Published: February 2026
Payroll tax is one of the most misunderstood obligations for growing Australian businesses. It is a state-based tax on wages paid by employers, and it applies once your total Australia-wide group wages exceed the state threshold. The rates, thresholds, grouping rules, and additional levies differ across every state and territory, making compliance genuinely complex for businesses operating across borders or scaling quickly.
In 2026, the ATO and state revenue offices continue to increase enforcement around payroll tax, particularly targeting businesses that fail to register, misapply grouping rules, or exclude contractor payments from their wage calculations. Penalties for late registration can reach up to 200% of unpaid tax plus daily interest charges, even if no tax was ultimately payable.
This article provides the complete FY2026-27 payroll tax thresholds and rates for every Australian state and territory, explains how grouping and interstate apportionment work, and highlights the compliance traps that catch SMEs most often.
Each state and territory sets its own annual threshold, tax rate, and additional levies. The threshold is the amount of total Australian taxable wages below which no payroll tax is payable. Once your wages exceed the threshold, tax is calculated on the amount above it.
All thresholds are applied to aggregated Australia-wide wages of grouped employers, not individual entity wages. Monthly thresholds are the annual threshold divided by 12 and are used to determine when monthly payroll tax returns are required.
NSW applies a common control test for grouping provisions, and interstate wages are apportioned based on where services are performed. Monthly returns are due by the 7th of the following month, and the annual reconciliation is due 28 July. The threshold is pro-rated if you employ staff for only part of the financial year. Tiered rates apply for larger payrolls.
Victoria has the most complex payroll tax structure of any state.
Threshold phase-out: The threshold reduces for employers with national wages between $3 million and $5 million, decreasing by $1 for every $2 of wages above $3 million. Employers with national wages above $5 million receive no threshold at all.
Surcharges: Two additional surcharges apply. The Mental Health and Wellbeing Surcharge (0.5%) has been in effect since 1 January 2022, and the COVID-19 Debt Temporary Surcharge (0.5%) applies from 1 July 2023 until 30 June 2033.
The surcharge thresholds ($10 million and $100 million) are measured against total Australian taxable wages, but the surcharges themselves are calculated only on Victorian taxable wages. Combined, the surcharges add 1% on Victorian taxable wages for employers with national wages above $10 million, and 2% combined for employers with national wages above $100 million.
Regional rate: Employers that pay at least 85% of their taxable wages to regional employees qualify for the reduced 1.2125% rate.
Annual reconciliation: Due 21 July.
Queensland has strong grouping enforcement, particularly in multi-entity founder structures. If you operate multiple businesses through related entities in Queensland, your grouping position should be reviewed annually.
Employers above $1,700,000 pay a flat 4.95%. Regional rebates may apply in certain circumstances.
A phased-in threshold applies for employers with annual taxable wages between $1 million and $7.5 million, meaning the effective threshold reduces proportionally as wages increase within that band. Employers above $7.5 million receive no threshold. Contractor provisions are closely scrutinised in WA, particularly in the resources and construction sectors.
Apportionment rules apply where wages are split across states.
The ACT has the most complex tiered rate structure in the country:
The ACT uses close alignment with NSW-style grouping rules and calculates all obligations based on Australia-wide wages, not just ACT wages.
The NT has the highest threshold of any jurisdiction alongside the ACT, reflecting its smaller employer base. A flat rate system applies with no surcharges.
Grouping is the single most common payroll tax compliance trap for SMEs. When businesses share common control, common employees, or are related bodies corporate, they are treated as one employer for threshold purposes. The group receives only one threshold, not one per entity.
This means a founder who owns two companies each paying $700,000 in wages does not get two separate thresholds. The combined $1,400,000 is assessed against a single threshold, potentially triggering payroll tax in multiple states.
Revenue offices actively enforce grouping rules. Grouping can be triggered by:
If you have overlapping directors, shared ownership structures, or related entities paying wages in different states, you should review your grouping status before lodging. Getting this wrong can result in reassessments going back multiple years.
If your business pays wages in more than one state, your threshold in each state is reduced proportionally. The calculation is based on the ratio of wages paid in that state to your total Australian wages.
For example, a business paying $900,000 in NSW wages and $400,000 in VIC wages has $1,300,000 in total Australian wages. The NSW threshold entitlement would be $1,200,000 multiplied by ($900,000 / $1,300,000), giving a reduced threshold of approximately $830,769. The business would owe payroll tax on NSW wages above this reduced threshold, and would also need to assess its VIC obligations separately.
Interstate remote employees can change your registration obligations entirely. If you hire a remote worker in Victoria while operating from NSW, their wages count toward both your total Australian wages and your Victorian payroll tax calculation.
Taxable wages extend well beyond base salary. They include:
Most states include contractor payments where the contract is primarily for labour and performed by an individual, unless a specific exemption applies. This is particularly relevant for SMEs engaging sole traders in finance, IT, marketing, and construction. A contractor who works exclusively for your business, cannot delegate, and is paid by the hour may have their payments treated as wages for payroll tax purposes, even if they hold their own ABN.
Rapid growth from $1.5 million to $2 million in total payroll can trigger payroll tax registration unexpectedly. Businesses should monitor their total Australian wages monthly rather than waiting for the annual reconciliation.
You must register for payroll tax before the end of the month in which you first exceed the monthly threshold in any state. Late registration attracts penalties even if no tax is ultimately payable.
If you are approaching threshold in any state, it is worth modelling your total wage costs including super, bonuses, and contractor payments to determine when registration will be required. Your payroll software should be configured to track total Australian wages across all entities in your group.
Scale Suite provides embedded finance teams for Australian SMEs. We handle payroll tax registration, monthly returns, annual reconciliations, and interstate apportionment as part of our monthly service. Our oversight gives you compliance confidence without hiring internal staff. Contact us to discuss how we can take payroll tax compliance off your plate.
The payroll tax threshold is the amount of total Australian taxable wages below which no payroll tax is payable in a given state or territory. Once your group wages exceed the threshold, you must register and pay tax on the amount above it. Each state sets its own threshold, so a business operating in multiple states may need to register in each one.
You must register in any state where your monthly wages exceed the monthly threshold, even if your annual wages may end up below the annual threshold. If you are grouped with other entities, the combined wages of the group are used to determine whether the threshold is exceeded. Failure to register on time attracts penalties even if no tax is ultimately payable.
If you own or control more than one business, or your businesses share common directors, employees, or are related bodies corporate, the state revenue office will treat them as a single group. The group receives only one threshold, shared across all entities. This is the most common compliance trap for founders with multiple companies or trusts.
Your threshold in each state is reduced proportionally based on the ratio of wages paid in that state to your total Australian wages. You may need to register and lodge returns in every state where you pay wages, even if the wages in any single state are below that state's threshold.
In most states, contractor payments are treated as taxable wages where the contract is primarily for the labour of an individual who cannot delegate the work. The specific exemptions vary by state, but the default position is that sole trader contractor payments are captured unless an exemption applies.
All registered employers lodge monthly returns, typically due by the 7th of the following month. An annual reconciliation is also required, due in July (the exact date varies by state). Some states with lower payroll tax liability may allow annual lodgement, but monthly is the standard for most SMEs.
Disclaimer: Payroll tax rates, thresholds, and surcharges are subject to change. The information in this article reflects FY2026-27 rates as published by state and territory revenue offices as at February 2026. Always verify current rates with the relevant state revenue office before lodging. This article is general information only and does not constitute tax or legal advice.
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