Kalaro Guides · State Compliance
Payroll Tax Returns Explained
Payroll tax has nothing to do with the ATO. It's collected by state and territory revenue offices, which is why the rules can feel unfamiliar even to experienced business owners. This is what actually stays consistent underneath all that variation.
What payroll tax actually is
Payroll tax is a tax on an employer's total wage bill, charged once that bill passes an annual threshold. It's paid by the business, not deducted from employees' pay, and it's administered by each state and territory revenue office rather than the ATO. That last point trips people up constantly. There's no single "Australian payroll tax." There are eight related but separate taxes, each with its own threshold, rate and administrative quirks, and a business only deals with the ones for the states it actually operates in.
Why every state looks different
Because each jurisdiction sets its own settings independently, the specifics change with almost every state budget. Thresholds, rates, surcharges and phase-out rules are genuinely a moving target, and a figure that's accurate this financial year can be out of date by the next. Rather than publish exact numbers here that would go stale, the more useful habit is this: check your registration threshold and rate directly with your state or territory's revenue office each year, particularly if you're close to the threshold or your headcount has grown.
A few broad patterns hold across nearly every jurisdiction, even though the exact figures don't:
- There's always an annual (and monthly) wage threshold below which no payroll tax applies at all
- Tax is charged only on the amount above the threshold, not on total wages
- Larger employers often lose some or all of their tax-free threshold as wages climb, through a tapering or phase-out mechanism
- Regional employers in some states can access a reduced rate
What usually counts as wages
The definition tends to be broader than business owners expect. Beyond gross salaries, most jurisdictions also count superannuation guarantee contributions, bonuses and commissions, most allowances, and the grossed-up value of fringe benefits provided to staff. Payments to contractors can be caught too, where the arrangement is really personal labour dressed up as a business-to-business relationship rather than a genuinely independent contract.
Related businesses (common ownership, shared control, or staff who effectively work across more than one entity) are typically "grouped" for payroll tax purposes. The tax-free threshold is then shared across the whole group instead of applying separately to each entity. Splitting a team across multiple ABNs doesn't multiply how much you can pay before tax kicks in.
Working across more than one state
If you pay wages in more than one jurisdiction, each state's threshold is apportioned based on the share of your total Australian wages paid there. You don't get the full threshold everywhere you operate; it's divided based on where your people actually work. Businesses that hire interstate need to track wages by employee location carefully, since state revenue offices routinely share data and cross-check registrations against each other.
Registration and lodgment
Registration generally has to happen shortly after your wages first indicate you'll cross the threshold for the year, and it's on the business to notice and act, not the revenue office. Most states place registered employers on monthly returns, followed by an annual reconciliation once the financial year closes, to true up what was reported monthly against actual wages paid.
Frequently asked questions
No. Payroll tax is triggered by paying wages to employees, or in some cases to contractors treated as employees for this purpose. A sole trader working alone has no payroll tax exposure.
Yes, if you have any employees or contractors working elsewhere. The threshold test looks at your total wages apportioned across every state you operate in, not just wages paid in your home state.
No. Every jurisdiction has provisions that can bring seemingly independent arrangements into scope if the substance is really personal labour. Exemptions do exist, but they need to be actively established rather than assumed.
This guide describes how payroll tax generally works across Australian states and territories and is general information only. It doesn't take into account your specific circumstances and shouldn't be relied on as tax advice. Exact thresholds, rates and surcharges are set independently by each state and territory and change at each state budget, so always confirm current figures with the relevant revenue office before registering or lodging.