Payroll tax in Western Australia is collected by RevenueWA, not the ATO, and it applies once your wage bill crosses the state threshold. WA's headline numbers are simple, a $1 million threshold and a 5.5% rate, but the way the threshold tapers as you grow is where employers get caught out. Here is how it works for the 2026-27 financial year.
Western Australia has an annual payroll tax threshold of $1,000,000, or $83,333 a month, and a rate of 5.5% on taxable wages above it. So far, that looks like a straightforward hard cut-in. The complication is what happens as your wages grow past the threshold.
WA uses what it calls a diminishing tax-free threshold. Your full $1 million threshold only applies while your annual Australian taxable wages are at $1 million. Between $1 million and an upper limit of $7.5 million, the tax-free portion gradually reduces, so more of your wages become taxable as you grow. Once your annual wages reach $7.5 million or more, the threshold disappears entirely and the full 5.5% applies to all your WA taxable wages.
The practical effect is that your effective payroll tax cost rises faster than the flat 5.5% rate suggests as you move up through that $1 million to $7.5 million band. If you are planning a period of strong growth, this is worth modelling in advance rather than being surprised by it at reconciliation time.
WA taxable wages include salaries, superannuation, bonuses, commissions, allowances, fringe benefits and many contractor payments. Super is part of the base, so it sits alongside the rest of your payroll obligations rather than being separate from them, and contractor payments can count even when the worker invoices you.
Not sure how the diminishing threshold affects your business? Book a free call and we will model it with you.
WA adds higher rates for very large employers. Wages between $100 million and $1.5 billion attract an extra 6% on that portion, and wages above $1.5 billion attract 6.5% on the amount above that level. These tiers are irrelevant to almost every small and medium business, but they are part of the WA scale and worth knowing exist.
Once registered, you lodge returns through Revenue Online, generally by the seventh of the following month, and complete an annual reconciliation after the financial year ends in July. You need to register once it is clear your wages will exceed the threshold, which becomes relevant quickly when you are building out your team.
If you employ people in WA and other states, you apportion your wages and WA's threshold applies only to the WA share. The harmonised grouping rules apply, so related or commonly controlled businesses are grouped and share a single threshold. Our payroll tax by state guide compares WA with every other state and territory.
The biggest WA-specific mistake is treating the threshold as a fixed $1 million deduction. Because it diminishes between $1 million and $7.5 million, employers who budget on the flat rate alone tend to underestimate what they owe as they grow. The usual traps apply too: payroll tax is a state tax rather than a federal one, super and many contractor payments count as wages, and the grouping rules mean related businesses share a single threshold rather than each getting their own. If you are moving up through that $1 million to $7.5 million band, model the diminishing threshold before you hire, not after.
WA payroll tax starts at $1 million of annual wages at a flat 5.5%, but the tax-free threshold diminishes between $1 million and $7.5 million and disappears above that. Super and many contractor payments count as wages, and higher rates apply only to very large payrolls. If your wages sit in that $1 million to $7.5 million band, the diminishing threshold is the detail to get right.
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)
