Quick answer
Payroll tax is a state tax on wages, charged once your Australian wages pass a threshold that differs by state. As at October 2026, thresholds run from $1m in Victoria and Western Australia up to $2.5m in the Northern Territory, with the ACT's falling to $1.75m on 1 July 2026. Related businesses are grouped, and contractors can count.
Key points
- Payroll tax is assessed by each state on wages paid, not on profit, so it's due even in a quiet year
- Thresholds vary: about $1m in Victoria and WA, $1.2m in NSW, $1.3m in Queensland, $1.25m in Tasmania, $1.75m in the ACT and $2.5m in the NT
- Businesses under common control are grouped and share one threshold, which catches owners who split a company to stay under it
- Contractors, super and some allowances can count as taxable wages
- Unpaid payroll tax is a priority debt that lenders notice when they assess cash flow
Most business owners meet payroll tax the same way: an unexpected letter, roughly when headcount crosses a line nobody told them about. It isn’t an ATO tax and it doesn’t appear on your BAS. It’s a state tax with its own register, its own return and its own rules, and there are eight versions of it.
This guide sets out where the thresholds sit as at October 2026, the traps that catch growing businesses, and how a payroll tax liability looks to a lender. Check the revenue office in your state for the figure that applies to you, as thresholds and tapers are adjusted in state budgets.
What is payroll tax, and who pays it?
Payroll tax is charged on the wages you pay, above a tax-free threshold. It’s a tax on a payroll, not on profit, which is why a business can owe it in a year it loses money.
You become liable when your total Australian wages pass the threshold and you pay wages in that state. Each state or territory runs its own scheme:
- NSW: Revenue NSW
- Victoria: State Revenue Office
- Queensland: Queensland Revenue Office
- Western Australia: RevenueWA
- South Australia: RevenueSA
- Tasmania: State Revenue Office
- ACT: ACT Revenue Office
- Northern Territory: Territory Revenue Office
Because the thresholds are measured in wages, not in staff numbers, a business paying $1.2m a year in wages is roughly in the zone of a dozen to twenty staff depending on pay levels. Super counts too, so the base is bigger than the salary line suggests.
What are the thresholds in each state?
As at October 2026, from the revenue offices we could reach and the published state settings:
| State or territory | Annual tax-free threshold | Worth knowing |
|---|---|---|
| New South Wales | $1.2m | Same for 2025-26 and 2026-27 on Revenue NSW’s table |
| Victoria | $1m | Threshold phases out between $3m and $5m of wages; reduced regional rate for eligible employers |
| Queensland | $1.3m | Regional employers may get a reduction to 30 June 2030; a separate mental health levy applies to large payrolls |
| Western Australia | About $1m | Deduction tapers as wages rise; confirm with RevenueWA |
| South Australia | $1.5m registration threshold | Relief phases in below the higher payroll level; confirm with RevenueSA |
| Tasmania | $1.25m | Liability trigger shown on the State Revenue Office page |
| ACT | $1.75m from 1 July 2026 | Down from $2m, with the rate structure also changed |
| Northern Territory | $2.5m | The highest threshold in the country |
Two cautions. First, we have deliberately left out rates: tiers, tapers and surcharges for large employers change often, and the revenue office calculator is the safe place for them. Second, WA’s figure is one we could not read directly on an official page, so treat it as indicative until you’ve checked.
A quick way to see the order of magnitude
An illustrative NSW employer pays $1.5m in wages in 2026-27. The threshold is $1.2m, so the taxable amount is $300k. At the NSW rate of 5.45% shown on the Revenue NSW table, the annual tax is about $16,350. It’s not a fortune, but it’s a bill that arrives whether or not the year was profitable.
What catches growing businesses out?
Five traps show up repeatedly.
1. Grouping. If you run two or three companies with common control, shared staff or similar ties, the revenue offices can treat them as one group and share one threshold. Setting up a second entity to stay under the line doesn’t work if the entities are grouped. Ask your accountant to map the entities and test the grouping rules, particularly if there is a family trust in the structure.
2. Contractors. A payment to a contractor can be treated as wages under the relevant-contract provisions, depending on the state and the nature of the engagement. A business that “has no employees” can still be liable. This matters in building, trades, cleaning, transport and professional services.
3. Interstate wages. The threshold looks at your total Australian wages, then apportions it across states by where wages are paid. A business with a head office in one state and staff in another can find itself liable in both.
4. Part-year and monthly thresholds. Thresholds are prorated for part years, and monthly returns use a monthly threshold. Victoria’s, for example, is $83,333 a month on the State Revenue Office basis. A strong growth month can trip a registration obligation even if the annual figure looks safe.
5. Taxable benefits. Superannuation, bonuses, allowances and some fringe benefits count. Our guide on super guarantee obligations and cash flow explains the other half of the wage cost.
Which states offer relief for regional employers?
Victoria and Queensland both offer regional employers a better deal. Victoria taxes eligible regional employers at a lower rate if at least 85% of their Victorian taxable wages go to regional employees, and the definition of a regional employee changed from 1 July 2025. Queensland lists a reduction for regional employers to 30 June 2030. For more on how that fits into regional borrowing, see business loans in regional Australia.
Other states have had and occasionally still run exemptions for apprentices, trainees, new hires, small-business relief or disability employment. Programs move with budgets. The reliable approach is to ask your accountant to check the revenue office’s exemptions list once a year, around the time you plan your hiring.
When are payroll tax returns due?
Timing varies, but the pattern is similar. Larger employers lodge monthly, usually by about the 7th of the following month in Victoria, and smaller ones may lodge less often. An annual reconciliation follows at the end of the financial year; in Victoria it is due by 21 July.
Add the dates to your tax calendar next to BAS and super. Our guide to key dates in the Australian tax calendar is a good place to start.
How does payroll tax show up in a loan application?
It’s often invisible until it isn’t.
- Cash flow commitments. A lender reading your statements will see the monthly payroll tax payment alongside wages. It counts as a fixed cost in serviceability.
- Arrears. An overdue payroll tax debt is a compliance issue, in the same family as unpaid BAS or super. Lenders ask about tax lodgements and payments, and some will ask directly about debts to revenue offices.
- Growth plans. If you’re borrowing to hire, ask whether the new staff push you over a threshold, and include the extra tax in your forecast. See how to fund new staff.
A realistic forecast that includes payroll tax at the right level signals a business that understands its costs. A forecast that misses it signals the opposite, and it also leaves you short.
If you’re lining up finance for hiring, a conversation can help you size the facility properly. Tell us about the plan and a person will talk it through with you.
What if you can’t pay a payroll tax bill?
Do three things quickly.
- Lodge on time even if you can’t pay in full. Late lodgement adds penalties on top.
- Contact the revenue office and ask for a payment arrangement. Revenue offices generally prefer an arrangement to enforcement, and early contact helps.
- Think carefully before borrowing to pay. A loan can bridge the gap, but if the problem is structural, the next bill will arrive on schedule. Compare it with a payment arrangement, and see funding for paying a tax bill.
The wider principle in how to deal with an ATO debt applies here too: the earlier you talk, the more options you have.
Planning for payroll tax as you grow
A few habits help:
- Track wages against the threshold monthly, not annually.
- Review structure with your accountant before adding entities or contractors.
- Budget the tax into every hiring decision. The marginal cost of a new hire above the threshold includes payroll tax.
- Keep records of exemptions you claim, with the evidence a revenue office would ask for.
- Revisit each July, when state thresholds and rules often change. The ACT’s 1 July 2026 change is a good reminder.
Funding growth without losing sight of the tax
Payroll tax is rarely the thing that stops a good business, but it’s one of the costs that makes a cash flow forecast wrong if it’s left out. If you’re planning a hiring round, a second site or a seasonal ramp-up and want to know what finance suits, the enquiry form takes about a minute and doesn’t involve a credit check.
Your answers stay with us rather than going out to a string of lenders, and a person on our team reads them before ringing you. Accurate wage figures, amount and purpose make that call far more useful.
Frequently asked questions
What is the payroll tax threshold in each state in 2026-27?
As at October 2026: NSW $1.2m a year, Victoria $1m (phasing out between $3m and $5m of wages), Queensland $1.3m, Tasmania $1.25m, the ACT $1.75m from 1 July 2026, the Northern Territory $2.5m, South Australia has a $1.5m registration threshold, and Western Australia is about $1m. Confirm the current figure with your state revenue office, because thresholds and tapers change.
Do I pay payroll tax if I only employ a few people?
Usually not. The threshold is in wages, not headcount, and it is well above what a small team costs. Wages across a group of related businesses are added together, though, and contractor payments can be taxable, so check before assuming you are under.
What counts as taxable wages for payroll tax?
Salary and wages, bonuses and commissions, superannuation contributions, many allowances and fringe benefits, and in many cases payments to contractors under relevant-contract provisions. Some items are exempt, such as certain parental leave payments. Each state publishes its own list.
What is payroll tax grouping?
Related businesses, for example companies under common control or sharing employees, are treated as a group and share a single tax-free threshold. Splitting one business into several entities does not give each its own threshold, and the revenue offices have rules to look through arrangements made mainly for that purpose.
What happens if I don't pay payroll tax?
The state revenue office can assess the tax with interest and penalties, issue notices to third parties and take recovery action. The debt can also affect borrowing, because lenders look at tax compliance and cash commitments. If you owe, contact the revenue office about a payment arrangement early.
Can I borrow to pay a payroll tax bill?
Sometimes. A short-term or working capital facility can bridge a payroll tax bill, but it adds a repayment on top of the next one, so compare it with a payment arrangement from the revenue office first. Lenders will want to see that the debt is a one-off and not a pattern.