Payroll tax is one of the more complicated employer taxes in Australia because there is no single national payroll tax threshold.
Each state and territory sets its own threshold, payroll tax rate, registration requirements, lodgement rules and grouping provisions. Some jurisdictions also reduce the available threshold as payroll increases, while others impose additional levies or higher rates on larger employers.
For the 2026–27 financial year, the Payroll Tax Thresholds by State for 2026-27 range from $1 million in Victoria and Western Australia to $2.5 million in the Northern Territory.
However, the headline threshold is only the starting point.
Australian-wide wages, interstate employees, related businesses, payroll tax groups and large-employer levies can all affect the final amount payable.
This guide compares the current 2026–27 rules across all eight Australian states and territories and highlights the main issues employers should review.
For broader payroll support, visit VeiraMal’s Payroll Services.
Payroll Tax in Australia: 2026–27 at a Glance
The 2026–27 payroll tax rules vary significantly across Australia.
Victoria and Western Australia have the lowest headline thresholds at $1 million, while the Northern Territory has the highest at $2.5 million.
The ACT also introduced important changes from 1 July 2026, including a $1.75 million threshold and a broader tiered payroll tax rate structure.
Victoria and Western Australia
Northern Territory
from 1 July 2026
in Victoria and Queensland
Payroll Tax Thresholds by State for 2026-27
The table below provides a single reference point covering all eight jurisdictions.
It includes the annual threshold, standard rate, whether the system is flat or tiered, large-employer surcharges or levies and typical lodgement frequency.
2026–27 Payroll Tax Reference Table
| State / Territory | Annual Threshold | Rate | Rate Type | Large Employer Surcharge / Levy | Lodgement Frequency | Official Source |
|---|---|---|---|---|---|---|
| New South Wales | $1,200,000 | 5.45% | Flat | No separate large-employer payroll surcharge. | Annual return required. Monthly payments generally apply where annual NSW payroll tax liability exceeds $20,000. | Revenue NSW |
| Victoria | $1,000,000. Threshold begins reducing once Australian wages exceed $3 million and is fully removed above $5 million. | 4.85% standard rate. 1.2125% for eligible regional employers. | Flat base rate with threshold phase-out. | Mental Health and Wellbeing Surcharge and COVID-19 Debt Temporary Payroll Tax Surcharge may apply to larger employers. | Generally monthly, with annual reconciliation due in July. | State Revenue Office Victoria |
| Queensland | $1,300,000 | 4.75% up to $6.5 million Australian taxable wages. 4.95% above $6.5 million. | Tiered | Mental Health Levy of 0.25% above $10 million, with an additional 0.5% applying above $100 million on relevant wages. | Monthly, half-yearly or annual depending on payroll tax liability. | Queensland Revenue Office |
| Western Australia | $1,000,000. Deductible threshold progressively reduces and reaches nil at $7.5 million. | 5.5% | Flat rate with diminishing threshold. | No separate large-employer payroll surcharge. | Generally monthly. Quarterly or annual lodgement may be approved for eligible lower-liability employers. | RevenueWA |
| South Australia | $1,500,000 | Nil up to $1.5 million. Variable rate between $1.5 million and $1.7 million. 4.95% above $1.7 million. | Variable / Tiered | No separate large-employer payroll surcharge. | Generally monthly, with annual reconciliation in July. | RevenueSA |
| Tasmania | $1,250,000 | 4% between $1.25 million and $2 million. 6.1% above $2 million. | Tiered | No separate large-employer surcharge. | Monthly or annual depending on assigned reporting frequency, with annual adjustment required. | State Revenue Office Tasmania |
| Australian Capital Territory | $1,750,000 |
6.75% from $1.75m to $20m 6.85% from $20m to $50m 7.35% from $50m to $100m 7.85% from $100m to $150m 8.75% above $150m |
Tiered | No separate surcharge. Larger employers move into higher payroll tax rate bands. | Generally monthly with annual reconciliation. Approved alternative arrangements may apply. | ACT Revenue Office |
| Northern Territory | $2,500,000 | 5.5% where employer or group Australian-wide wages are below $100 million. 6.5% at $100 million or more. | Tiered by employer or group payroll size. | No separate surcharge. Large employers move to the higher 6.5% rate. | Generally monthly, excluding June, followed by annual adjustment and reconciliation. | Northern Territory Treasury |
Payroll Tax Grouping Provisions
One of the biggest payroll tax risks for businesses operating through several entities is assuming each company receives its own full payroll tax threshold.
That is often not the case.
Payroll tax grouping provisions can combine businesses where there are relationships such as:
- related corporations
- common ownership or control
- employees working across multiple businesses
- controlling interests between entities
- certain interconnected business arrangements.
Once businesses are grouped, the combined Australian wages of the group can be used when assessing payroll tax liability.
In most cases, the full tax-free threshold is available only once across the group rather than separately to every member.
For example, Revenue NSW confirms that businesses may be grouped through related corporations, common employees, common control and tracing provisions.
This makes payroll tax grouping particularly important for businesses with several trading entities, holding companies or related operating businesses.
Multiple businesses do not automatically receive multiple payroll tax thresholds. Related corporations, commonly controlled entities and businesses sharing employees may be grouped for payroll tax purposes.
When Does a Business Become Liable in a Second State?
Employing someone in another state can create a payroll tax obligation outside the business’s home state.
However, liability is not determined solely by the location of the employer’s head office.
Australian payroll tax legislation uses nexus rules to determine which jurisdiction has the right to tax particular wages.
These rules can consider factors including:
- the employee’s principal place of residence
- where the employer’s registered office or principal business location is situated
- where the employee primarily performs services
- where work is performed if the earlier tests do not determine the position.
Another important issue is threshold apportionment.
If a business pays wages in more than one state, it may not receive the full payroll tax threshold in each jurisdiction.
For example, Victoria reduces the available payroll tax threshold according to the proportion of total Australian wages attributable to Victoria.
Western Australia also uses Australian taxable wages when calculating deductions available to interstate employers.
This means expanding into another state should trigger a payroll tax review.
Businesses should ideally assess the position before the first interstate payroll is processed rather than waiting until annual reconciliation.
Mental Health and Similar Payroll Levies
The standard payroll tax rate is not always the complete liability for larger employers.
Victoria
Victoria applies a Mental Health and Wellbeing Surcharge to certain employers with larger Australian payrolls.
Victoria also currently applies the COVID-19 Debt Temporary Payroll Tax Surcharge.
These surcharges can materially increase payroll-related costs for employers with Australian wages exceeding $10 million and $100 million.
Large Victorian employers should therefore model both the standard payroll tax liability and any applicable surcharges.
Queensland
Queensland applies a Mental Health Levy where Australian taxable wages exceed $10 million.
The first levy rate is 0.25%.
Employers and payroll tax groups exceeding $100 million in Australian taxable wages may also become subject to an additional 0.5% levy on relevant wages.
ACT and Northern Territory
The ACT and Northern Territory take a different approach.
Rather than imposing a separately labelled mental health-style surcharge, larger employers move into higher general payroll tax rates.
This distinction is important when businesses forecast employment costs across jurisdictions.
Why Australian-Wide Wages Matter
A common payroll tax mistake is checking payroll separately for each state.
Many jurisdictions use total Australian wages when determining whether payroll tax applies.
Australian-wide wages may affect:
- whether the payroll tax threshold has been exceeded
- whether the threshold begins to reduce
- which tax rate applies
- whether a higher employer rate applies
- whether a mental health levy applies
- how much threshold can be claimed in a particular state
- whether grouped entities become liable.
A business may therefore have relatively modest payroll in one state but still have payroll tax obligations because its total Australian payroll is significantly higher.
Growing businesses should monitor both state-level and Australian-wide payroll throughout the financial year.
Interactive Payroll Tax Exposure Check
The following interactive tool does not calculate payroll tax.
It is designed to help businesses identify common circumstances that may justify a more detailed payroll tax review.
Payroll Tax Exposure Check
Select every statement that applies to your business.
Payroll Tax Should Be Reviewed Throughout the Year
Payroll tax should not be treated purely as an end-of-financial-year accounting exercise.
Businesses should review their payroll tax position whenever:
- employee numbers increase significantly
- payroll approaches a state threshold
- employees are hired in another state
- a new company or related entity is created
- a business acquisition occurs
- employees begin working across multiple related businesses
- Australian-wide payroll moves into a higher tax or levy band.
Payroll tax should also form part of a broader payroll compliance framework.
Employers should regularly review Modern Award classifications, employee pay rates, overtime, allowances, superannuation, PAYG withholding, Single Touch Payroll reporting, leave entitlements and payroll reconciliations.
For a broader review, use VeiraMal’s Payroll Audit Checklist.
Final Takeaway
The Payroll Tax Thresholds by State for 2026-27 demonstrate why payroll tax cannot be managed using one Australia-wide threshold.
The headline thresholds range from $1 million to $2.5 million, but the final payroll tax position can be affected by much more than the threshold alone.
Employers also need to consider:
- Australian-wide wages
- threshold reductions
- interstate payroll
- nexus rules
- payroll tax grouping
- mental health levies
- large-employer rates
- state-specific lodgement requirements.
Businesses operating across multiple entities or jurisdictions should monitor payroll tax throughout the year rather than waiting until annual reconciliation.
For assistance with payroll processing, payroll compliance and payroll reviews, visit VeiraMal’s Payroll Services.
Important Information!
This article provides general information only and should not be treated as tax, legal or accounting advice.
Payroll tax treatment can vary depending on the employer’s circumstances, including interstate wages, exemptions, grouping arrangements and the nature of payments made to workers.
Always confirm your position with the relevant state or territory revenue authority or an appropriately qualified adviser.
