Payroll Tax in Australia – What It Is, Who Pays It, and State-by-State Thresholds
Book a Free DemoPayroll Tax
Payroll tax is a state-based tax on wages paid by employers once total payroll exceeds a certain threshold. While often confused with PAYG withholding, payroll tax is separate and paid…
Payroll tax is a state-based tax on wages paid by employers once total payroll exceeds a certain threshold. While often confused with PAYG withholding, payroll tax is separate and paid directly to your state or territory revenue office — not the ATO.
At Ozobooks, we help employers across Australia register, calculate, and lodge payroll tax correctly to stay compliant and avoid costly penalties.
What Is Payroll Tax?
Payroll tax applies when your total taxable wages exceed a specific threshold set by your state or territory. Tax rates and thresholds vary depending on location.
It includes:
- Salaries and wages
- Superannuation
- Bonuses and commissions
- Fringe benefits
- Allowances
Example:
A NSW business pays $1.4 million in annual wages. Since the NSW threshold is $1.2 million, they must register and pay payroll tax on the excess $200,000 at the state rate (currently 5.45%).
State-by-State Thresholds & Rates (2025 Update):
| State/Territory | Annual Threshold | Tax Rate |
| NSW | $1.2 million | 5.45% |
| VIC | $700,000 | 4.85% (metro) |
| QLD | $1.3 million | 4.75% |
| WA | $1 million | 5.5% |
| SA | $1.5 million | 4.95% |
| TAS | $1.25 million | 4.0% |
| ACT | $2 million | 6.85% |
| NT | $1.5 million | 5.5% |
(Note: Rates may vary by industry or location. Always confirm with your state revenue office.)
Key Differences: Payroll Tax vs PAYG
| Feature | Payroll Tax | PAYG Withholding |
| Level | State/Territory | Federal (ATO) |
| Paid by | Employer | Employer (on behalf of employee) |
| Based on | Total wages | Individual income tax owed |
How Ozobooks Helps
We offer full payroll tax support, including:
- Registration with your state revenue office
- Monthly or quarterly calculations
- Lodgement of returns
- Reconciling wages vs thresholds
- Advice on grouping or exemptions
FAQ:
Q1: Do all businesses pay payroll tax?
No. Only businesses whose total Australian wages exceed their state/territory threshold must register and pay.
Q2: Is payroll tax the same across all states?
No. Each state has its own tax rate, threshold, and registration process.
Q3: Can I be liable in more than one state?
Yes. If you have employees in multiple states, your wages are grouped and may trigger tax in more than one jurisdiction.
Q4: What happens if I don’t register?
You may face backdated liabilities, penalties, and interest. We can help you get compliant quickly.