Payroll tax is a state-based obligation administered by the State Revenue Offices in each state and territory. While the payroll tax rules in each state and territory have been largely harmonised, some differences exist in each jurisdiction.
In recent times, there has been an increase in compliance activities undertaken by the State Revenue Offices, making it more likely for discrepancies to be detected. Where the errors result in an underpayment of payroll tax, the costs for employers to rectify can be significant not only in terms of the underpaid tax, but also in terms of penalties and interest charges.
This factsheet is designed to assist employers in considering their payroll tax obligations, ensuring they remain compliant and avoid the pitfalls associated with underpayment. While our team has expertise in the payroll tax rules across each of the states and territories of Australia, this factsheet has specific emphasis on the rules in Victoria.
The factsheet covers the following areas:
- Are you required to be registered for payroll tax?
- What are the lodgements due dates?
- Payroll Tax Grouping
- Taxable and exempt wages
- Payroll tax surcharges in Victoria
- Payments to contractors
- Payroll tax and the medical industry in Victoria
- How can Pitcher Partners assist
Are you required to be registered for payroll tax?
Employers are required to be registered for payroll tax when their total Australian taxable wages exceed the relevant threshold amount. In most jurisdictions, employers will only pay payroll tax on the amount of taxable wages that exceeds the threshold amount. Employers should consider their payroll tax obligations in each state and territory where taxable wages are paid.
The thresholds applicable for the 2024/25 financial year across the states and territories can be best summarised in the table below:
| State | 2024/25 threshold* | 2024/25 rates |
| Victoria | $900,000 | 4.85% (1.2125% for regional employers) |
| New South Wales | $1,200,000 | 5.45% |
| Queensland | $1,300,000 | 4.75% – 4.95% (regional rate 1% less) |
| Western Australia | $1,000,000 | 5.5% |
| South Australia | $1,500,000 Max Deduction $600,000 |
0 – 4.95% |
| Northern Territory | $1,500,000 | 5.5% |
| Tasmania | $1,250,000 | 4% – 6.1% |
| Australian Capital Territory | $2,000,000 | 6.85% |
* This table provides a high-level summary. It does not take into account special rules which exist in many jurisdictions for different levels of taxable wages. All rates and thresholds are current as of June 2025.
In Victoria, the payroll tax threshold entitlement of $900,000 is only available for businesses with taxable wages under $3 million. For businesses with taxable wages between $3 million – $4 million, there is a diminishing threshold entitlement, and no threshold entitlement is available for businesses with taxable wages above $5 million. Some of the other Australian jurisdictions have similar rules – we would recommend you contact a member of our team for more information.
From 1 July 2025, in Victoria the threshold entitlement is increasing to $1 million.
What are the lodgements due dates?
Monthly payroll tax returns are due on the 7th day of the following month.
Annual reconciliations are required to be lodged by 21 July in Victoria, Queensland, Western Australia, Northern Territory and Tasmania and by 28 July for New South Wales, South Australia and the Australian Capital Territory.
Payroll tax grouping
When entities are grouped for payroll tax purposes, they are entitled to a single threshold for the entire group.
The main ways in which a payroll tax group can be formed are summarised below:
- Related corporations – holding / subsidiary relationship – more than 50% ownership
- Commonly controlled businesses – if a person or set of persons has a controlling interest (more than 50%) in each of two businesses.
- Employees of one business performing duties for another business.
- Tracing interests in corporations.
- Amalgamation of smaller groups.
Grouped employers should nominate one Designated Group Employer in each jurisdiction to collect the threshold entitlement, all other entities should be registered as group members. All group members have joint and several liability in relation to the group’s payroll tax obligations.
Grouped employees are required to report their total Group Australian wages and interstate wages in their payroll tax returns.
In Victoria, if Australian group taxable wages are above $5 million, there is no threshold entitlement for the group.
Taxable and exempt wages
Employers should ensure that all relevant components of taxable wages have been captured in their payroll tax returns, including the following (non-exhaustive) items: salary, wages, allowances, bonuses, commissions, superannuation, fringe benefits, employee share scheme discounts, most termination payments, director’s fees, backpay remediation payments.
The following payments may be exempt from payroll tax subject to satisfying relevant criteria: parental leave, volunteer leave, the tax-free component of a redundancy payment, certain Workcover payments, accommodation allowances, cents per kilometre reimbursements and payments to eligible employees performing services outside of Australia. Where a business is engaging apprentices or trainees, exemptions and concessions may be available in certain jurisdictions.
Payroll tax surcharges in Victoria
If Australian group taxable wages are above $10 million, the following surcharges apply:
- Mental Health and Wellbeing Levy; and
- COVID-19 Budget Repair Surcharge apply.
These surcharges have the same rates and apply as follows:
- The combined rate of 1% applies to Victorian taxable wages above $10 million, up to $100 million.
- The combined rate of 2% applies to Victoria taxable wages above $100 million.
Queensland and Australian Capital Territory have also introduced payroll tax surcharges – we would recommend you contact a member of our team for more information.
Payments to contractors
Relevant contractor provisions are mostly harmonised in all states and territories except for Western Australia. The rules set out below are applicable in all states and territories other than Western Australia.
Broadly, payments to relevant contractors are subject to payroll tax, unless at least one of the following exemptions applies:
- Services are provided on no more than 90 days in a financial year
- The contractor engages other persons to help perform the
- The provision of labour under the contract is ancillary to the supply of materials or
- The services are not ordinarily required by the business and the contractor provides the same services to other independent clients.
- The services are of a type required by the business for less than 180 days in a financial year
- The contractor renders the same services to other clients in the same financial year
There are also specific exemptions available for owner-drivers, insurance agents and door-to-door salespeople.
Relevant contractor provisions are quite broad. When determining applicability of payroll tax, employers should consider all suppliers who provide labour services to their businesses. The burden of proof is on the employer to substantiate that a contractor exemption applies. The State Revenue Offices may deny a contractor exemption due to a lack of information or insufficient evidence.
Payroll tax and the medical industry in Victoria
There have been some recent payroll tax changes applicable to businesses in the medical industry, so it is important for employers in this industry to understand the different payroll tax obligations that may exist. The discussion below is focused on the changes in Victoria, however, it would be equally important for businesses operating across Australia to understand their obligations in the other jurisdictions as the changes are not harmonised between jurisdictions.
The medical industry includes medical practices that engage health practitioners who practise Aboriginal and Torres Strait Islander health, Chinese medicine, chiropractic, dental (including the profession of a dentist, dental therapist, dental hygienist, dental prosthetist and oral health therapist), medical, medical radiation practice, midwifery, nursing, occupational therapy, optometry, osteopathy, paramedicine, pharmacy, physiotherapy, podiatry and psychology.
Employers operating within the medical industry should review their payroll tax disclosures, particularly in relation to medical practitioners who are relevant contractors and ensure that they are compliant with the applicable State Revenue Office guidance.
Payroll tax relief is applicable for Victorian general practice (GP) businesses for periods up to 30 June 2024 and in some instances until 30 June 2025. The relief only applies to GP businesses and does not apply to other medical professionals or allied health professionals.
From 1 July 2025, wages paid, or payable, by a GP medical business to employee and contractor GPs are exempt when related to Medicare fully-funded items of GP work. As the proportion of GP work that is Medicare fully-funded will be the proportion of GP wages exempt from payroll tax, this exemption aims to support GP medical businesses that bulk bill their services. This exemption does not apply to non-medical GP businesses (i.e. allied health professionals and dentists).
How can Pitcher Partners assist?
| Registration | Assistance with registering relevant entities for payroll tax across all relevant states and territories. |
| Review and Lodge Returns | Assistance with the preparation of annual payroll tax reconciliations, or review of payroll tax reconciliations. |
| Grouping | Assistance with grouping compliance and preparation of de-grouping applications. |
| SRO Investigations | Preparing correspondence to the SRO and reviewing of required documentation as part of any SRO Investigation. |
| Advice | Providing specific payroll tax advice on a particular matter or query. |
Further Information
The summary above underscores the complexities of payroll tax legislation in different jurisdictions, especially for businesses operating nationally or as grouped entities across various Australian states and territories. We recommend that business owners and managers to consult with our employment tax specialists to ensure compliance with payroll tax lodgement processes and legislative requirements. Our expertise can help you navigate these intricate laws, allowing you to focus on other critical aspects of your business operations.
We look forward to working with you and providing support and guidance you need. For more information about our services and how we can assist, please contact our employment taxes specialists or your usual contacts at Pitcher Partners.
