Payroll tax: an overview
Payroll taxes are state-based taxes on wages that Australian businesses with employees must pay. These taxes are used by governments to fund public services, such as health care and education, as well as infrastructure. Not all businesses need to pay this tax – it is only payable if your annual wages and salaries exceed certain thresholds, which are different depending on your state or territory. As a business owner, it is your responsibility to assess your tax obligations and lodge your payroll tax. Failing to comply with your tax obligations can have serious negative consequences for your business, such as penalties, interest charges and being audited.
State and territory tax thresholds
You must register for payroll tax if your total Australian wages are above the state or territory thresholds. The following information is current as of 2023. As state legislation may change, it’s always a good idea to seek advice from your state or territory tax authority or a professional tax agent. Here is a breakdown of the tax thresholds.
Australian Capital Territory
Monthly wage threshold: $166,666.66.
Tax rate: 6.85%
New South Wales
Monthly wage thresholds:
- 28-day month: $95,082
- 30-day month: $98,361
- 31-day month: $101,639.
Tax rate: 5.45%
Northern Territory
Monthly wage threshold: $125,000.
Tax rate: 5.5%
Queensland
Monthly wage threshold: $108,333
Tax rate: 4.75% for employers paying $6,500,000 or less in wages annually. 4.95% for employers paying over $6,500,000 in wages annually.
South Australia
Monthly wage threshold: $125,000.
Tax rate: variable rate of 0% to 4.95% for employers paying between $1,500,000 and $1,700,000 in wages annually and a standard rate of 4.95% for employers paying over $1,700,000 in wages annually.
Tasmania
Monthly wage thresholds:
- 28-day month: $99,044
- 30-day month: $102,459
- 31-day month: $105,874.
Tax rate: 4% for total wages between $1,250,001 and $2,000,000 annually and 6.1% for total wages above $2,000,001.
Victoria
Monthly wage threshold: $58,333.
Tax rate: 4.85% for metropolitan employers and 1.2125% for employers in regional Victoria.
Western Australia
Monthly wage threshold: $83,333.
Tax rate: 5.5 –6.5%
What happens if I pay wages in more than one state or territory?
If you pay wages to employees across the country, whether you need to register for payroll tax in the relevant states and territories depends on your total taxable Australia-wide wages. Here is an example.
Let’s say you pay $1,500,000 in total taxable wages annually to your employees in three states:
Wages in Victoria = $600,000 (threshold = $699,996)
Wages in Tasmania = $600,000 (threshold = $1,250,000)
Wages in Queensland = $300,000 (threshold = $1,300,000).
In this case, you must register for payroll tax in all three states – Victoria, Tasmania and Queensland –because your total taxable Australia-wide wages are above the threshold for each state.
Annual reconciliation
Each financial year, you are required to lodge an annual reconciliation. This gives you an opportunity to review the tax paid over the financial year and make any necessary adjustments to rectify overpayments or underpayments. Here are the due dates for the payroll tax annual reconciliation, with links to each state/territory revenue office.
Australian Capital Territory: 28 July
New South Wales: 28 July
Northern Territory: 21 July
Queensland: 28 July
South Australia: 28 July
Tasmania: 21 July
Victoria: 21 July
Western Australia: 21 July
How to register for and lodge payroll tax in 4 steps
So, business is booming – that’s great! You have forecasted that your business is set to exceed your state’s payroll tax threshold. It’s time to register for and lodge your payroll tax. Here’s how to do it in 4 steps.
- Register for payroll tax. To register, get in touch with your state or territory government revenue office. Be ready to fill out an online application and provide information about your business, including your ABN and contact details.
- Calculate how much tax you need to pay. Calculate your tax liability by firstly adding the total wages and salaries you pay to your employees in a given month. Apply the tax-free threshold to this amount, then factor in any deductions and rebates you are eligible for. Finally, apply the relevant payroll tax rate to this amount.
- Lodge the tax. You need to lodge your tax return with your state or territory revenue office. The information that you will probably need to provide includes the total salaries and wages paid to your employees and any payroll tax you have paid during the financial year. Make sure you lodge your tax return by the due date, which is usually seven days after the end of the month. Check the due date for your area with the relevant state or territory revenue office.
- Consider using tools to make the process easier. There are many online calculators, payroll software programs, and professional services, such as accountants and tax agents, to help you calculate your tax liability and lodge your tax return.
Payroll tax FAQs
What if I’m a member of a group of employers?
If the group’s taxable Australia-wide wages exceed the threshold of the state or territory in which your employees are located, you will be liable for payroll tax in that state or territory.
What if I only employ for part of the year?
If you, or your group of employers, employ for only part of the financial year, the threshold will be adjusted based on the number of days on which you employ during the year.
Are there any exemptions or deductions?
You may be eligible for a tax exemption or deduction. For example, some states offer exemptions for wages paid to certain employees, such as apprentices or trainees. You could also be eligible to receive a deduction or rebate for undertaking certain activities, including research and development or employing people with disabilities.
How is it calculated?
The payroll tax rate is a percentage of the total wages that you pay your employees. This rate varies depending on your state or territory, so make sure you confirm the requirements in your state or territory.
When is it due?
Once again, each state or territory has their own rules. Depending on the business size and wages paid, payroll tax is usually payable monthly or quarterly.
What happens if I don’t pay the taxes on time?
If the tax is underpaid or if you miss the deadline, you may be liable for penalties and interest charges. Typically, the penalty amount depends on the severity of the fault. The penalty may be waived if you can show that you took reasonable care or circumstances were out of your control.
What wages does payroll tax apply to?
Typically, payroll tax is payable on any employee wages. This includes salary, wages, commissions, allowances, bonuses and superannuation contributions. Contractor payments, director fees, fringe options and termination payments may also be included.
Tips to help you avoid payroll mistakes
- Create and use checklists: Having checklists and/or standardised procedures for every payroll cycle helps to ensure you don’t miss any steps and that your payroll is done accurately and on time.
- Conduct regular audits and reviews: By regularly auditing and reviewing your payroll processes, records and compliance, you can identify any issues or inconsistencies early before they become a major problem.
- Outsource your payroll: If your budget allows it, outsourcing your payroll to an external service could be a good option. This would enable you to focus on other areas of your business, take the burden off your internal resources and reduce the risk of errors.
