Australian wages and nominate one designated group employer

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Contractors: the relevant contract rules

The contractor provisions are where most payroll tax disputes happen. Under the "relevant contract" rules in the harmonised states, if a contractor supplies you with the services of a worker, the labour part of what you pay can be taxable wages — even when the contractor has an ABN and invoices you. Payments for materials, tools and equipment are excluded, and genuine employees of an employment agency are covered by separate agency rules.

In NSW, payments are exempt if any one of seven exemptions applies:

Each exemption has detailed conditions and needs evidence — a declaration alone often won't satisfy an auditor. The states' commissioners have published practice notes and rulings (Revenue NSW's is Commissioner's Practice Note CPN 007). Medical practices have been a flashpoint since the NSW Court of Appeal's 2022 decision in Thomas and Naaz, which held that payments to GPs under a service arrangement could be taxable; several states have since announced amnesties or exemptions for GP practices, so health businesses should check their state's current position.

Planning as your payroll approaches the threshold

Most small businesses cross a payroll tax threshold gradually — a new hire here, a pay rise there — and the first sign is often a letter from the revenue office matching their Single Touch Payroll and super data. Revenue offices share data with the ATO, so wages that show up in federal reporting are visible to the states. Planning a few months ahead avoids back tax, interest and penalties.

Start by working out your real payroll tax wages, not just gross salaries. Add employer super at 12%, the grossed-up value of any fringe benefits, directors' fees, and contractor payments that don't clearly fit an exemption. A business with A$1.1 million of gross salaries pays about A$132,000 in super guarantee on top, which alone takes it past the NSW A$1.2 million threshold.

Then check whether you're part of a group. Many family businesses have a second company or trust — a property-holding entity that employs a bookkeeper, or a related café — whose wages count towards the same threshold. If you are grouped, only one member gets the threshold, so the second business may be liable from its first dollar.

Finally, budget for the tax in your pricing. Payroll tax is a cost of employing, like super and workers compensation insurance, and once you're over the threshold every extra dollar of wages costs the state's rate on top. For a NSW employer, a new A$90,000 role costs an extra A$4,905 a year in payroll tax at 5.45%, plus payroll tax on that role's super. Some states also offer concessions — for apprentices and trainees, regional employers or new jobs — that can reduce the bill if you plan hires around them.

Worked example: the same A$1.6 million payroll in every state

Take a business, not part of any group, that pays A$1.6 million of taxable wages for the whole of 2026-27, all in one state. Here's roughly what it pays in each, ignoring regional concessions and exemptions.

Payroll tax on A$1.6 million of wages, 2026-27

State	Deduction	Taxed amount	Payroll tax
NSW	A$1,200,000	A$400,000	A$21,800
Victoria	A$1,000,000	A$600,000	A$29,100
Queensland	A$1,257,143	A$342,857	A$16,286
WA	A$907,692	A$692,308	A$38,077
SA	A$600,000	Variable rate band	Use RevenueSA's calculator
Tasmania	A$1,250,000	A$350,000 at 4%	A$14,000
ACT	A$1,750,000	Nil	A$0
NT	A$2,500,000	Nil	A$0

NSW

Deduction

A$1,200,000

Taxed amount

A$400,000

Payroll tax

A$21,800

Victoria

Deduction

A$1,000,000

Taxed amount

A$600,000

Payroll tax

A$29,100

Queensland

Deduction

A$1,257,143

Taxed amount

A$342,857

Payroll tax

A$16,286

WA

Deduction

A$907,692

Taxed amount

A$692,308

Payroll tax

A$38,077

SA

Deduction

A$600,000

Taxed amount

Variable rate band

Payroll tax

Use RevenueSA's calculator

Tasmania

Deduction

A$1,250,000

Taxed amount

A$350,000 at 4%

Payroll tax

A$14,000

ACT

Deduction

A$1,750,000

Taxed amount

Nil

Payroll tax

A$0

NT

Deduction

A$2,500,000

Taxed amount

Nil

Payroll tax

A$0

The workings follow each state's formula. In NSW it's (A$1,600,000 − A$1,200,000) × 5.45% = A$21,800. Victoria's wages are below A$3 million, so the full A$1 million deduction applies: A$600,000 × 4.85% = A$29,100. Queensland's deduction falls by A$1 for every A$7 above A$1.3 million, so it is A$1,300,000 − (A$300,000 ÷ 7) = A$1,257,143, and A$342,857 × 4.75% = A$16,286. WA's falls by A$2 for every A$13 above A$1 million: A$1,000,000 − (A$600,000 × 2 ÷ 13) = A$907,692, and A$692,308 × 5.5% = A$38,077. Tasmania taxes A$350,000 at 4%.

The comparison shows why a headline rate is misleading. WA's 5.5% rate looks only slightly above NSW's 5.45%, but the tapering threshold nearly doubles the bill on this payroll. And the ACT, despite the highest rate in the table, charges nothing until wages pass A$1.75 million.

Two-state example

Now suppose a Sydney-based business pays A$1.6 million in NSW and A$800,000 in Victoria — A$2.4 million in total. NSW allows A$1,200,000 × 1.6 ÷ 2.4 = A$800,000 of threshold, so NSW tax is (A$1,600,000 − A$800,000) × 5.45% = A$43,600. Australian wages are under A$3 million, so Victoria allows its full A$1 million deduction pro-rated: A$1,000,000 × 0.8 ÷ 2.4 = A$333,333, and Victorian tax is A$466,667 × 4.85% = A$22,633. Total: about A$66,233 a year, paid monthly in two states.

Registering, lodging and paying

You must register with each state's revenue office once your wages exceed the threshold — and most states test this monthly, using a pro-rated figure. In NSW, for example, the 2026-27 monthly threshold is A$101,918 for a 31-day month and A$98,630 for a 30-day month. Registration is online through each office's portal (Payroll Tax Online in NSW, the SRO's online services in Victoria, QRO Online in Queensland and so on).

Once registered, you lodge a return and pay each month, generally by the 7th of the following month — NSW's July 2026 return, for example, was due on 7 August 2026. After 30 June you lodge an annual reconciliation that recalculates the year using actual annual wages and the full-year threshold; it is due in July (Queensland's 2025-26 annual return was due on 21 July 2026). Overpayments are refunded or credited; underpayments must be paid with the return.

The payroll tax year

Any month wages exceed the monthly threshold

Register with that state's revenue office

7th of each month

Lodge and pay the previous month's return (most states)

1 July

New financial year; check new rates and thresholds

July

Annual reconciliation for the year just ended

Any change in group or states

Update registration and designated group employer

Late registration is costly. Revenue offices can assess back tax for prior years with interest and penalty tax — a percentage of the unpaid tax that rises sharply for intentional disregard and falls for voluntary disclosure. If you've realised late that you should have registered, a voluntary disclosure before an audit almost always produces a better result.

Common mistakes and how they get fixed

Forgetting super and fringe benefits. Employer super and the grossed-up value of fringe benefits are wages for payroll tax. Fix: build them into your monthly wage totals.

Ignoring interstate wages. A single remote worker in another state can change both states' thresholds. Fix: track wages by state from the first interstate hire.

Assuming each entity gets its own threshold. Related businesses are grouped. Fix: map ownership and shared staff, then nominate one designated group employer.

Treating every ABN contractor as exempt. An ABN doesn't decide the issue. Fix: test each contractor against the exemptions and keep evidence — invoices, contract terms, days worked, advertising to the public.

Not doing the annual reconciliation properly. Monthly figures use pro-rated thresholds and can over- or under-pay. Fix: reconcile on actual annual wages each July and claim any refund.

Official links

• Revenue NSW — Thresholds and ratesNSW annual and monthly thresholds
• SRO Victoria — Payroll tax current ratesRate, regional rate, phase-out, surcharges
• Queensland Revenue Office — Rates and thresholdsRates, threshold and regional discount
• RevenueWA — Payroll tax calculationThreshold taper formula
• RevenueSA — Rates and thresholdsSA rate scale and deduction
• SRO Tasmania — Rates and thresholdsTwo-tier rates
• ACT Revenue Office — Payroll tax2026-27 threshold and brackets
• NT Territory Revenue Office — Payroll taxThreshold, deduction and 2026-27 measures

What to do next

Add up your Australian wages — including super, fringe benefits and any contractors who might be caught — and compare them with the threshold in each state you pay wages in. If you're within 20% of a threshold, set a monthly check so registration doesn't slip. Our salary slip generator helps keep wage records consistent, and the minimum wage guide covers what you must pay staff in the first place.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

What is the payroll tax threshold in each state for 2026-27?

The annual thresholds are: NSW A$1.2 million, Victoria A$1 million, Queensland A$1.3 million, WA A$1 million, SA A$1.5 million, Tasmania A$1.25 million, the ACT A$1.75 million (down from A$2 million on 1 July 2026) and the NT A$2.5 million. Several states reduce the threshold as wages rise, and it's shared across a group and across states.

Is payroll tax calculated on total wages or wages above the threshold?

Generally on wages above the threshold (or deduction), at the state's rate. But the threshold in several states shrinks as your total Australian wages grow — in Victoria it phases out between A$3 million and A$5 million, in WA it reaches nil at A$7.5 million and in Queensland at A$10.4 million. Large employers can therefore pay on every dollar of wages.

Do I pay payroll tax on contractors?

Possibly. Under the relevant contract provisions in most states, payments for a contractor's labour can be taxable wages unless an exemption applies. Common exemptions include services required for 180 days or less, or provided for 90 days or less, in a financial year, services the contractor offers to the public generally, and work done by two or more people. Materials and equipment are excluded.

What is payroll tax grouping?

Grouping treats related businesses as one employer for payroll tax. Businesses are grouped if they are related companies, share employees, or are controlled by the same people (generally more than 50%). The group's combined Australian wages are tested against the threshold, and only one designated group employer claims it. Grouping stops owners splitting a business to stay under the threshold.

When do I need to register for payroll tax?

You register in a state once your wages, or your group's Australian wages, exceed that state's threshold — usually tested monthly against a pro-rated figure. In NSW, for example, the 2026-27 monthly threshold is A$101,918 in a 31-day month. Register within the state's deadline, generally by the 7th of the following month, and lodge monthly returns from then on.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 9 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Payroll tax thresholds and rates — Revenue NSW · accessed 9 October 2026
2. 2.Payroll tax — contractors — Revenue NSW · accessed 9 October 2026
3. 3.Payroll tax (current rates) — State Revenue Office Victoria · accessed 9 October 2026
4. 4.Payroll tax rates and thresholds — Queensland Revenue Office · accessed 9 October 2026
5. 5.Calculation: Payroll Tax Employer Guide — Government of Western Australia (RevenueWA) · accessed 9 October 2026
6. 6.Payroll tax rates and thresholds — RevenueSA · accessed 9 October 2026
7. 7.Payroll tax rates and thresholds — State Revenue Office Tasmania · accessed 9 October 2026
8. 8.Taxation Administration (Amounts and Rates—Payroll Tax) Determination 2026 (DI2026-151) — explanatory statement — ACT Legislation Register · accessed 9 October 2026
9. 9.NT Budget 2026-27 — Grant Thornton Australia · accessed 9 October 2026
10. 10.SA State Budget 2026-27 — RSM Australia · accessed 9 October 2026