Payroll tax is a state tax on total Australian wages above a threshold. It has no small business exemption — only a threshold, and once you cross it the tax applies.
Most content lists the numbers. The numbers are the easy part. The two things that actually catch businesses out are grouping and Victoria’s phase-out.
The thresholds, 2026-27
| State / Territory | Annual threshold | Rate |
|---|---|---|
| NSW | $1,200,000 | 5.45% |
| VIC | $1,000,000 | 4.85% (2.425% regional) — phases out $3m–$5m |
| QLD | $1,300,000 | 4.75%–4.95% |
Rates and thresholds for SA, WA, TAS, NT and ACT differ again — check your state revenue office directly, as they move at budget time.
What crossing it actually costs
A NSW business at $1,400,000 in total wages:
| Line | Amount |
|---|---|
| Total Australian wages | $1,400,000 |
| Less threshold | −$1,200,000 |
| Taxable | $200,000 |
| Payroll tax at 5.45% | $10,900 |
The marginal effect is what matters for hiring decisions. Once above the threshold, every additional dollar of wages carries the full rate.
A $75,000 hire in NSW above the threshold costs an extra $4,088 in payroll tax on top of salary, 12% super and workers compensation — which is why the true cost of that employee is closer to $100,000.
→ The true cost of an employee
The grouping trap
This is the one that catches people, and it catches them retrospectively with interest and penalties.
Related entities are grouped and assessed together. You get one threshold across the group, not one each.
Grouping generally applies where there is:
- Common control — the same person or people control multiple businesses
- Common employees — staff used across entities
- A holding/subsidiary relationship
- Tracing of interests through trusts and companies
So a business owner running three companies, each with $500,000 of wages, is not three businesses comfortably under the threshold. They are one group with $1,500,000 of wages, and in NSW that is $16,350 of payroll tax they may not have been paying.
Contractors can also be caught. Payments to contractors are deemed wages under relevant contract provisions unless a specific exemption applies. Businesses that restructured to contractors specifically to avoid payroll tax frequently discover this at audit.
If you operate more than one entity, get advice on grouping before you assume you are under. Retrospective assessments run for years.
Victoria’s phase-out
Victoria is structurally different and frequently misread.
The $1,000,000 threshold reduces progressively between $3,000,000 and $5,000,000 of national wages, and disappears entirely above $5,000,000.
A Victorian business at $4m of wages does not get the full $1m threshold. A Victorian business at $5.5m gets none of it and pays 4.85% on the whole amount.
The regional rate of 2.425% applies where 85% of wages are paid to regional employees — a substantial saving worth checking eligibility for.
Multi-state businesses
If you employ across states, wages are apportioned and your threshold in each state is pro-rated based on the proportion of your total Australian wages paid there.
You cannot claim a full threshold in every state. This is a common and expensive misunderstanding for businesses that expand interstate.
What to do
Know your number. Total Australian wages across all grouped entities, including superannuation, allowances, fringe benefits, bonuses, commissions and deemed contractor payments. It is broader than salary.
Check grouping if you run multiple entities. Before you assume, not after.
Model the threshold before your next hire. Crossing it mid-year changes the marginal cost of every employee, not just the new one.
Register when required. Late registration attracts interest and penalties. The obligation is yours to identify.
Check regional eligibility in Victoria and other states offering regional concessions.
Where to go next
- The True Cost of an Employee\n- Can You Afford to Hire?\n- The 2026-27 Award Increase\n- Australian Business Compliance Calendar
Sources: NSW Revenue, State Revenue Office Victoria, Queensland Revenue Office, 2026-27. Thresholds and rates change at state budgets — confirm current figures with your state revenue office. Grouping and contractor provisions are complex; this is general information, not tax advice.