Payroll tax tends to arrive as a surprise. The business grows, a second company is set up, a few contractors are added, and nobody checks whether the group has crossed the threshold. Then the revenue office writes, and the bill covers several years plus interest.
This guide gives you the 2026–27 thresholds and rates for every state and territory, explains what counts as wages, how grouping works, how contractors get caught, and walks through a worked example for a business that employs in two states.
What are the payroll tax rates and thresholds for 2026–27?
Each state and territory sets its own threshold and rates. The figures below apply for 2026–27. We checked each against the relevant revenue office on 17 October 2026.
| State / territory | Annual threshold (2026–27) | General rate | How the threshold works | Extras |
|---|---|---|---|---|
| NSW | $1,200,000 | 5.45% | Flat threshold, no taper | — |
| Victoria | $1,000,000 | 4.85% (1.2125% for eligible regional employers) | Deduction tapers off for Australian wages between $3m and $5m; none above $5m | Mental health and COVID debt surcharges: combined 1% above $10m national wages, 2% above $100m |
| Queensland | $1,300,000 | 4.75% (wages up to $6.5m); 4.95% (above $6.5m) | Deduction reduces by $1 for every $7 over $1.3m, reaching nil at $10.4m | 1% regional discount for eligible employers; mental health levy above $10m |
| South Australia | $1,500,000 | 4.95% above $1.7m | Nil up to $1.5m; rate phases in between $1.5m and $1.7m | — |
| Western Australia | $1,000,000 | 5.5% | Threshold diminishes between $1m and $7.5m; none above $7.5m | — |
| Tasmania | $1,250,000 | 4% on wages from $1.25m to $2m; 6.1% above $2m | Two-tier structure | — |
| ACT | $1,750,000 | 6.75% (Australian wages up to $20m) | Rate rises in tiers with wages: 6.85%, 7.35%, 7.85%, 8.75% above $150m | Threshold cut from $2m on 1 July 2026 |
| Northern Territory | $2,500,000 | 5.5% | Deduction applies; check the NT for how it reduces | 6.5% from 1 July 2026 for groups with Australian wages of $100m or more |
Sources: each revenue office's current rates page, linked under Sources below. Thresholds are annual. Monthly thresholds apply for monthly returns, and the annual figure is reconciled after 30 June.
Watch out: ACT employers: the threshold dropped from $2 million to $1.75 million on 1 July 2026. If your ACT wages, or your group's, sit between those figures, you may need to register for the first time this year.
What the different threshold designs mean
- Flat threshold (NSW): you pay on wages above the threshold, whatever your size.
- Tapering deduction (Victoria, Queensland, WA, NT): larger employers lose some or all of the tax-free amount, so the effective rate rises as you grow.
- Tiered rates (Tasmania, ACT, Queensland, NT): a higher rate applies once total wages pass set levels.
So the same payroll can produce quite different bills in different states. Our state taxes service runs the calculation for every state you employ in.
Who has to pay payroll tax?
Any employer, or group of employers, whose total Australian taxable wages exceed the relevant threshold. Three points catch people out:
- It's tested on Australia-wide wages. If you employ in more than one state, each state looks at your total Australian wages to decide if you're liable and what rate applies, then gives you a share of its threshold based on the share of your wages paid in that state.
- It's tested on group wages. Related businesses are grouped and share one threshold (see below).
- Registration is based on the monthly or weekly equivalent. In most states, you must register once your wages for a month exceed the monthly threshold, not just when the year's total does.
Most states require monthly returns and an annual reconciliation after 30 June. Check your state's lodgment dates.
What counts as wages for payroll tax?
Much more than salary. The definitions are largely harmonised across states, and generally include:
| Included in taxable wages | Notes |
|---|---|
| Salaries, wages, overtime, bonuses, commissions, allowances | Gross amounts, before tax |
| Employer super contributions | Including super guarantee and most salary sacrificed super |
| Fringe benefits | At their taxable value for FBT purposes |
| Directors' fees | For all directors, including non-executive |
| Termination payments | Many types, such as unused leave paid out |
| Shares and options given to employees | Valued under each state's rules |
| Payments to contractors under "relevant contracts" | Unless an exemption applies (see below) |
| Payments to employment agencies for on-hired workers | Usually taxable to the agency or the client |
Common exemptions include wages for parental leave (in most states, within limits), and wages of approved apprentices and trainees, plus some charities and public hospitals. Exemptions differ by state, and medical practices have specific arrangements in several states for contractor GPs. Check before you rely on one.
How does payroll tax grouping work?
Grouping stops businesses from splitting a payroll across several entities to stay under the threshold. Businesses can be grouped if they:
- are related companies under the Corporations Act;
- share employees, where staff of one business work for another;
- are under common control, for example the same person or people control more than 50% of each, directly or through trusts;
- are linked through tracing, where one entity has an interest in another through a chain of companies and trusts. Discretionary trust beneficiaries can be treated as controlling the trust for these purposes.
Once grouped, the whole group shares one threshold, which is claimed by a nominated designated group employer, and every member is jointly and severally liable for the group's payroll tax. In some circumstances a business can apply to the revenue office to be excluded from a group, for example if it's carried on independently. That's not automatic.
Key point: Family groups are the usual blind spot. Your company, your spouse's business and a family trust's business can all be grouped, even if they do completely different things.
What should you do if you're getting close to the threshold?
Payroll tax is a growth tax: it applies just as your business starts to scale. Planning for it early is far cheaper than discovering it late.
| Where you are | What to do now |
|---|---|
| Group wages (including super) well below your state's threshold | Note the threshold and check annually. Watch for new entities or contractors being added |
| Within about 20% of the threshold | Check monthly. A bonus month or a new hire can trigger registration before the annual total does |
| Over the threshold in one month but not for the year | Check your state's registration rule. Most require you to register based on the monthly threshold, then reconcile at year end |
| Employing in a second state | Apportion the threshold. You may owe tax in a state where your wages are small |
| Using many contractors | Test each arrangement against the contractor provisions and keep the evidence for any exemption |
| Several related businesses | Map the group. Assume you're grouped unless you're clearly not, and consider whether an exclusion application is realistic |
| Already over and not registered | Get the exposure quantified and talk to us about a voluntary disclosure |
Build payroll tax into your pricing and your hiring plans. For a business paying 5% or so on wages above the threshold, every new hire costs more than their salary and super. That's not a reason not to grow, but it belongs in the numbers.
Does payroll tax apply to contractors?
Often, yes. Every state and territory has contractor provisions (the "relevant contract" rules) that treat many payments to contractors as taxable wages, even when the contractor is genuinely independent for tax and Fair Work purposes.
Payments are generally caught where a business pays for services to be performed by individuals, unless an exemption applies. The exemptions are broadly harmonised and, in general terms, cover services that are ancillary to the supply or use of goods; services of a kind the business doesn't ordinarily need, or needs only for limited periods in a year; services the contractor ordinarily provides to the public generally; and arrangements where the contractor engages others to do the work. Each has its own conditions.
The case everyone is watching involves Uber and payroll tax on payments to its drivers under these provisions. A High Court decision on the payroll tax contractor provisions was pending at the time of writing, and because the provisions are largely harmonised across states, the outcome is likely to matter well beyond NSW. Platform businesses, medical centres and businesses that use many contractors should be cautious.
Our guide to employee vs contractor explains how the Fair Work, ATO and super tests differ from payroll tax.
Worked example: a business employing in two states
Hypothetical, rounded, 2026–27 rates. Not grouped with any other business.
Say a company pays $2,400,000 in taxable wages a year (gross wages plus super). $1,800,000 is paid to staff in NSW and $600,000 to staff in Victoria.
NSW
- NSW share of Australian wages: $1.8m ÷ $2.4m = 75%
- NSW threshold available: $1,200,000 × 75% = $900,000
- Taxable: $1,800,000 − $900,000 = $900,000
- NSW payroll tax: $900,000 × 5.45% = $49,050
Victoria
- Victorian share: $0.6m ÷ $2.4m = 25%
- Australian wages are under $3m, so the full $1,000,000 deduction is available before apportionment
- Victorian deduction: $1,000,000 × 25% = $250,000
- Taxable: $600,000 − $250,000 = $350,000
- Victorian payroll tax: $350,000 × 4.85% = $16,975
Total for the year: about $66,000. If the company had paid all $2.4 million in NSW, the tax would be $65,400. Two points stand out: the company pays in Victoria even though its Victorian wages are well under Victoria's $1 million threshold, and splitting wages across states doesn't avoid the tax, because each state apportions its threshold. If this company is also grouped with the owner's other business, the threshold is shared again and the bill rises.
How to work out your payroll tax, step by step
- List every entity in your family or business group, and check which ones are grouped.
- Total the taxable wages for each entity: gross wages, super, fringe benefits, directors' fees, contractor payments caught by the contractor provisions.
- Split the wages by state, based on where the services are performed.
- Check each state's threshold against your group's total Australian wages, on a monthly basis as well as annually.
- Register in each state where you're over the threshold, generally within a set time after the month you first exceed it.
- Lodge monthly returns and pay by the due date.
- Reconcile after 30 June, adjusting for the actual annual threshold and any rate tiers.
- Review contractor payments each year against the exemptions, and keep the evidence.
Mistakes we see with payroll tax
- Forgetting super when checking the threshold.
- Looking at one entity, not the group.
- Assuming contractors are outside payroll tax.
- Missing the monthly registration trigger in a busy month, such as a bonus month.
- Not apportioning the threshold across states.
- Leaving it out of the forecast as the business grows. Our guide to building a cash flow forecast shows where it fits.
- Waiting for the revenue office to find it. Voluntary disclosure usually reduces penalties.
How BPAG helps with payroll tax
We work out if you're liable, who's grouped with whom, and what you owe in each state. Our state taxes agent calculates payroll tax across every state and territory and tests contractor payments against each state's rules, and our NSW, Victorian, South Australian and ACT specialist agents go further into those states' details. A qualified accountant reviews every calculation before it's lodged or relied on.
We can also run your payroll so the numbers that feed payroll tax are right in the first place. See our payroll and Payday Super service. For a broader look at your group's structure, and whether it creates payroll tax grouping you didn't expect, see business structure advice. Medical practices should also read our page for medical practices and health services, where contractor arrangements raise particular payroll tax questions.
Frequently asked questions
Does payroll tax include super?
Yes. In every state and territory, employer superannuation contributions are counted as taxable wages, including super guarantee and most salary sacrificed super. When you check if you're over the threshold, add super to gross wages.
Is payroll tax deductible?
Yes. Payroll tax paid by a business is generally deductible for income tax as a business expense. Interest and penalties charged by a state revenue office for late payment are treated differently, so check with your accountant before claiming them.
Is payroll tax on the BAS?
No. Payroll tax is a state tax, lodged and paid to the state or territory revenue office through its own online system. It doesn't appear on your BAS, which covers federal taxes such as GST and PAYG withholding.
What happens if I should have registered for payroll tax years ago?
Come forward. Revenue offices can assess back years, with interest and penalties, and penalties are usually much lower when you make a voluntary disclosure before they contact you. We can quantify the exposure first, so you know the number before you disclose.
Are directors' fees subject to payroll tax?
Yes. Fees paid to company directors count as wages for payroll tax in all states and territories. So do fringe benefits, many termination payments, and shares or options given to employees.
Do I pay payroll tax on apprentices and trainees?
Most states exempt or rebate wages of approved apprentices and trainees, subject to conditions. The rules differ between states and change from time to time, so check your revenue office's current exemptions before you assume the wages are excluded.
Official sources
General information only, current as at 18 October 2026. It is not personal tax, legal or financial product advice and doesn't take your circumstances into account. Talk to us before you act. Where a recommendation needs a licensed financial adviser or a solicitor, we work alongside them.