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 2026-27 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. If you would rather not set up an entity at all, an employer of record in Australia can employ staff on your behalf and handle payroll tax registration and remittance in every state.

Payroll Tax Rates and Thresholds by State (2026-27)

The table summarises the payroll tax rates and annual thresholds that apply from 1 July 2026 (the 2026-27 financial year). Thresholds are deductions: you pay tax only on wages above the threshold, and a group of related employers shares one threshold.

Important notes:

• Thresholds are deductions: you only pay payroll tax on wages above the threshold.
• Related businesses are grouped and share one threshold, claimed by the designated group employer. Grouping applies across Australia, so a foreign group's other Australian entities count.
• Several states measure the threshold or the rate against Australia-wide wages, so an employer with staff in more than one state needs every state's figures.
• Rates and thresholds change each 1 July. Always check the current figures with the state revenue office before lodging.

Detailed State-by-State Breakdown

New South Wales payroll tax (NSW)

NSW is the most common first location for foreign companies. The rate is a flat 5.45% on taxable wages above the $1,200,000 annual threshold, administered by Revenue NSW. The monthly threshold depends on the number of days in the month ($92,055 for 28 days, $98,630 for 30 days and $101,918 for 31 days). There is no separate surcharge.

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 payroll tax (VIC)

Victoria charges 4.85% above a $1,000,000 threshold ($83,333 a month), administered by the State Revenue Office. Two features catch larger employers:

• Threshold phase-out: when Australia-wide wages are between $3 million and $5 million, the threshold reduces by 50 cents for every dollar above $3 million. Above $5 million there is no threshold.
• Surcharges: the mental health and wellbeing surcharge and the COVID-19 debt temporary surcharge together add 1% for employers with Australia-wide wages above $10 million, and 2% above $100 million. They apply to the Victorian share of wages above those thresholds. The COVID debt surcharge runs to 30 June 2033.

Regional Victorian employers pay a reduced rate of 1.2125%.

Example: A company whose only wages are $2,500,000 in Melbourne keeps the full threshold (its wages are under $3 million). Payroll tax = ($2,500,000 - $1,000,000) x 4.85% = $72,750.

Queensland payroll tax (QLD)

Queensland charges 4.75% on taxable wages up to $6.5 million and 4.95% above that, administered by the Queensland Revenue Office. The $1,300,000 deduction reduces by $1 for every $7 of Australian wages above $1.3 million and is nil at $10.4 million. A mental health levy applies to employers with Australian wages above $10 million (0.25%, plus a further 0.5% above $100 million). Regional employers receive a 1% rate discount until 30 June 2030.

Western Australia payroll tax (WA)

WA charges a flat 5.5% above a $1,000,000 threshold. The threshold reduces by $2 for every $13 of Australian wages above $1 million, so it phases out entirely at $7.5 million. Employers are liable once monthly Australian wages exceed $83,333. The higher 6% and 6.5% large-employer tiers ended on 30 June 2023.

South Australia payroll tax (SA)

SA's registration threshold is $1,500,000 ($125,000 a month), with a maximum deduction of $600,000. Wages above $600,000 are taxed at a rate that phases in from 0% to 4.95% as Australian wages rise from $1.5 million to $1.7 million, and at 4.95% above $1.7 million.

Tasmania payroll tax (TAS)

Tasmania has two rates: 4% on taxable wages from $1.25 million to $2 million, and 6.1% above $2 million. The threshold is $1,250,000.

ACT payroll tax

From 1 July 2026 the ACT cut its threshold to $1,750,000 (from $2 million) and replaced its single rate and surcharges with tiered rates based on Australia-wide group wages: 6.75% up to $20 million, 6.85% to $50 million, 7.35% to $100 million, 7.85% to $150 million and 8.75% above $150 million.

Northern Territory payroll tax (NT)

The NT threshold is $2,500,000 ($208,333 a month) and the rate is 5.5%. From 1 July 2026, employers or groups with Australia-wide wages of $100 million or more pay 6.5%.

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) = $333,333
• NSW payroll tax: ($2,000,000 – $800,000) x 5.45% = $65,400
• VIC payroll tax: ($1,000,000 – $333,333) x 4.85% = $32,333
• Total payroll tax: $97,733

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

What is the payroll tax threshold in NSW?

The NSW payroll tax threshold for 2026-27 is $1,200,000 a year. The monthly threshold depends on the days in the month ($92,055 to $101,918). The rate is 5.45% on wages above the threshold.

What is the payroll tax threshold in Victoria?

Victoria's payroll tax threshold for 2026-27 is $1,000,000 a year ($83,333 a month), with a rate of 4.85%. The threshold phases out between $3 million and $5 million of Australia-wide wages, and surcharges add 1% above $10 million and 2% above $100 million.

What is the payroll tax threshold in Queensland?

Queensland's payroll tax threshold for 2026-27 is $1,300,000 a year. The rate is 4.75% on taxable wages up to $6.5 million and 4.95% above that. The deduction reduces for larger employers and is nil at $10.4 million, and a mental health levy applies above $10 million.

Which Australian state has the lowest payroll tax rate?

Tasmania has the lowest headline rate, 4% on wages between $1.25 million and $2 million (6.1% above). Among flat rates, Queensland (4.75%) and Victoria (4.85%) are lowest. The Northern Territory has the highest threshold ($2.5 million), and the ACT has the highest rates (6.75% to 8.75% from 1 July 2026).

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 2026-27 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 AusBusinessRegister.com.au.

Last updated: October 2026

For official information, see NSW Revenue payroll tax information.

This content is general information only and is not legal, financial or tax advice. Laws and regulations change often. For advice on your circumstances, speak to a qualified adviser.