Australia's Payroll Tax Cliff

Pay $1.5 million in wages and you owe $31,731 in payroll tax in Western Australia, and nothing at all in South Australia, the Northern Territory or the ACT. Same wage bill, same staff, same work. The only difference is which side of a state line the office sits on.

Payroll tax is the largest tax most growing Australian small businesses have never budgeted for, and the one they meet by accident. It is not federal, the ATO does not administer it, and every state and territory sets its own threshold, its own rate and its own rules about who gets counted. The gap between the most and least expensive jurisdiction at the same payroll is currently more than $31,000 a year.

Two things changed on 1 July 2026, and one of them moved in the direction that catches more small employers. This report sets out the current numbers for all eight jurisdictions, models what they cost at real wage levels, and covers the three rules that decide whether you are liable at all.

The eight jurisdictions, 2026-27

Every figure below applies to the 2026-27 financial year and is taken from the relevant revenue office.

The thresholds alone span $1.5 million. A business in Victoria or Western Australia starts paying at $1m. The same business in the Northern Territory pays nothing until $2.5m.

What changed on 1 July 2026

The ACT lowered its threshold. It fell from $2 million to $1,750,000, and the general rate came down from 6.85% to 6.75%. The rate cut reads like relief, and for larger employers it is. But a lower threshold means the tax starts sooner, so a Canberra business paying between $1.75m and $2m in wages is now liable when last year it was not. A $1.9m payroll that owed nothing in 2025-26 owes about $10,125 in 2026-27.

The Northern Territory added a top tier. A new 6.5% rate applies from 1 July 2026 to employers and groups with Australia-wide wages of $100 million or more. The $2.5m threshold, the deduction settings and the general 5.5% rate are unchanged for everyone else, so this one only bites at the very top.

Everywhere else, thresholds and headline rates held.

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What it actually costs

The table below models annual payroll tax on Australia-wide wages, assuming a single-jurisdiction employer with no grouping and a full financial year. Method and caveats are at the end.

Three things fall out of that.

At $1.5m, five jurisdictions charge and three do not. The spread between Western Australia and the three that charge nothing is the whole $31,731.

Western Australia is the most expensive at every level tested. Not because its 5.5% rate is the highest, the ACT's 6.75% is, but because its $1m threshold is equal-lowest and its deduction starts shrinking immediately. A low threshold with a taper costs more than a high rate with a high threshold at the wage levels most small businesses actually operate at.

The Northern Territory is the cheapest at every level. At $3m of wages an NT employer pays $41,250 where a WA employer pays $126,923. That is roughly three times the tax on identical payroll.

The three rules that decide whether you are liable

The rates are the easy part. What catches people is who gets counted.

1The test is Australia-wide wages, not local wages

Every jurisdiction tests your threshold against your total Australian taxable wages, not the wages you pay in that state. A business paying $700,000 in Victoria and $700,000 in New South Wales has $1.4m of Australian wages, so it is over Victoria's $1m threshold and over New South Wales' $1.2m threshold, even though neither state's payroll on its own would have triggered anything.

2Interstate employers apportion the threshold

You do not get a full threshold in each state. Each jurisdiction gives you a share of its threshold proportional to the wages you pay there.

Revenue NSW puts it as a formula: the NSW threshold multiplied by NSW wages divided by total Australian wages. On $900,000 of NSW wages out of $3,000,000 Australian wages, the available NSW threshold is $1,200,000 x ($900,000 / $3,000,000), which is $360,000, not $1.2m.

This is the single most common reason a business that "should not be liable" gets an assessment.

3Grouped businesses share one threshold

If businesses are related, through common ownership, shared employees, or being part of the same corporate group, the revenue offices can group them. A group gets one threshold between all members, not one each, and the wages of every member are added together to test against it.

Two companies each paying $800,000 in wages, both owned by the same people, are not two businesses comfortably under a $1.2m threshold. They are one $1.6m group with one threshold.

And then there are the levies on top

The headline rate is not always the whole bill. Queensland applies a mental health levy above its own thresholds. Victoria applies mental health and wellbeing and COVID debt surcharges to larger employers. The ACT's tiers step up four times above $20m. None of these hit a business at $1.5m of wages, but they change the arithmetic as you grow, and they are levied on top of the rate in the table above, not instead of it.

Why this is the tax that ambushes people

Payroll tax has three features that make it easy to walk into.

It is self-assessed. Nobody sends you a bill when you cross the line. You are expected to register with the revenue office yourself, and interest and penalties run from when you should have registered, not from when you noticed.

It is not the ATO. Businesses that are diligent about BAS and PAYG often assume payroll tax arrives the same way. It does not. It is administered by eight separate state and territory revenue offices, each with its own portal, lodgement cycle and rules.

And it is wages, not profit. Payroll tax is charged on what you pay your staff regardless of whether you made money. A business having a bad year with a stable headcount pays the same payroll tax as one having a good one.

Add the fact that superannuation counts as wages for payroll tax purposes in every jurisdiction, and the Super Guarantee is now 12.00% for 2026-27, and a business can cross a threshold without giving anyone a pay rise. Twelve per cent on top of base wages is doing real work toward that threshold.

What to do about it

1. Work out your Australia-wide wages, not your local ones. Include superannuation, allowances, bonuses, commissions, directors' fees and most contractor payments that fail the relevant contractor exemptions. This is the number the threshold is tested against.
2. If you are anywhere near the line, check monthly, not annually. Most jurisdictions require monthly returns once you are registered, and liability is assessed on a monthly threshold too.
3. Map your group before you restructure. Common ownership, shared staff and interposed entities all trigger grouping. Setting up a second entity does not buy a second threshold.
4. If you employ across state lines, apportion before you assume you are under. The formula above turns a $1.2m threshold into $360,000 quite quickly.
5. Budget it as a cost of hiring, not a tax event. Once you are over the threshold, every additional dollar of wages carries the marginal rate on top of the wage itself, super, workers compensation and leave.
6. Register when you cross, not when you are asked. Voluntary disclosure is treated very differently from a revenue office finding you.

If you want to run your own numbers, the payroll tax calculator applies each jurisdiction's threshold and rate, and the employer cost calculator shows what a hire costs once super and on-costs are added.

Frequently asked questions

What is the payroll tax threshold in Australia in 2026-27?

There is no national threshold. Each jurisdiction sets its own: Victoria and Western Australia $1,000,000, New South Wales $1,200,000, Tasmania $1,250,000, Queensland $1,300,000, South Australia $1,500,000, the ACT $1,750,000 and the Northern Territory $2,500,000. The threshold is tested against your total Australian taxable wages, not the wages paid in that state alone.

What is the payroll tax rate in NSW?

5.45% on Australian taxable wages above $1,200,000, for 2026-27. The rate and threshold are unchanged from 2025-26. NSW has no taper: below the threshold you pay nothing, above it you pay 5.45% on the excess.

What is the payroll tax rate in Victoria?

4.85% above a $1,000,000 threshold, or 1.2125% for regional Victorian employers. The tax-free deduction progressively phases out for employers with Australian wages between $3 million and $5 million, and mental health and wellbeing and COVID debt surcharges apply to larger employers.

Did ACT payroll tax change in 2026?

Yes. From 1 July 2026 the ACT threshold fell from $2 million to $1,750,000 and the general rate fell from 6.85% to 6.75%. Because the threshold dropped, some Canberra employers who paid no payroll tax in 2025-26 are liable in 2026-27. A $1.9m payroll now attracts about $10,125.

Do I get a payroll tax threshold in every state I employ in?

No. Each jurisdiction gives you a share of its threshold proportional to the wages you pay there. Revenue NSW expresses it as the NSW threshold multiplied by NSW wages divided by total Australian wages, so $900,000 of NSW wages out of $3,000,000 Australian wages gives an available threshold of $360,000, not $1,200,000.

Does superannuation count towards payroll tax?

Yes. Employer superannuation contributions are taxable wages for payroll tax in every Australian jurisdiction. With the Super Guarantee at 12.00% for 2026-27, super alone can push a business over a threshold without any change to headline pay.

What happens if two of my companies are related?

They can be grouped. A group shares one tax-free threshold between all members rather than each member claiming its own, and the wages of every member are added together to test against it. Common ownership, shared employees and being part of the same corporate group can all trigger grouping.

Is payroll tax paid to the ATO?

No. Payroll tax is a state and territory tax, self-assessed and lodged with the relevant revenue office: Revenue NSW, the State Revenue Office Victoria, the Queensland Revenue Office, RevenueSA, RevenueWA, the State Revenue Office Tasmania, the ACT Revenue Office or the Territory Revenue Office. The ATO does not administer it.

Sources and method

Rates and thresholds were checked against the revenue offices on 5 August 2026.

• NSW: Revenue NSW, Payroll tax thresholds and rates. The published table gives $1,200,000 at 5.45% for 1 July 2026 to 30 June 2027, and supplies the interstate apportionment formula quoted above.
• VIC: State Revenue Office Victoria, Payroll tax current rates: $1,000,000 maximum deduction at 4.85%, 1.2125% regional, "from 1 July 2025 onward".
• QLD: Queensland Revenue Office, Payroll tax rates and thresholds: $1.3m threshold, 4.75% for groups paying $6.5m or less and 4.95% above, 1% regional discount to 30 June 2030, plus the mental health levy.
• ACT: ACT Revenue Office, About payroll tax: from 1 July 2026 the threshold is $145,833.33 a month or $1.75 million a year, with rates of 6.75%, 6.85% over $20m, 7.35% over $50m, 7.85% over $100m and 8.75% over $150m.
• NT: Territory Revenue Office: the $2.5m threshold, deduction settings and 5.5% general rate are unchanged, with a new 6.5% rate from 1 July 2026 for groups with Australia-wide wages of $100m or more.
• WA: $1,000,000 threshold at 5.5%, with the deduction reducing by $2 for every $13 of wages above the threshold and reaching nil at $7.5m.
• TAS: $1,250,000 threshold, 4.0% from $1,250,001 to $2,000,000 and 6.1% above $2,000,000.
• SA: $1,500,000 threshold, a variable rate between $1.5m and $1.7m and the full 4.95% above $1.7m. RevenueSA's site returned HTTP 403 to automated requests on the day of writing, so unlike the others this figure was cross-checked against secondary sources rather than read directly off the revenue office page. Confirm it with RevenueSA before relying on it.
• Super Guarantee: Australian Taxation Office, Super guarantee rates: 12.00% for 1 July 2026 to 30 June 2027.

Modelling assumptions. The cost table assumes a single-jurisdiction employer, no grouping, a full financial year and wages evenly spread across it. It applies each jurisdiction's threshold, rate and deduction taper: NSW and ACT flat above the threshold; Victoria's deduction phasing out between $3m and $5m; Queensland's deduction reducing $1 per $4 above the threshold; Western Australia's $2 per $13; the Northern Territory's $1 per $2; and Tasmania's marginal tiers. It excludes the Queensland mental health levy, the Victorian surcharges and the ACT's tiers above $20m, none of which apply at the wage levels shown. South Australia's variable band between $1.5m and $1.7m is not modelled, so the SA figure at $2m uses the full 4.95% on the excess above $1.5m.

What this is not. This report is general information, not tax advice. Grouping, contractor provisions, exemptions and apportionment all turn on facts specific to your business, and the amounts here are modelled rather than assessed. Check your position with your state revenue office or a registered tax agent.