Payroll tax is a state and territory tax on wages. A foreign-owned Australian company pays it in each state or territory where it pays wages once its total Australian wages, counted across its whole Australian group, exceed that jurisdiction's tax-free threshold. As at October 2026, annual thresholds range from $1 million (Victoria and Western Australia) to $2.5 million (Northern Territory), and rates differ too, with several jurisdictions charging more as total wages rise. The overseas parent's own staff overseas are not counted, but every Australian company in the same corporate group is, and the group gets one threshold between them.
This page is general information. Payroll tax is self-assessed and has state-by-state detail, so have your accountant confirm registration and calculations.
How payroll tax works
According to business.gov.au:
- payroll tax is a state or territory tax calculated on the total wages you pay each month
- it may also include payments you make to some contractors
- the state or territory where your workers are collects the tax
- you pay once your total Australian wages are over the tax-free threshold for that state or territory, and thresholds and rates vary.
The test uses total Australian wages. A company with staff in two states compares its national wage bill to each state's threshold, then pays each state on the wages paid there, with the threshold shared in proportion.
Payroll tax is not an ATO tax
Foreign finance teams sometimes assume payroll is all federal. It isn't.
| Obligation | Who administers it | What it is |
|---|---|---|
| PAYG withholding | ATO (federal) | Income tax withheld from employees' pay and sent to the ATO |
| Single Touch Payroll | ATO (federal) | Reporting payroll information to the ATO using STP-enabled software |
| Super guarantee | ATO (federal) | Employer super contributions; see Payday Super |
| Payroll tax | State and territory revenue offices | Employer tax on wages above the threshold |
| Workers compensation | State and territory schemes | Compulsory insurance for employees |
STP reporting to the ATO does not register you for payroll tax or lodge payroll tax returns. You register separately with each revenue office.
Thresholds and rates by state and territory
Figures below are as published by each revenue office when checked on 28 October 2026. Rates and thresholds change, often at budget time, so check the office's page before relying on them.
| State or territory | Annual tax-free threshold | Rate | Notes |
|---|---|---|---|
| New South Wales | $1,200,000 | 5.45% | Monthly registration threshold depends on days in the month (for example $101,918 for a 31-day month in 2026-27). Revenue NSW |
| Victoria | $1,000,000 ($83,333 a month) | 4.85% (1.2125% for eligible regional employers) | Threshold phases out for Australian wages between $3 million and $5 million; none above $5 million. Mental health and COVID-19 debt surcharges apply to Victorian wages where Australian wages exceed $10 million. SRO Victoria |
| Queensland | $1,300,000 | 4.75% where Australian wages are $6.5 million or less; 4.95% above | Current QRO figures (page last updated July 2024). A deduction may be available on annual Australian wages; a mental health levy applies to Queensland wages above its thresholds; regional employers may get a 1% rate discount until 30 June 2030. QRO |
| South Australia | $1,500,000 (RevenueSA registration threshold; see rate) | Nil up to $1.5 million; variable from 0% to 4.95% between $1.5 million and $1.7 million; 4.95% above $1.7 million | Registration once Australian wages exceed $1.5 million a year ($125,000 a month). RevenueSA |
| Western Australia | $1,000,000 | 5.5% | Diminishing threshold between $1 million and $7.5 million. RevenueWA |
| Tasmania | $1,250,000 | 4% on wages from $1.25 million to $2 million; 6.1% above $2 million | SRO Tasmania |
| Australian Capital Territory | $1,750,000 ($145,833.33 a month) from 1 July 2026 | 6.75% for Australia-wide wages up to $20 million, rising in steps to 6.85%, 7.35%, 7.85% and 8.75% for larger payrolls | Threshold was $2 million before 1 July 2026. ACT Revenue Office |
| Northern Territory | $2,500,000 ($208,333 a month) | 5.5%; 6.5% from 1 July 2026 for employers and groups with Australia-wide wages of $100 million or more | NT Territory Revenue Office |
Two practical points:
- Thresholds are for a full year. If you start paying wages part-way through the year, the threshold is usually apportioned by days.
- Rates often depend on Australia-wide or group wages, not just wages in that state. A small ACT office of a large Australian group may pay a higher ACT rate.
Grouping: why related companies share one threshold
Grouping is the rule foreign-owned companies most often miss. Every state has grouping provisions so that a business can't split its wages across entities to claim several thresholds.
Revenue NSW explains the related corporations rule:
- all corporations that are "related bodies corporate" under section 50 of the Corporations Act 2001 are grouped for payroll tax
- corporations are related if they are a holding company and a subsidiary, or subsidiaries of the same holding company
- any related corporations paying Australian wages are grouped, even if they have an overseas holding company
- corporations grouped this way cannot apply to be excluded from the group.
So if your overseas parent owns two Australian subsidiaries, say a sales company in Sydney and a development company in Melbourne, they form one group. Their Australian wages are added together to test the threshold, and only one member of the group can claim the tax-free threshold, as the designated group employer (Revenue NSW). The other members pay tax from the first dollar of wages in that state. Where the group employs in several states, the designated group employer need not be the same entity in each.
Grouping also catches:
- a foreign company employing staff in Australia directly (for example through a registered branch) alongside an Australian subsidiary
- businesses under common control, which can group entities that are not related companies
- businesses that share employees.
When a new Australian entity joins the group, for example after an acquisition, recheck the group's position straight away.
Contractors and employment agencies
Payroll tax is not limited to employees on your payroll:
- Contractors. Revenue NSW states that payments to contractors are liable for payroll tax unless an exemption applies. These "relevant contract" rules can catch arrangements that would not be employment for income tax purposes. Exemptions exist but their details differ between states, so get each contractor arrangement reviewed.
- Super and fringe benefits. Revenue NSW treats superannuation contributions and taxable fringe benefits as liable for payroll tax.
- Employment agencies and employers of record. Where an agent obtains workers to provide services to a client for a fee, special employment agency provisions apply. If you have used an employer of record before setting up, check how the transition affects your group; see employer of record vs subsidiary.
Registration and returns
- Register in each state where you pay wages once your Australian wages, or your group's, exceed the threshold. In NSW the trigger is total Australian wages above the monthly threshold in any month. In the ACT the law requires you to apply within 7 days after the end of the month in which you exceed the threshold.
- Lodge returns on the office's schedule. NSW and the ACT, for example, use monthly returns plus an annual return or reconciliation.
- Group members must register as part of the group, even if their own wages are small. RevenueSA, for example, requires registration where the group's Australian wages exceed the threshold, regardless of the wage level of the particular member.
Late registration can mean back-dated tax plus interest and penalty tax. Because the test is monthly and groupwide, a company can cross the line quickly after a few senior hires or a bonus run. Add a payroll tax check to your compliance calendar.
Workers compensation
Workers compensation is separate from payroll tax but also state-based. According to business.gov.au, employers must get workers compensation insurance from an authorised insurer, and the laws vary in each state and territory. Insure in each jurisdiction where staff work, and check how the scheme treats contractors. See hiring employees in Australia for the full first-hire checklist.
What directors should check
Unpaid payroll tax is a company debt. Directors of a foreign-owned subsidiary should ask:
- What are the group's total Australian wages, including other Australian companies owned by the parent?
- Which states do we pay wages in, and are we registered where needed?
- Who is the designated group employer in each state?
- Have contractor payments been reviewed under the relevant contract rules?
- Are returns lodged and paid on time?
Federal payroll debts carry their own director risk; see director penalty notices.
Where we fit
AG Resident Directorship provides resident directors and company secretarial support for foreign-owned companies. Your accountant handles payroll tax; we help make sure the board asks the right questions and the records are kept. See pricing or start here.
Frequently asked questions
Does our overseas parent's payroll count towards the Australian threshold?
No. Thresholds are based on Australian wages. But if the parent has other Australian subsidiaries, or employs staff in Australia directly, those Australian wages are grouped with yours and the group shares one threshold.
Is payroll tax the same as PAYG withholding?
No. PAYG withholding is a federal amount you withhold from employees' pay and send to the ATO. Payroll tax is a separate state or territory tax the employer pays on its own account, on total wages above a threshold.
We only have two employees. Do we need to worry about payroll tax?
Probably not yet, if your total Australian wages (and your group's) are well below the lowest relevant threshold. Keep an eye on it as you grow, because registration is triggered by monthly wages in most states, and contractor payments and super can count as wages.
Which state do we pay in if staff work remotely in different states?
Generally the state or territory where the work is done. Each state then gives you a share of its threshold based on the proportion of your Australian wages paid there. Your accountant can apply the nexus rules to your staff.
Official sources
- business.gov.au: Payroll tax business.gov.au
- business.gov.au: Insurance you need by law (workers compensation) business.gov.au
- ATO: Single Touch Payroll ato.gov.au
- ATO: PAYG withholding ato.gov.au
- Revenue NSW: Payroll tax thresholds and rates revenue.nsw.gov.au
- Revenue NSW: Grouping for related corporations revenue.nsw.gov.au
- Revenue NSW: What is payroll tax grouping? revenue.nsw.gov.au
- Revenue NSW: Taxable wages revenue.nsw.gov.au
- State Revenue Office Victoria: Payroll tax current rates sro.vic.gov.au
- State Revenue Office Victoria: Threshold and phase-out rate sro.vic.gov.au
- Queensland Revenue Office: Payroll tax rates and thresholds qro.qld.gov.au
- RevenueSA: Payroll tax rates and thresholds revenuesa.sa.gov.au
- WA Department of Treasury and Finance: Payroll tax calculation wa.gov.au
- State Revenue Office Tasmania: Payroll tax rates and thresholds sro.tas.gov.au
- ACT Revenue Office: About payroll tax revenue.act.gov.au
- ACT Revenue Office: Payroll tax registration revenue.act.gov.au
- NT Territory Revenue Office: Payroll tax rates and thresholds treasury.nt.gov.au
Checked against these sources on . Fees, thresholds and forms change: confirm with the source before you lodge.
General information about Australian law and practice, not legal or tax advice for your circumstances. Check the official sources, or ask your adviser, before you act.