Payroll Tax Australia 2026-27: State Thresholds, Rates & Worked Examples

Short answer: payroll tax is a state tax on the wages you pay, and you only pay it on wages above your state’s tax-free threshold. In 2026-27 the thresholds run from $1,000,000 in Victoria and Western Australia to $2,500,000 in the Northern Territory, and the rates from 4% in Tasmania to 8.75% at the top of the ACT’s scale. A New South Wales employer with a $2,000,000 wage bill pays $43,600. An employer with the same wage bill in Victoria pays $38,800. And an employer with a $1,900,000 wage bill in the ACT pays $10,125 this year — after paying nothing at all last year, because the ACT cut its threshold from $2,000,000 to $1,750,000 on 1 July 2026.

Payroll tax is the business tax most small employers never think about until a state revenue office writes to them. It is not PAYG withholding, it is not collected by the ATO, and it does not come out of your employees’ pay — it comes out of your pocket. This guide gives you every state’s 2026-27 threshold and rate in one table, explains what counts as wages, works through five real calculations including a multi-state employer, and covers the traps that catch growing businesses: the monthly registration trigger, grouping, and contractors who count as employees for payroll tax even when they do not for income tax.

What payroll tax is — and what it is not

Payroll tax is levied by each state and territory on the total taxable wages an employer pays. It has nothing to do with the ATO: each state runs its own revenue office, threshold, rate, and registration system. Employ people in three states and you can owe payroll tax in all three.

Three things it is commonly confused with:

• PAYG withholding is income tax you withhold from your employees’ pay and send to the ATO. It is your employees’ money, not yours. Payroll tax is your money — an extra cost of employing people, on top of wages, super and workers compensation.
• Superannuation Guarantee (SG) is the 12% you must pay into your employees’ super funds in 2026-27. SG itself counts as a taxable wage for payroll tax — the tax is partly charged on the cost of another tax. See our guide to the Super Guarantee 12% rate.
• Fringe benefits tax (FBT) is a federal tax on non-cash benefits you give employees. The grossed-up value of fringe benefits also counts as taxable wages for payroll tax. Our FBT guide explains the gross-up.

The formula is the same everywhere, which is the good news. The thresholds, rates and taper rules are different everywhere, which is where the work is:

(Total taxable wages − tax-free threshold) × payroll tax rate = payroll tax payable.

You only ever pay on the amount above the threshold. A business with $1,100,000 of wages in New South Wales pays nothing, because the NSW threshold is $1,200,000. A business with $1,300,000 pays 5.45% on $100,000 — $5,450, not 5.45% of the whole $1,300,000.

Payroll tax thresholds and rates 2026-27: all eight states and territories

The table below is the whole picture for 2026-27. Figures are the annual tax-free thresholds and headline rates published by each state revenue office; the notes column is where the real money hides, because most states reduce the threshold as wages grow.

Two things jump out. First, thresholds are tested against your total Australian wages, not just the wages you pay in that state. Second, several states do not really give you the full threshold: in Victoria, Queensland, Western Australia and the Northern Territory it shrinks as wages rise, so the effective tax is higher than a simple (wages − threshold) × rate calculation suggests. Only New South Wales gives every employer the full $1,200,000 whatever the wage bill.

What counts as taxable wages

The threshold test and the tax both run on “taxable wages”, and the definition is wider than most employers expect. If you only counted base salaries, you would understate your wages and underpay:

• Salaries, wages, commissions, bonuses and allowances — including overtime and penalty rates.
• Superannuation contributions — the 12% SG and any salary-sacrificed super.
• Fringe benefits — at grossed-up value, not face value. A $10,000 car benefit can add roughly $18,000 to taxable wages.
• Directors’ fees and payments to directors for services.
• Termination payments — including unused annual and long service leave paid out.
• Shares and options granted to employees, at market value when acquired.
• Certain contractor payments — see the contractor trap below. A payment to a contractor can be a taxable wage even with no employment relationship for income tax.
• Apprentice and trainee wages — exempt in some states, not in others.

Some states exempt wages for apprentices and trainees, parental leave, or workers compensation — but the exemptions differ by state, so a national employer needs a state-by-state check rather than one national answer.

Step by step: how to work out your payroll tax

The process is the same in every state, even though the numbers differ:

Step 1 — Add up your total Australian taxable wages. Include every item in the list above, for every state, for the full financial year. This is the figure the threshold is tested against.

Step 2 — Work out your threshold entitlement in each state. One state only: the full published threshold, subject to any taper. Several states: each threshold is apportioned — state threshold × (wages in that state ÷ total Australian wages).

Step 3 — Apply the rate to the wages above the threshold in each state. Where a state has two bands or a taper, work the bands separately — the Tasmanian example below shows how.

Step 4 — Register and lodge. Register with each state revenue office where you are liable. Most states require monthly returns (or nil returns) within 7 days of month end, plus an annual reconciliation — in NSW, by 28 July. Re-check every month, not just at year end: registration is triggered by a single month’s wages crossing the monthly threshold, even if your annual wages end up under it.

Worked examples: five real calculations

Example 1 — Single-state employer in NSW: $43,600

A Sydney landscaping business pays $2,000,000 in taxable wages in 2026-27 — salaries, super, allowances and a Christmas bonus, all in NSW.

Taxable wages above the threshold: $2,000,000 − $1,200,000 = $800,000.
Payroll tax: $800,000 × 5.45% = $43,600 for the year.

That is the whole calculation in NSW, because the threshold is flat. The same $2,000,000 wage bill in Victoria costs $38,800 — ($2,000,000 − $1,000,000) × 4.85% — and in Western Australia the bill is higher, because the WA threshold tapers as wages rise and the rate is 5.5%.

Example 2 — Multi-state employer: $97,330 across NSW and Victoria

A professional services firm pays $3,000,000 in total Australian wages: $900,000 in NSW and $2,100,000 in Victoria. Its NSW wages alone are under the $1,200,000 threshold — but the test uses total Australian wages, so it is liable in both states, on apportioned thresholds.

NSW: apportioned threshold = $1,200,000 × ($900,000 ÷ $3,000,000) = $360,000. Tax = ($900,000 − $360,000) × 5.45% = $540,000 × 5.45% = $29,430.
Victoria: apportioned threshold = $1,000,000 × ($2,100,000 ÷ $3,000,000) = $700,000. Tax = ($2,100,000 − $700,000) × 4.85% = $1,400,000 × 4.85% = $67,900.
Total payroll tax: $97,330.

This is the calculation that catches almost every business expanding interstate: the firm thought it was under the threshold in NSW, and the shortfall would have been backdated if Revenue NSW had found it first.

Example 3 — The ACT threshold cut: $0 last year, $10,125 this year

A Canberra consultancy paid $1,900,000 in wages in 2025-26 and will pay the same in 2026-27. In 2025-26 the ACT threshold was $2,000,000, so it owed nothing. On 1 July 2026 the ACT cut its threshold to $1,750,000 and moved to a tiered rate starting at 6.75%.

2026-27 tax: ($1,900,000 − $1,750,000) × 6.75% = $150,000 × 6.75% = $10,125.

The wage bill did not change. The tax went from zero to five figures because the threshold moved. If your business sits between $1,750,000 and $2,000,000 of wages in the ACT, 2026-27 is the first year you are liable — and you need to register.

Example 4 — Queensland’s shrinking deduction: $322,457 on a $7,000,000 payroll

A Brisbane construction company pays $7,000,000 in taxable wages. Queensland’s headline threshold is $1,300,000, but the deduction falls by $1 for every $7 of wages above $1,300,000 — and because Australian wages exceed $6,500,000, the rate is 4.95%, not 4.75%.

Deduction: $1,300,000 − ($7,000,000 − $1,300,000) ÷ 7 = $1,300,000 − $814,286 = $485,714.
Taxable wages: $7,000,000 − $485,714 = $6,514,286.
Payroll tax: $6,514,286 × 4.95% = $322,457.

Had the employer used the full $1,300,000 threshold at 4.75%, it would have calculated $270,750 — and underpaid by more than $50,000. The taper is the most expensive misunderstanding in Queensland payroll tax.

Example 5 — Tasmania’s two bands: $60,500 on a $2,500,000 payroll

A Hobart manufacturer pays $2,500,000 in wages. Tasmania charges 4% on wages between $1,250,000 and $2,000,000, and 6.1% above $2,000,000.

Band 1: ($2,000,000 − $1,250,000) × 4% = $750,000 × 4% = $30,000.
Band 2: ($2,500,000 − $2,000,000) × 6.1% = $500,000 × 6.1% = $30,500.
Total: $60,500.

Note the jump: the last $500,000 of wages costs $30,500 while the first $750,000 above the threshold costs $30,000. A pay rise that pushes wages over $2,000,000 in Tasmania is taxed at 6.1% on the margin, not 4%.

The five traps that catch growing employers

1. The monthly threshold trap

You must register when your wages in any single month exceed the monthly threshold — even if your annual wages end up under the annual threshold. In NSW the monthly threshold in a 31-day month is $101,918. A business with $1,100,000 of annual wages that pays a $110,000 month — Christmas bonuses, a big overtime month, a redundancy payout — must register, and in NSW you have 7 days from crossing to do it. Miss it and the liability is backdated to the month you crossed.

2. Grouping: related businesses share one threshold

If two companies are related — common control, common shareholders, or one using the other’s employees — the revenue office can group them, and the group gets one threshold between them, not one each. Three related companies each paying $800,000 in NSW wages look individually exempt. Grouped, they have $2,400,000 of wages and owe 5.45% on $1,200,000 — $65,400. Splitting a business to stay under the threshold does not work, and grouping is one of the first things a revenue office checks in an audit.

3. Contractors who are employees for payroll tax

A worker can be a genuine contractor for income tax and still be a deemed employee for payroll tax. Every state has “relevant contract” provisions that catch payments to contractors who work mainly for one principal, supply only their labour, or work under the principal’s direction — the classic case is a “contractor” engaged full-time for years, on the business’s premises, using its equipment. For income tax the arrangement is contracting; for payroll tax, the payments are taxable wages. If you have long-term contractors, get the classification checked — the ATO’s test and the revenue office’s test are different, with different answers.

4. Part-year employment shrinks the threshold

If you employ staff for only part of the financial year, your threshold is pro-rated. Employ for 184 days in NSW and your threshold is $1,200,000 × (184 ÷ 365) = $604,932, not $1,200,000. A seasonal business that hires for six months and pays $700,000 in that period is liable — ($700,000 − $604,932) × 5.45% = $5,181 — even though its wages look modest on an annualised basis.

5. The interstate wages test

As Example 2 showed, the threshold is tested on total Australian wages. A business with $500,000 of wages in each of three states has $1,500,000 of total Australian wages and is over the threshold in every state — while owing tax only on the apportioned share in each. Employers who check each state’s payroll in isolation conclude they are under the threshold everywhere. They are wrong everywhere.

Registering, lodging and what happens if you do not

Register with the revenue office in each state where you are liable — Revenue NSW, the State Revenue Office Victoria, the Queensland Revenue Office, RevenueWA, RevenueSA, the State Revenue Office Tasmania, the ACT Revenue Office, or the Territory Revenue Office. Registration is generally required within 7 days of crossing the threshold, and most states require monthly returns (or nil returns) within 7 days of month end, plus an annual reconciliation. In NSW the annual reconciliation is due by 28 July.

If you should have registered and did not, the consequences are not a polite reminder. State revenue offices data-match with the ATO’s Single Touch Payroll records, so they already know what you paid. An assessment can be backdated — typically up to five years — with interest and penalties on top. The NSW 2026-27 Budget papers flag payroll tax administration as an area of focus, with grouping and contractor arrangements singled out. Voluntarily disclosing before you are audited usually produces a better outcome: interest may still apply, but penalties are commonly reduced.

Tips: keeping payroll tax under control

• Run a monthly threshold check, not an annual one. A single big month triggers registration. Build the check into your monthly payroll close.
• Budget the tax into every hire. A $100,000 salary in NSW costs roughly $5,450 in payroll tax once you are over the threshold — plus 12% super, which is itself a taxable wage.
• Keep contractor files that prove independence. Contracts, invoices, evidence the contractor works for others, and their own insurance and equipment. If a revenue office asks, the file is your defence.
• Review grouping before you restructure. Adding a second company does not add a second threshold. Get advice before you split a business for tax reasons.
• Use the state calculators. Every revenue office publishes one — use it for SA’s phase-in band and Queensland’s taper rather than estimating, because the effective rate in those bands cannot be read off a table.
• Diary the ACT change. If your ACT wages are between $1,750,000 and $2,000,000, 2026-27 is your first liable year. Register before the revenue office finds you.

Frequently asked questions

Do I pay payroll tax if my wages are under the threshold?

No — but only if your total Australian wages are under the threshold, and only if no single month crosses the monthly threshold. Check your state’s monthly threshold, not just the annual one.

Is payroll tax the same as PAYG withholding?

No. PAYG withholding is your employees’ income tax, which you deduct from their pay and send to the ATO. Payroll tax is a state tax you pay yourself, on top of wages — separate taxes, different governments, different lodgement systems. Our PAYG instalments guide covers the PAYG side for businesses.

Does superannuation count as wages for payroll tax?

Yes. Superannuation Guarantee contributions — 12% in 2026-27 — are taxable wages in every state, as is salary-sacrificed super. It is one of the most commonly missed items, and can be the difference between being under and over the threshold.

Are contractors included in taxable wages?

Sometimes. Payments to contractors who work mainly for you, supply only labour, or work under your direction can be taxable wages under each state’s “relevant contract” provisions — even if the contractor is genuine for income tax. Genuinely independent contractors who work for many clients are generally not caught.

I employ people in two states. Do I get two thresholds?

No. You get one threshold per state, apportioned by the share of wages paid in that state, and the test for whether you are liable at all uses your total Australian wages. See Example 2 above for the full calculation.

What happens if I never register?

The revenue office can assess you for the unpaid tax going back years, with interest and penalties. Revenue offices data-match against ATO Single Touch Payroll data, so unregistered employers are increasingly found rather than self-reporting. Voluntary disclosure before an audit usually reduces penalties.

Payroll tax is a tax on growth: it only starts when your wage bill crosses a threshold, then scales with every dollar above it. The thresholds are generous enough that most small businesses never pay it — but the monthly trigger, the grouping rules, the contractor provisions and the interstate test mean a business can become liable without ever feeling large. Know your total Australian wages, check them monthly against your state’s threshold, and work the calculation before the revenue office does it for you.

This article is general information, not tax advice. Payroll tax turns on grouping, contractor arrangements and state-specific exemptions — verify your figures with the relevant state revenue office and take advice from a registered tax agent before relying on them.