Victoria's payroll tax has more moving parts than any other state's. There's a low $1 million threshold, a phase-out that takes the threshold away from mid-sized employers, a regional rate that cuts the tax by three-quarters if you qualify, two surcharges for large payrolls, and an exemption for GP practices that depends on how much of their work is bulk billed. Get one of those wrong and the annual reconciliation will find it.
This guide sets out the 2026–27 figures, how each piece is calculated, what counts as wages, grouping and contractors, the exemptions, the lodgement dates, what the SRO is auditing this year, and worked examples at different payroll sizes. For every state side by side, see our guide to payroll tax by state.
Victorian payroll tax at a glance (2026–27)
| Item | 2026–27 figure | Source |
|---|---|---|
| General rate | 4.85% | SRO Victoria |
| Regional employer rate | 1.2125% | SRO Victoria |
| Annual threshold (maximum deduction) | $1,000,000 ($83,333 a month) | SRO Victoria |
| Threshold phase-out | Reduced by 50 cents per $1 of Australian wages above $3 million; nil above $5 million | SRO Victoria |
| Mental health and wellbeing surcharge | 0.5% above $10m Australian wages; extra 0.5% above $100m | SRO Victoria |
| COVID-19 debt temporary surcharge | 0.5% above $10m; extra 0.5% above $100m (1 July 2023 to 30 June 2033) | SRO Victoria |
| Combined surcharges | 1% above $10m; 2% above $100m (on the Victorian share of wages above the threshold) | SRO Victoria |
| Monthly payment | By the 7th of the following month | SRO Victoria |
| Annual reconciliation | 21 July 2027 for 2026–27; no extensions | SRO Victoria |
| Interest on tax defaults | 12.43% a year for 2026–27 (market rate 4.43% + 8% premium) | SRO Victoria |
The threshold rose to $1 million on 1 July 2025, and the 50% phase-out rate has applied from 2025–26 onwards. No rate or threshold changed on 1 July 2026.
What is the Victorian payroll tax rate and threshold for 2026–27?
The 2026–27 rate is 4.85% of taxable wages above the threshold, or 1.2125% for eligible regional Victorian employers. The threshold is $1 million a year ($83,333 a month) for employers and groups with Australian wages up to $3 million. The SRO's current rates page (updated 29 September 2026) confirms both.
Victoria calls the threshold a "deduction". You subtract it from your Victorian wages and pay tax on the rest. As in other states, it's reduced if you pay wages interstate (you get the Victorian share only) or employ for part of the year (pro-rated by days).
How does the threshold phase-out work?
If your Australian wages, or your group's, are between $3 million and $5 million, the threshold is reduced by 50% of the wages above $3 million. Above $5 million you get no threshold at all.
For a business that employs only in Victoria for the full year, the formula simplifies to: threshold = ($5 million − your wages) × 50%.
| Australian wages (Vic only, full year) | Threshold 2026–27 | Effective tax-free amount |
|---|---|---|
| $2,500,000 | $1,000,000 | Full threshold |
| $3,000,000 | $1,000,000 | Full threshold |
| $3,500,000 | $750,000 | Reduced |
| $4,000,000 | $500,000 | Reduced |
| $4,500,000 | $250,000 | Reduced |
| $5,000,000 and above | Nil | Tax on every dollar |
If you also employ interstate, the SRO applies the same steps to your Victorian share: threshold × Victorian share, less (Victorian wages − $3 million × Victorian share) × 50%. The SRO's threshold calculator does this for you.
How much is payroll tax in Victoria at different payroll sizes?
Metropolitan employer, Victoria only, not grouped, full year, 2026–27.
| Australian taxable wages | Threshold | Payroll tax | Surcharges | Total |
|---|---|---|---|---|
| $1,000,000 | $1,000,000 | Nil | Nil | Nil |
| $2,000,000 | $1,000,000 | $48,500 | Nil | $48,500 |
| $3,000,000 | $1,000,000 | $97,000 | Nil | $97,000 |
| $4,000,000 | $500,000 | $169,750 | Nil | $169,750 |
| $5,000,000 | Nil | $242,500 | Nil | $242,500 |
| $12,000,000 | Nil | $582,000 | $20,000 | $602,000 |
Notice the jump between $3 million and $5 million: each extra $1 of wages in that band costs about 7.3 cents in tax (4.85% plus the lost threshold), not 4.85 cents.
How do the Victorian mental health and COVID debt surcharges work?
Two surcharges, each 0.5%, apply to the Victorian share of wages above $10 million when your Australian wages (or your group's) exceed $10 million a year, with a further 0.5% each above $100 million. That's 1% combined above $10 million and 2% above $100 million, on top of the 4.85%.
- The mental health and wellbeing surcharge started on 1 January 2022 and is ongoing.
- The COVID-19 debt temporary payroll tax surcharge started on 1 July 2023 and runs until 30 June 2033.
Both are calculated automatically in your returns. The monthly thresholds are $833,333 and $8,333,333. For groups, the thresholds apply at group level and are claimed by the designated group employer, and they're apportioned for interstate wages and part-year employment. Wages that are exempt from payroll tax are also exempt from the surcharges.
Key point: Some online calculators say Victoria has no mental health surcharge. That's wrong. The SRO names it and collects it.
Who qualifies for the Victorian regional payroll tax rate?
You qualify for the 1.2125% regional rate if at least 85% of your Victorian taxable wages are paid to regional employees, meaning employees who perform more than half their work for you in regional Victoria. Only work done in Victoria counts when deciding whether someone is a regional employee (Revenue Ruling PTA-042v2).
- Regional Victoria means the regional council areas listed by the SRO (for example Greater Geelong, Ballarat, Greater Bendigo, Latrobe and Greater Shepparton). Melbourne metropolitan councils don't qualify.
- You must meet the 85% rule for the full financial year at the annual reconciliation. If you fall short in some months, you pay 4.85% for those months and may get a refund at year end if the full-year test is met.
- Each member of a group is tested separately. Being grouped with a regional employer doesn't give you the lower rate.
For a regional employer, the regional rate cuts the tax on $3.5 million of taxable wages from $169,750 to $42,438.
Who has to register for payroll tax in Victoria?
You must register with the SRO if you pay wages in Victoria and your taxable Australian wages, or your group's, exceed the threshold ($83,333 in a month or $1 million a year). The SRO warns that penalties and interest can apply if you don't register when you should.
Registration is online through PTX Express. You'll need your ABN, wage records for the past 4 years, and details of any businesses you're grouped with. The SRO says it confirms registration in writing, usually within 90 business days. Your liability starts when you crossed the threshold, so back-calculate and pay from then.
Not sure if you've crossed it? Ask us.
What counts as wages for Victorian payroll tax?
Taxable wages include salary, super, fringe benefits, directors' fees, termination payments, shares and options, and payments under relevant contracts and employment agency arrangements. The definitions are harmonised with NSW, Queensland, SA, Tasmania and the ACT.
| Item | Victorian treatment |
|---|---|
| Salary, wages, bonuses, commissions, allowances | Taxable |
| Employer super (SG, salary sacrifice, extra contributions) | Taxable |
| Fringe benefits | Taxable at their grossed-up FBT value (have your FBT return ready for the annual reconciliation) |
| Directors' fees | Taxable |
| Employee share scheme shares and options | Taxable |
| Accommodation allowance | Exempt up to $328.85 a night for 2026–27; the excess is taxable |
| Motor vehicle allowance | Exempt up to the ATO cents-per-kilometre rate for the previous year; the excess is taxable |
| Workers compensation | Exempt, including the first 10 days paid by the employer; make-up pay is taxable |
How does grouping work for Victorian payroll tax?
Grouped businesses share one threshold, are tested together for the phase-out and surcharges, and are jointly and severally liable for the group's tax. Businesses are grouped under Part 5 of the Payroll Tax Act 2007 (Vic) if they're related companies, share employees, are under common control, or are linked by tracing interests through companies and trusts.
Grouping matters even more in Victoria than in NSW, because group wages also decide whether you lose some or all of the threshold. A family with two businesses each paying $2 million of wages has $4 million of group wages: the group's threshold falls to $500,000, not $1 million each.
The SRO can exclude a business from a group (other than related companies) if it is run independently; you apply through the SRO. The SRO lists grouping as a 2026–27 compliance focus, so expect questions if related entities aren't registered as a group.
Do contractors and labour hire count in Victoria?
Yes, unless an exemption applies. The relevant contract provisions in Part 3, Division 7 deem many payments to contractors to be wages, and the employment agency provisions tax on-hire arrangements. The standard exemptions are harmonised: services ancillary to goods, services not ordinarily required, services needed for 90 days or less in a year, contractors who ordinarily serve the public generally, and contractors who engage others.
The SRO's compliance priorities for 2026–27 (published 23 September 2026) name employers who don't correctly disclose contractor payments, employee share schemes and fringe benefits, employers who don't lodge annual reconciliations on time, employers who should be grouped, and labour hire arrangements. The SRO reported more than 13,500 investigations in 2025–26 and over $1 billion in assessed tax.
On the contractor provisions, the High Court heard Uber Australia v Chief Commissioner of State Revenue (from NSW) on 8 April 2026, and judgment was still reserved as at 23 October 2026. Victoria's provisions are harmonised with NSW's, so until the High Court rules we treat the NSW Court of Appeal decision against Uber as the working position in Victoria too. Platform, delivery and rideshare businesses shouldn't assume their payments are outside payroll tax.
Our employee vs contractor guide explains how the Fair Work, ATO and payroll tax tests differ.
What exemptions apply to Victorian payroll tax?
Common exemptions include primary and secondary caregiver leave (up to 14 weeks), GP wages for fully-funded consultations, volunteer emergency leave, defence leave, workers compensation and the tax-free part of genuine redundancies. Apprentice and trainee wages are generally taxable in Victoria.
| Item | Victorian treatment (2026–27) |
|---|---|
| Primary or secondary caregiver leave | Exempt up to 14 weeks per child (or the equivalent at reduced pay, such as 28 weeks at half pay). Annual, sick and long service leave aren't covered |
| Commonwealth Paid Parental Leave | Not wages |
| Apprentices and trainees | Taxable, except re-employed apprentices or trainees taken on by a new, ungrouped employer to continue the same training, and approved group training organisations |
| Volunteer firefighters and emergency responders (CFA, SES, Life Saving Victoria and others) | Exempt while volunteering (not while on annual or long service leave) |
| Defence force leave | Exempt |
| Genuine redundancy and early retirement payments | Tax-free portion exempt |
| Portable long service leave and redundancy scheme contributions | Exempt if not fringe benefits |
| Charities, public benevolent institutions, some non-government schools | Employer exemptions, subject to conditions |
Victorian GP practices: the fully-funded consultation exemption
From 1 July 2025, wages paid by a GP medical business to employee and contractor GPs are exempt in proportion to the GP work that is fully funded (generally bulk billed). The exempt wages are:
GP wages × (amount received for fully-funded GP items ÷ amount received for all GP items), excluding amounts for consumables.
So if a practice pays $20,000 of GP wages in a month and $12,000 of its $30,000 GP income is for fully-funded items, $8,000 is exempt and $12,000 is taxable. The exemption doesn't apply to dentists or allied health. For earlier years, the Treasurer's ex gratia relief covered contractor GP payments up to 30 June 2024, and for 2024–25 for practices that hadn't been advised by 22 May 2024 that tax was payable and hadn't paid it. See our page for medical practices and health services.
When are Victorian payroll tax returns due?
Monthly payroll tax is due by the 7th of the following month, and the 2026–27 annual reconciliation must be lodged and paid by 21 July 2027. If the date falls on a weekend or public holiday, it moves to the next business day.
- Monthly returns: lodge through PTX Express every month, even if no tax is payable, and pay by the 7th.
- June: no June monthly return. June wages go into the annual reconciliation.
- Annual reconciliation: available from mid-June, due 21 July, no extensions. You can edit it until early May the following year.
- What you'll need: Victorian wages by component, interstate wages, tax paid, estimated wages for next year, your FBT return (if you provide fringe benefits) and, for regional employers, a split of regional and non-regional wages.
What are the penalties for getting Victorian payroll tax wrong?
Missing the 21 July deadline can bring penalty tax of up to 25% plus interest, and interest on tax defaults is 12.43% a year for 2026–27. Penalty tax is higher where the SRO finds intentional disregard, and lower where you disclose voluntarily. The SRO says significant penalty and interest discounts apply to voluntary disclosures made before an investigation.
Worked example: a Victorian manufacturer with a regional site
Hypothetical, rounded, 2026–27 rates.
Say a company makes furniture. Its head office and showroom in Melbourne pay $1,200,000 of taxable wages (wages plus super), and its factory in Ballarat pays $2,600,000. It has no other businesses and employs only in Victoria.
Step 1: Threshold. Australian wages are $3,800,000, inside the phase-out band. Threshold = $1,000,000 − ($3,800,000 − $3,000,000) × 50% = $600,000.
Step 2: Regional test. Regional wages are $2,600,000 ÷ $3,800,000 = 68% of Victorian wages, below 85%. The company is not a regional employer, so the 4.85% rate applies to everything.
Step 3: Tax. ($3,800,000 − $600,000) × 4.85% = $155,200.
Now say the company moves its showroom and office staff to Ballarat, so 100% of wages are regional. Tax = $3,200,000 × 1.2125% = $38,800, a saving of about $116,000 a year. That isn't a reason to move a business on its own, but it belongs in the numbers for any relocation, new site or restructure. If the same company were grouped with the owner's $1.5 million transport business, group wages would be $5.3 million and the threshold would disappear entirely.
How BPAG helps with Victorian payroll tax
We work out your threshold after the phase-out, test the regional rate and surcharges, map your group, and review contractor and labour hire arrangements against the SRO's current focus areas. Our Victorian state taxes agent works through Victorian payroll tax, surcharges and concessions in detail, and a qualified accountant reviews every calculation before it's lodged or relied on.
We can register you in PTX Express, prepare monthly returns and the annual reconciliation, and help with a voluntary disclosure if past years are wrong. We work with Victorian businesses from our Melbourne office in Bundoora and remotely. Our state taxes service covers payroll tax with land tax and duty, and our payroll service keeps the wage data clean at the source.
What to send us
- Payroll reports for the last 12 months (and up to 4 years if you may have been liable earlier) for every entity in your group
- Where each employee works (metropolitan Victoria, regional Victoria or interstate), with the share of time for anyone who moves around
- Contractor, labour hire and employment agency payments, with the agreements
- Your FBT return and any employee share scheme details
- Your PTX Express customer and group numbers, and any SRO letters or assessments
- For GP practices: Medicare and billing reports splitting fully-funded and other GP items, and GP pay records
Frequently asked questions
Is payroll tax only in Victoria?
No. Every Australian state and territory has its own payroll tax, with different rates and thresholds. Victoria is one of the stricter ones for mid-sized employers because of its $1 million threshold and the phase-out above $3 million of wages. There is no federal payroll tax.
Do I pay Victorian payroll tax on superannuation?
Yes. Employer super contributions, including super guarantee and salary sacrificed super, are taxable wages in Victoria. Include them when you check the threshold and when you lodge.
Can I lodge Victorian payroll tax annually instead of monthly?
Your return cycle is set when you register and shown in your registration letter. Most employers lodge monthly, with the June month included in the annual reconciliation. If you want to change cycle, contact the SRO.
Are private schools exempt from Victorian payroll tax?
Some are. Since 1 July 2024, wages paid by a non-profit, non-government school for educational services are exempt only if the school has been declared by the Minister for Education; wages paid by other schools are taxable above the threshold. Check the SRO's schools guidance and whether your school is declared before relying on the exemption.
What if I've underpaid Victorian payroll tax in past years?
Tell the SRO before it contacts you. The SRO says significant penalty and interest discounts apply to voluntary disclosures made before an investigation starts. Have the exposure calculated first, so the disclosure is complete and you know the figure.
How long does Victorian payroll tax registration take?
The SRO confirms registration in writing, and says this usually happens within 90 business days. You'll need your ABN, wage records for the past 4 years and details of any businesses you're grouped with. Liability runs from when you crossed the threshold, not from when registration is confirmed.
Official sources
- SRO Victoria — Payroll tax current rates
- SRO Victoria — Threshold and phase-out rate
- SRO Victoria — Payroll tax surcharges
- SRO Victoria — Regional employers
- SRO Victoria — Medical industry
- SRO Victoria — Lodge your annual reconciliation
- SRO Victoria — Compliance areas of focus 2026–27
- SRO Victoria — Schools and education providers
General information only, current as at 23 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.