Payroll Tax Calculator Australia (FY 2025-26): State Rates & Thresholds

Updated for FY 2025-26 · Published 3 March 2026

"Payroll tax" is one of those terms that means very different things depending on who you ask. If you're an employee, you might assume it refers to the tax withheld from your salary each pay cycle. But in Australia, payroll tax is actually a state and territory tax paid by employers — not deducted from your wages at all.

This guide explains what payroll tax is, how it's calculated, the current rates and thresholds in every state and territory, and what employers need to do to stay compliant in FY 2025-26. If you're an employee looking for your own tax breakdown, jump straight to our Take-Home Pay Calculator.

What Is Payroll Tax?

Payroll tax is a self-assessed state and territory tax levied on employers whose total Australian wages exceed a set threshold. It is calculated on the total wages, salaries, and other remuneration a business pays its workers — including permanent employees, casual staff, directors, and in some cases, contractors.

Crucially, payroll tax is an employer obligation. It is not deducted from your employees' pay packets. You pay it on top of wages from your own business funds. Think of it as a cost of employing staff beyond a certain scale.

The threshold is designed to exempt small businesses. Most states only require payroll tax once your total annual wages bill reaches $1 million or more. Once you exceed the threshold, you pay tax on the whole amount above it — or in some jurisdictions, on the full wages once a phase-out range is passed.

Payroll Tax Rates and Thresholds by State (FY 2025-26)

Each state and territory sets its own payroll tax rate and annual wages threshold. Here's a summary for FY 2025-26:

Rates and thresholds are subject to change. Always verify current figures with your relevant state revenue office before lodging returns.

How to Calculate Payroll Tax

The basic calculation is straightforward: apply your state's rate to the wages above the threshold. However, most states use a tapering or deduction system so that businesses just over the threshold don't face a sudden large tax bill.

Given the complexity of state-specific tapering formulas, most businesses use their state revenue office's online calculator or accounting software to calculate exact liability. Victoria's State Revenue Office, Revenue NSW, and Queensland Revenue Office all offer free online payroll tax calculators.

What Counts as "Wages" for Payroll Tax?

The definition of "wages" for payroll tax purposes is broader than most employers expect. It typically includes:

• Salaries, wages, and bonuses paid to employees
• Superannuation contributions (employer SGC and salary sacrifice amounts)
• Fringe benefits (the grossed-up taxable value of FBT benefits)
• Directors' fees
• Allowances (e.g., car allowances, overtime meal allowances)
• Contractor payments (in some circumstances — see below)
• Employee share scheme (ESS) benefits in some states

Superannuation is often overlooked. In most states, the employer's SGC contributions (currently 12% in FY 2025-26) are included in your wages for payroll tax purposes. This can push businesses that are borderline under the threshold over it. See our Superannuation Calculator to understand SGC amounts.

Contractors are a grey area. If a contractor is deemed to be providing services in a way that resembles employment, their payments may count as wages. Each state has its own contractor provisions and exemptions, so check with your state revenue office if you use contractors.

Grouping: Multi-Entity and Interstate Businesses

If you operate through multiple related companies, trusts, or partnerships, the states have grouping provisions that treat all related entities as a single employer for threshold purposes. This prevents large businesses from splitting wages across multiple entities to avoid payroll tax.

For businesses operating in multiple states, the threshold deduction is apportioned based on where wages are paid. You'll only claim one threshold across all states — not one per state. Each state revenue office calculates your deduction entitlement based on the proportion of your total Australian wages paid in that state.

For example, if your total wages are $3M split equally between NSW and VIC, each state would apportion the threshold deduction accordingly. You'd effectively get half the benefit of each state's threshold, not the full threshold in both.

When and How to Lodge

Payroll tax is typically lodged and paid monthly, with an annual reconciliation return lodged at year-end (usually in July for the prior financial year). The annual reconciliation is where you true up your monthly estimates against actual wages paid.

Most states require:

• Registration with the state revenue office once you exceed (or expect to exceed) the threshold
• Monthly returns and payments (due around the 7th of the following month in most states)
• Annual reconciliation return (usually due in July)

If you're a new business and uncertain whether you'll hit the threshold, it's worth registering early and monitoring wages carefully. Penalties for late registration and underpayment can be significant.

For remote or regional employers in Victoria, the reduced regional rate of 1.2125% applies to wages paid to employees whose regular place of work is in regional Victoria — a useful concession for regional businesses.

Payroll Tax vs Employee Tax: A Quick Summary

Employees often confuse payroll tax with the income tax withheld from their wages. Here's the key difference:

As an employee, your take-home pay is affected by PAYG withholding, Medicare levy, and HECS repayments — not by your employer's payroll tax. Use our Take-Home Pay Calculator to see your exact after-tax income. You can also check the Medicare Levy Calculator and HECS-HELP Repayment Calculator for your specific situation.

Summary

Payroll tax is an unavoidable part of running a growing business in Australia. While the threshold keeps small businesses exempt, any employer approaching $700,000–$1 million in annual wages should start planning for compliance. The rules vary enough between states that it's worth consulting an accountant or tax adviser if you operate across borders.

For the employee side of the tax equation, explore our full suite of calculators: Income Tax rates, Superannuation, and Salary Sacrifice — all updated for FY 2025-26.

This article is for general informational purposes only and does not constitute financial, legal, or tax advice. Payroll tax rates and thresholds change frequently — always verify current figures with your relevant state revenue office. For personal advice, consult a registered tax agent or accountant.