• Written by: James Carey, CA CTA
• 27/01/2026

Australian Payroll Tax by State | 2026 Rates Guide

Payroll tax is one of the most overlooked obligations for foreign companies hiring employees in Australia. Unlike federal income tax or GST, payroll tax is administered separately by each of Australia’s six states and two territories, and every jurisdiction sets its own rate, threshold, and exemption rules. For a foreign company with employees in Sydney, Melbourne, and Brisbane, that means registering with three different state revenue offices, meeting three different thresholds, and filing three different returns.

This guide breaks down Australian payroll tax by state for the 2025-26 financial year, explains the grouping provisions that commonly affect foreign-owned businesses, and provides a practical roadmap for compliance. If your company is expanding into Australia and expects to employ staff, understanding payroll tax early prevents costly back-assessments and penalties.

What Is Payroll Tax?

Payroll tax is a state and territory tax levied on employers based on the total wages they pay to employees. It is not deducted from employees’ pay — it is an additional cost borne entirely by the employer, on top of salaries, superannuation, and other employment costs.

Every Australian state and territory administers payroll tax independently. There is no federal payroll tax in Australia. This means each jurisdiction has its own legislation, its own revenue office, its own registration process, and its own compliance requirements. The rates and thresholds are harmonised to some degree through inter-governmental agreements, but meaningful differences remain.

For foreign companies, payroll tax often comes as a surprise. Many countries do not have an equivalent employer-level state tax on wages, and the obligation is not always flagged during the initial company registration process with ASIC or the ATO. However, once your Australian wage bill crosses the relevant threshold, payroll tax registration is mandatory and failure to register can result in back-assessments with interest and penalties.

If you are in the early stages of establishing an Australian presence, our guide to foreign company registration covers the ASIC and ATO registrations you need to complete before hiring employees.

Payroll Tax Australian Payroll Tax Rates and Thresholds by State (2025-26)

The following table summarises the standard payroll tax rates and annual thresholds for each Australian state and territory for the 2025-26 financial year (1 July 2025 to 30 June 2026).

Important notes:

• Thresholds are deductible — you only pay payroll tax on the amount of wages exceeding the threshold.
• If your business is part of a group (see grouping provisions below), the threshold is shared across all group members.
• Rates and thresholds are subject to annual change. Always verify with the relevant state revenue office before lodging.

Detailed State-by-State Breakdown

New South Wales (NSW)

NSW has the largest economy in Australia and is the most common destination for foreign companies establishing their first Australian presence.

• Rate: 5.45% on taxable wages above the threshold
• Annual threshold: $1,200,000
• Administered by: Revenue NSW
• Registration trigger: You must register within 7 days of your monthly wages first exceeding $100,000 (or when you expect your annual wages to exceed $1,200,000)
• Returns: Monthly, due 7th of the following month
• Annual reconciliation: Due 28 July each year

NSW does not impose a separate mental health or COVID levy on payroll tax. The rate has been stable at 5.45% since 2020.

Example: A foreign company subsidiary in Sydney pays $1,800,000 in annual taxable wages. Payroll tax = ($1,800,000 – $1,200,000) x 5.45% = $32,700.

Victoria (VIC)

Victoria has a tiered rate structure including a mental health and wellbeing surcharge that adds complexity for larger employers.

• Base rate: 4.85% on taxable wages above the threshold
• Annual threshold: $1,000,000 (lower than most other states)
• Mental health and wellbeing surcharge: Additional 0.5% on Victorian taxable wages for employers with national wages above $10 million. This increases to 1.0% for employers with national wages above $100 million.
• Administered by: State Revenue Office Victoria (SRO)
• Registration trigger: Within 7 days of wages first exceeding the monthly threshold ($75,000)
• Returns: Monthly (or annual for smaller employers), due 7th of the following month

Victoria’s lower threshold and additional surcharge make it the most expensive payroll tax jurisdiction for mid-to-large employers. Foreign companies with national wages exceeding $10 million should factor in the surcharge when budgeting for Victorian operations.

Example: A foreign company with $15 million in national wages pays $2,500,000 in Victorian taxable wages. Base payroll tax = ($2,500,000 – $1,000,000) x 4.85% = $77,600. Mental health surcharge = $2,500,000 x 0.5% = $12,500. Total = $90,100.

Queensland (QLD)

Queensland uses a tiered rate system where larger employers pay a higher marginal rate.

• Rate: 4.75% on taxable wages up to $6,500,000; 4.95% on the portion exceeding $6,500,000
• Annual threshold: $1,300,000
• Administered by: Queensland Revenue Office (QRO)
• Registration trigger: Within 7 days of becoming liable (wages exceed threshold)
• Returns: Monthly for employers with wages above $6,500,000; periodic (quarterly or annual) for others
• Discount: A 1% discount applies if returns are lodged and paid by the due date (effectively reducing the rate to ~4.70% for smaller employers)

Queensland’s higher threshold and discount for timely payment make it one of the more employer-friendly jurisdictions.

Western Australia (WA)

• Rate: 5.5% on taxable wages above the threshold
• Annual threshold: $1,000,000
• Administered by: Department of Finance WA
• Registration trigger: Within 7 days of wages exceeding the monthly threshold
• Returns: Monthly, due by the 7th of the following month
• Annual reconciliation: Due 21 July each year

WA has the highest flat rate among the mainland states and a relatively low threshold, making it the most expensive jurisdiction per dollar of wages for small-to-medium payrolls.

South Australia (SA)

• Rate: 4.95% (effectively, through a formula that phases in the rate above the threshold)
• Annual threshold: $2,500,000
• Administered by: RevenueSA
• Registration trigger: Within 14 days of becoming an employer liable for payroll tax
• Returns: Monthly, due by the 7th of the following month

SA provides one of the more generous thresholds in Australia, which benefits smaller foreign company operations. SA also offers payroll tax exemptions for certain apprentice and trainee wages.

Tasmania (TAS)

Tasmania uses a two-tier rate structure.

• Rate: 4.0% on taxable wages between $1,250,000 and $2,000,000; 6.1% on the portion above $2,000,000
• Annual threshold: $1,250,000
• Administered by: State Revenue Office Tasmania
• Registration trigger: Within 7 days of becoming liable

Tasmania’s base rate of 4.0% is the lowest in Australia, but the jump to 6.1% for wages above $2 million means larger employers pay a significant premium.

Australian Capital Territory (ACT)

• Rate: 6.85% on taxable wages above the threshold
• Annual threshold: $2,000,000
• Administered by: ACT Revenue Office
• Registration trigger: Within 7 days of wages exceeding the threshold

The ACT has the highest rate in Australia at 6.85%, but it also has the highest threshold at $2 million. For smaller employers, the high threshold means many businesses avoid payroll tax entirely. For larger employers, the rate is steep.

Northern Territory (NT)

• Rate: 5.5% on taxable wages above the threshold
• Annual threshold: $2,500,000
• Administered by: Territory Revenue Office
• Registration trigger: Within 21 days of becoming liable

The NT matches SA’s threshold and WA’s rate. Small employer exemptions may apply for businesses in regional areas.

What Counts as Taxable Wages?

The definition of “taxable wages” for payroll tax purposes is broader than many foreign employers expect. It extends beyond base salary to include:

The contractor provision catches many foreign companies off guard. Under payroll tax legislation, payments to certain contractors are treated as wages if the contract is primarily for labour (rather than a result or outcome) and the contractor does not provide their own plant and equipment. This “relevant contracts” provision varies slightly between states but can significantly increase your payroll tax liability if you engage Australian contractors.

Grouping Provisions: Why They Matter for Foreign Companies

Grouping provisions are particularly relevant for foreign companies and multinational groups operating in Australia. Under payroll tax law, related businesses can be “grouped” together, which means they share a single threshold rather than each claiming their own.

When Does Grouping Apply?

Grouping typically applies when:

• Common ownership: A foreign parent company owns two or more Australian entities (for example, both an Australian subsidiary and a registered branch)
• Related entities: Companies under common control, including entities connected through a chain of ownership
• Use of common employees: Where employees of one entity perform work for a related entity

Impact on Foreign Companies

For a typical foreign company entering Australia with a single subsidiary or branch, grouping may not initially be an issue. However, if your global group has any other Australian-related entities — even entities you may not manage directly — they could trigger grouping.

Example: A US parent company has a wholly owned Australian subsidiary in Sydney (annual wages $800,000) and a separate Australian subsidiary in Melbourne (annual wages $600,000). Individually, neither exceeds the NSW or VIC thresholds. But because they are grouped, their combined Australian wages of $1,400,000 exceed both thresholds, and the group must register for payroll tax in both states. The single threshold is apportioned between the group members.

Designated Group Employer (DGE)

Groups can nominate a Designated Group Employer (DGE) to lodge returns and pay payroll tax on behalf of all group members in a jurisdiction. This simplifies compliance but requires careful coordination between entities.

Multi-State Payroll Tax Registration

Foreign companies operating across multiple Australian states face the administrative burden of registering and lodging in each jurisdiction where they have employees.

When Do You Need Multi-State Registration?

You must register for payroll tax in every state or territory where you pay wages to employees who perform work in that jurisdiction. This includes:

• Employees physically based in the state
• Employees who work remotely but are connected to an office in the state
• Employees who work across multiple states (allocated based on principal place of work or days worked in each jurisdiction)

Interstate Wages and Threshold Allocation

The threshold allocation formula ensures that you do not claim a full threshold in every state. Instead, the threshold in each state is reduced proportionally based on the share of your total Australian wages paid in that state.

Formula:

State threshold = State annual threshold x (State taxable wages / Total Australian wages)

Example: A foreign company pays $3,000,000 in total Australian wages — $2,000,000 in NSW and $1,000,000 in VIC.

• NSW threshold allocation: $1,200,000 x ($2,000,000 / $3,000,000) = $800,000
• VIC threshold allocation: $1,000,000 x ($1,000,000 / $3,000,000) = $300,000
• NSW payroll tax: ($2,000,000 – $800,000) x 5.45% = $65,400
• VIC payroll tax: ($1,000,000 – $300,000) x 4.85% = $33,950
• Total payroll tax: $99,350

Exemptions and Concessions

Each state offers various exemptions and concessions that can reduce your payroll tax liability. Common exemptions include:

Foreign companies should investigate state-specific concessions with the relevant revenue office or their Australian tax adviser, as eligibility criteria and application processes vary.

How to Register for Payroll Tax

The registration process is broadly similar across all jurisdictions:

1. Determine your liability. Calculate your monthly and projected annual wages (including grouped entities). If they exceed or are likely to exceed the threshold, you must register.
2. Register with the state revenue office. Each state has an online portal for payroll tax registration. You will need your ABN, ACN or ARBN, business details, and an estimate of your monthly wages.
3. Set up lodgement and payment. Most states require monthly electronic lodgement of payroll tax returns. Set up direct debit or electronic payment through the state’s portal.
4. Lodge returns on time. Returns are generally due by the 7th of the month following the reporting period. Annual reconciliations are typically due in July.
5. Review annually. Check each state’s updated rates and thresholds at the start of each financial year (1 July).

If your company is setting up payroll in Australia for the first time, we recommend engaging a local payroll provider or tax adviser to handle the initial registrations and first-year returns. Payroll tax errors are common in the first year of operations and can be costly to remediate.

Common Mistakes Foreign Employers Make

1. Not Registering at All

The most common mistake is not knowing payroll tax exists. Many foreign companies complete their ASIC registration, obtain an ABN, register for GST and PAYG withholding, and begin hiring — without realising they also need to register for state payroll tax once wages exceed the threshold.

2. Ignoring Grouping Rules

Foreign companies often fail to check whether other entities in their global group have Australian operations. If a sister company or related entity already has employees in Australia, your wages may be grouped together, pushing you over the threshold even if your own payroll is small.

3. Excluding Contractor Payments

Payments to Australian contractors who are deemed “employees” under the relevant contracts provisions should be included in your taxable wages calculation. Failing to include these payments can result in a significant back-assessment.

4. Missing the Fringe Benefits Component

Fringe benefits — such as company cars, housing, or relocation assistance — must be included in your payroll tax calculation at their grossed-up taxable value. Foreign companies providing relocation packages to expatriate employees frequently overlook this.

5. Applying the Wrong Threshold in Multi-State Situations

Claiming a full threshold in each state when you have employees in multiple jurisdictions is a compliance error. The threshold must be apportioned based on your wages in each state relative to your total Australian wages.

6. Not Reconciling Annually

Monthly estimates often diverge from actual annual wages. The annual reconciliation (typically due in July) is mandatory and can result in either a top-up payment or a refund. Missing the annual reconciliation triggers penalties and interest.

Frequently Asked Questions

Do foreign companies have to pay payroll tax in Australia?

Yes. Any employer — including registered foreign companies, Australian subsidiaries of foreign parents, and even entities using contractor arrangements that fall within the relevant contracts provisions — must pay payroll tax if their total Australian taxable wages exceed the threshold in a given state or territory. There is no exemption based on the employer’s country of incorporation.

What happens if I employ staff in multiple Australian states?

You must register for payroll tax in each state where you have employees performing work. Your threshold in each state is proportionally reduced based on the share of wages in that state relative to your total Australian wages. This prevents double-counting of the threshold but does mean your overall payroll tax liability increases compared to operating in a single state.

Is payroll tax deductible for income tax purposes?

Yes. Payroll tax paid to state and territory revenue offices is an allowable deduction for Australian income tax purposes. This effectively reduces the net cost of payroll tax by your applicable corporate tax rate (typically 25% or 30%).

Can I claim exemptions for expatriate employees on temporary assignments?

Generally, no. Wages paid to employees working in Australia are subject to payroll tax regardless of the employee’s residency status or visa type. However, some limited exemptions may apply in specific circumstances, such as employees working in Australia for very short periods. Consult your tax adviser for advice on your specific situation.

How do I determine which state’s payroll tax applies when an employee works remotely?

The general rule is that payroll tax is payable in the state where the employee performs the work. For remote workers, this is typically the state where they are physically located. If an employee works from home in Victoria but is employed by a company with its office in NSW, the wages are generally subject to Victorian payroll tax, not NSW. Some states apply a “principal place of employment” test as a secondary rule when the work location is ambiguous.

This guide provides general information about Australian payroll tax for the 2025-26 financial year. Payroll tax rates and thresholds are subject to change. Foreign companies should consult with a qualified Australian tax adviser for advice specific to their circumstances. For assistance with payroll setup and compliance, contact Australian Business Register.

Last updated: February 2026

For official information, see NSW Revenue payroll tax information.