Payroll tax in Victoria is collected by the State Revenue Office, not the ATO, and it applies once your wage bill crosses the state threshold. Victoria has a few features that make it different from most other states: a lower rate for regional employers, a threshold that phases out as you grow, and surcharges for very large payrolls. Here is what applies for the 2026-27 financial year.
From 1 July 2025, Victoria's annual tax-free threshold is $1,000,000, which works out to $83,333 a month. Metropolitan employers pay 4.85% on wages above the threshold. Regional employers pay a much lower 1.2125%, provided they are based in regional Victoria and pay at least 85% of their wages to regional employees.
That regional rate is a genuine saving, so if your business and your team are based in regional Victoria it is worth checking whether you qualify rather than assuming the standard rate applies.
Victoria does not use a simple hard cut-in. The tax-free threshold gradually phases out as your wages rise above $1 million, and large employers eventually get no tax-free threshold at all. In practice that means your effective payroll tax cost climbs more steeply than the headline rate suggests once you are well above the threshold. If you are budgeting for a big hiring year, do not assume the first $1 million stays tax free forever.
Taxable wages in Victoria cover the full picture: salaries, superannuation, bonuses, commissions, allowances, fringe benefits and many contractor payments. Super is included, which catches a lot of employers out, especially as it sits alongside your other payroll obligations rather than being separate from them.
Not sure whether you have crossed the Victorian threshold, or whether you qualify for the regional rate? Book a free call and we will check it with you.
Victoria applies two payroll tax surcharges on top of the standard rate: the mental health and wellbeing surcharge, and a temporary COVID debt surcharge. Both only bite once your national wages are large. They start at combined wages above $10 million and step up again above $100 million, and they only apply to your Victorian share of wages over those levels. For most small and medium businesses these surcharges never come into play, but they matter if you are scaling toward that size.
Once registered, you lodge monthly returns through the State Revenue Office, generally by the seventh of the following month, and complete an annual reconciliation after the end of the financial year in July. As with every state, you need to register once it is clear your wages will cross the threshold, not only once they have.
If you employ people in Victoria and other states, you apportion your wages and Victoria's threshold applies only to the Victorian share. The harmonised grouping rules also apply, so related or commonly controlled businesses are grouped and share a single threshold. This becomes relevant fast when you are growing your team across more than one state. Our payroll tax by state guide compares all eight jurisdictions side by side.
Three things catch Victorian employers out. The first is assuming payroll tax is federal: it is not administered by the ATO, and your BAS and PAYG obligations do not cover it. The second is forgetting that super and many contractor payments count as wages, which quietly pushes your total over the threshold. The third is assuming a second entity resets the threshold, when the grouping rules add related businesses together and share one threshold between them. And if you think you might qualify as a regional employer, check the definition carefully rather than assuming, because the gap between 4.85% and 1.2125% is worth real money.
Victorian payroll tax starts at $1 million of annual wages, at 4.85% for metro employers and 1.2125% for regional ones. The threshold phases out as you grow, super and many contractor payments count as wages, and surcharges apply only to large national payrolls. If you are near the threshold or think you might qualify for the regional rate, it is worth getting it checked.
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.
Figures are current for the 2026-27 financial year and were checked in September 2026. This article is general information only and does not take your circumstances into account. Please seek advice tailored to your situation before acting.
.png)
