Income tax and GST work the same way no matter where in Australia you are. Payroll tax does not. It is levied by each state and territory individually, which means the threshold at which you start paying, the rate you pay, and even how the threshold tapers off can all be different depending on where your business is based, or where your employees work. Here is what actually applies in each state, current for the 2026-27 financial year.
Payroll tax is a state-based tax on the total wages you pay, once your annual wage bill crosses that state's threshold. It covers salaries, wages, super, bonuses, allowances and most contractor payments if the contractor is effectively working like an employee. It has nothing to do with the ATO. You register and lodge with your state's revenue office, not the Tax Office.
NSW: $1,200,000 annual threshold, flat 5.45% rate above it.
VIC: $1,000,000 annual threshold, 4.85% metro rate (1.2125% for regional employers). A mental health and wellbeing surcharge adds 1% on wages over $10m, and 2% total on wages over $100m.
QLD: $1,300,000 annual threshold, 4.75% up to $6.5m and 4.95% above that, with a 1% regional discount running until 30 June 2030. A mental health levy adds 0.25% on wages over $10m and a further 0.5% on wages over $100m.
WA: $1,000,000 annual threshold, flat 5.5% rate above it.
SA: $1,500,000 annual threshold, then a sliding scale up to 4.95% between $1.5m and $1.7m, flat 4.95% above that.
TAS: $1,250,000 threshold at 4%, rising to 6.1% above $2,000,000.
ACT: $1,750,000 annual threshold (cut from $2m from 1 July 2026), then a tiered rate starting at 6.75% and climbing to 8.75% for wages over $150m.
NT: $2,500,000 annual threshold (up from $1.5m), flat 5.5% standard rate, with a new 6.5% tier from 1 July 2026 for employers with Australia-wide wages of $100m or more.
This is the part that catches people out. NSW, TAS, ACT and NT use a straightforward cut-in: you owe nothing below the threshold, and tax applies to wages above it. VIC, QLD, WA and SA instead taper the tax-free deduction down gradually as your wages rise, so your effective tax rate creeps up more gradually rather than jumping the moment you cross the line. If you are budgeting for payroll tax for the first time, do not assume every state works the same way.
All eight jurisdictions use harmonised grouping provisions. If you run related businesses, or your business is commonly controlled with another entity, your wages are added together across the group for threshold purposes, and only one member of the group gets the tax-free threshold. This trips up business owners who set up a second entity thinking it resets the threshold. It does not.
If you employ people in more than one state, you also need to apportion wages and work out which state's threshold and rate apply to which portion of your payroll. That calculation is where most of the actual complexity sits, and it is worth getting right before you expand rather than after.
Not sure whether you are even close to a threshold, or expanding into a new state and want to know what it actually changes? Book a free call and we will walk through your numbers with you.
Assuming payroll tax is federal. It is not administered by the ATO, and BAS/PAYG obligations do not cover it.
Forgetting contractor payments. Many contractor arrangements still count as taxable wages for payroll tax purposes, even though the contractor invoices you and isn't on your payroll software.
Missing the grouping rules. Splitting a business into multiple entities does not multiply your tax-free thresholds if the entities are related or commonly controlled.
Not registering on time. Most states require registration once you are reasonably likely to exceed the threshold for the year, not only once you actually have.
Payroll tax thresholds range from $1m to $2.5m depending on the state, rates range from roughly 4.75% to 8.75%, and some states taper the threshold while others use a hard cut-in. If your business operates across state lines, or you are close to a threshold anywhere, it is worth getting the numbers checked properly rather than guessing.
We handle payroll tax registration and lodgement as part of our fixed-fee packages, with every question answered within 24 hours. Book your free call here.
This article is general information only and does not take into account your personal circumstances. Please seek advice tailored to your situation before acting.
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