Employer obligations: Payroll tax factsheet

Payroll tax is a state-based obligation administered by the State Revenue Offices in each state and territory. While the rules are largely harmonised, important differences remain across jurisdictions, including thresholds, rates, due dates, grouping rules and the treatment of particular wage components.

There continues to be 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. Our employment taxes team has experience in all Australian states and territories.

The factsheet covers the following areas:

• Are you required to be registered for payroll tax?
• What are the lodgements due dates?
• Payroll Tax Grouping
• Payroll Tax Nexus – in which jurisdiction payroll tax should be paid
• Taxable and exempt wages
• Payments to contractors
• Employee Share Schemes and payroll tax
• Payroll tax and the medical industry
• 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 group 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 2025/26 financial year across the states and territories can be best summarised in the table below:

* 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 July 2026.

** In some jurisdictions, further levies and/or surcharges may apply. For example, Victoria’s COVID-19 and mental health levy, Queensland’s mental health levy, Australian Capital Territory’s surcharge, etc

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.

Payroll tax Nexus – in which jurisdiction payroll tax should be paid

The harmonised payroll tax nexus provisions determine the Australian state or territory in which wages are subject to payroll tax. Where an employee performs services wholly within a single jurisdiction during a calendar month, payroll tax is payable in that jurisdiction.

Where services are performed across multiple Australian jurisdictions, or partly overseas, the legislation applies a sequential four-tier test to identify the taxing jurisdiction, considering:

1. the employee’s principal place of residence;
2. the employer’s registered ABN address or principal place of business;
3. the jurisdiction in which the wages are paid or payable; and
4. the jurisdiction in which the services are mainly performed.

These rules are particularly important for employers with interstate, mobile, fly-in fly-out, or remote workforces, as an incorrect nexus determination may result in wages being reported in the wrong jurisdiction, leading to reassessments, penalties, and interest. Employers should therefore periodically review employee working arrangements and payroll tax reporting positions to ensure compliance with the nexus requirements.

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.

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.

Consideration should also be given to the characterisation of arrangements with contractors for other employment taxes obligations. You can read more about these here.

Employee share schemes and payroll tax

Employee Share Schemes (ESS) are one of the effective tools to attract, retain and motivate talents. However, when it comes to payroll tax, the rules can catch employers off guard, especially when an ESS that looks favourable for income tax purposes still triggers a payroll tax liability.

Employers can generally choose when payroll tax is triggered, known as the ‘relevant day’, which is usually either:

• the date the share or option is granted; or
• the date it vests.

Payroll tax is then calculated based on the market value of the interest on that day. The choice of relevant day can have a significant impact on employer’s cashflow because of the risk of unexpected payroll tax costs.

You can read more about ESS and payroll tax here.

Payroll tax and the medical industry

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.

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 and/or concessions are available in some jurisdictions and highlight dependent on the fact pattern of the business paying the medical professionals.

How can Pitcher Partners assist?

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.