Payroll tax in Australia: State-by-state thresholds and rates guide

Published 13 July 2026

Table of contents

• What is payroll tax in Australia?
• Who pays payroll tax and when to register
• State payroll tax rates and thresholds
• Wages that count for payroll tax
• How to calculate payroll tax
• Keep payroll compliant with Xero
• FAQs on payroll tax in Australia

Key takeaways

• Know what payroll tax is and how it differs from other employer taxes, so you can keep your business compliant.
• Track your payroll tax thresholds by state and stay up to date with current rates and rules before you lodge.
• Include all relevant wages – salaries, super, contractor payments, and fringe benefits – and check for state-based exemptions.
• Use payroll software and official calculators to estimate, monitor, and reconcile your payroll tax throughout the year.

What is payroll tax in Australia?

Employer payroll tax is a state and territory tax that businesses pay when their total wages paid to employees exceed a set threshold.

Each state and territory sets its own payroll tax rules, including:

• an annual threshold: the amount of total wages you can pay before payroll tax applies.
• a tax rate: the percentage applied to wages above the threshold.

Payroll tax is separate to (PAYG) withholding, superannuation and income tax. Employers must assess the wages they pay employees, and register and lodge monthly returns if the wages they pay exceed relevant state thresholds.

Who pays payroll tax and when to register

You must pay payroll tax if your business’s total wages in a state or territory exceed its threshold.

Payroll tax can apply to:

• companies
• trusts
• partnerships
• sole traders with employees
• some contractor arrangements

When to register

You’ll need to register your business for payroll tax if you expect to exceed the state’s threshold in a financial year (1 July to 30 June).

In most states and territories, you must complete payroll tax registration within a short period after your business exceeds their threshold. This is often within seven days, although the exact timeframe varies by jurisdiction.

If your wages are approaching the threshold, it is important to monitor them closely so you can register on time.

What if you operate in more than one state?

If your business employs staff in more than one state or territory:

• you may need to register for payroll tax in each state or territory where you pay taxable wages.
• your threshold may be reduced based on the proportion of wages paid in each state.
• grouping rules may apply if related businesses share employees or are under common control.

Tax grouping rules treat related entities as a single employer for payroll tax purposes. This prevents businesses from splitting operations across multiple entities to remain under state thresholds.

State payroll tax rates and thresholds

The table below displays Australia’s tax rates and thresholds for payroll, broken down by state/territory. Thresholds and rates can change, so always confirm with the relevant state revenue office before lodging.

You’ll pay payroll tax on the wages above the threshold, not on your entire payroll.

All states and territories allow you to track and pay payroll tax monthly by dividing the annual threshold by 12. This helps spread your payments across the year.

If your business pays staff in more than one state, first add up your total Australian wages to see which rate applies, then calculate each state’s payroll tax based on the wages paid there.

Wages that count for payroll tax

Payroll tax applies to more than just ordinary salary or wages. Each state defines taxable wages slightly differently, but they usually include:

• bonuses and commissions
• allowances
• director fees
• superannuation contributions
• fringe benefits (for example, providing a company car) in their grossed-up form
• some contractor payments

Contractor payments

Even if someone has an ABN, payments may still count for payroll tax if:

• the contractor mainly provides labour.
• they work regularly for your business.
• they are paid for time rather than results.

Some exemptions apply, such as for genuine services contracts or where the contractor works for multiple clients.

If you regularly engage contractors, check your state revenue office website to confirm whether their payments count for payroll tax.

Exempt wages

Some wages may be exempt, such as:

• parental leave in certain states
• wages for apprentices or trainees (in some jurisdictions)
• wages paid by certain charities and not-for-profits

Some types of super, such as termination-related or charity contributions, can be exempt in certain states.

Check your state revenue office to confirm which wages, super or contractor payments are exempt before applying them.

How to calculate payroll tax

Follow our simple step-by-step approach to calculate payroll tax for your business.

1. Confirm total taxable wages

Run a payroll report for the financial year to date. Include:

• gross wages
• super
• bonuses
• contractor payments (where applicable)
• fringe benefits

Exclude any exempt wages where relevant.

2. Confirm the state threshold

Check the current annual threshold for the state where you pay wages.

If you operate in multiple states, work out how much of your total wages relate to each state.

3. Determine taxable portion

If your annual wages exceed the threshold, calculate your payroll tax with the following formula:

Total wages - Threshold = Taxable wages

Example:

In New South Wales, if you pay $1,500,000 in wages, then your taxable portion is:

$1,500,000 - $1,200,000 = $300,000

4. Apply the rate

Multiply the taxable portion by the state’s payroll tax rate.

For example, in New South Wales:

$300,000 × 5.45% = $16,350 payroll tax

5. Lodge and reconcile

To lodge your payroll tax, most states require:

• monthly returns (based on actual or estimated wages)
• an annual reconciliation after 30 June

If your wages fluctuate, review them monthly so you do not underpay or overpay.

Keep payroll compliant with Xero

Managing payroll tax manually can be time-consuming, especially across multiple states. Using payroll software such as Xero can simplify the process and keep your payroll data up to date.

With Xero, you can:

• automate super, leave, and pay runs
• run detailed payroll reports by state
• track wages and allowances in one place
• export data for payroll tax returns
• monitor year-to-date totals against thresholds
• keep digital records for audits

You can also use payroll reports from Xero alongside state revenue office calculators to estimate monthly liability and prepare annual reconciliations. This can significantly reduce compliance stress and manual spreadsheet work.

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FAQs on payroll tax in australia

Below are answers to common payroll tax questions from small business owners and bookkeepers.

Is payroll tax the same as PAYG or income tax?

No. Payroll tax is a state tax employers pay on total wages above a threshold.

PAYG withholding and income tax are federal taxes related to employees’ and business income.

Do I need to register in each state where staff work?

You usually need to register in any state where you pay wages that exceed that state’s payroll tax threshold.

Each state manages its own rules, so check with the relevant state revenue office to make sure you’re registered correctly.

Do contractor payments count toward payroll tax?

If you regularly pay contractors for their time or effort (e.g. hourly or daily rates), their payments are usually treated as taxable wages.

If a contractor is genuinely providing a specific service or deliverable, especially for multiple clients, their payments may be exempt.

Does payroll tax apply to superannuation and FBT?

Yes. In all states and territories, employer super contributions and fringe benefits (grossed-up) count towards payroll tax.

Some rare contributions – like special termination payments or certain charity arrangements – may be exempt, so check your state revenue office if you think this applies.

Is payroll tax deductible for income tax?

Yes, payroll tax is generally a deductible business expense under the Income Tax Assessment Act 1997, with few exceptions.

Make sure to keep records of your payroll tax payments in case you need them for your income tax return.