An overview of payroll taxes
What is payroll tax?
Payroll tax is a state or territory tax on a company’s taxable employee wages, once the sum of these wages reaches a certain threshold.
The threshold for businesses operating for only part of the year will be proportionate. For example, if you operate for half of the year, you’d owe payroll tax once your payroll amount reaches half of the annual threshold.
Businesses must register for payroll tax within 7 days of the end of the month in which they reached the applicable wage threshold. When you register, you’ll learn whether your business structure requires you to pay payroll tax on a monthly, quarterly or annual basis.
What is the difference between payroll tax and income tax?
The main difference between Australia's payroll tax and income tax is that payroll tax is based on the total wages you pay your employees and contractors, while income tax is based on your business’ taxable earnings (i.e., gross income, less deductions). Your company’s income isn't a factor when calculating your payroll tax.
What wages are subject to payroll taxes?
Firms must pay payroll taxes on the following:
Employee wages (hourly and salaried)
Payments to freelancers and contractors
Company director remunerations
Superannuation
Certain allowances
Employee commissions and bonuses
Fringe benefits
Termination/severance pay.
What are the payroll tax rates and thresholds for each state and territory?
You're responsible for paying payroll tax in any state or territory in which your company operates or in which your employees reside. Here are the payroll tax rates and thresholds around the country (as at July 2022 and subject to change):
ACT
The payroll tax threshold in Australian Capital Territory is $166,666.66 per month, or $2 million annually. The payroll tax rate in the ACT is 6.85%.
NT
The payroll tax threshold in the Northern Territory is $125,000 per month and includes both NT wages and all interstate wages. The payroll tax rate is 5.5%.
NSW
In New South Wales, the annual payroll tax threshold is $1.2 million. Monthly tax thresholds vary based on days per month:
31-day months: $101,918
30-day months: $98,630
28-day months: $92,055
The payroll tax rate in NSW is 5.45%.
QLD
Queensland businesses must pay payroll tax once their annual Australian taxable wages reach $1.3 million per year.
The payroll tax rate is 4.75% for companies paying $6.5 million or less in annual wages, and 4.95% for companies with annual wages exceeding $6.5 million.
SA
In South Australia, companies are liable for payroll tax after reaching an annual, Australia-wide wage threshold of $1.5 million.
The payroll tax rate is variable from 0%–4.95% for companies that pay over $1.5 million but don't exceed $1.7 million in annual wages. For firms that pay over $1.7 million in annual wages, the payroll tax rate is 4.95%.
TAS
Tasmania’s annual payroll tax threshold is $1.25 million. The tax rate is 4% for total annual wages of over $1.25 million but less than $2 million, and 6.1% for total annual wages over $2 million.
VIC
The payroll tax threshold for businesses operating in Victoria is $58,333 per month, or $700,000 over the full financial year (increasing to $900,000 from 1 July 2024). The payroll tax rate is 4.85%, or 1.2125% for regional employers.
WA
The payroll tax threshold in Western Australia is $83,333 per month, or $1 million per year. The tax rates are:
5.5% for annual total wages of $1 million–$100 million
6% for annual total wages of $100 million–$1.5 billion
6.5% for annual total wages in excess of $1.5 billion.
What happens if your business has employees in different states?
Businesses that operate in or have employees in multiple states must register and pay payroll tax if the following conditions apply:
State-specific payroll totals are equal to or above the threshold for that state
Total Australia-wide payroll amounts are equal to or above the threshold for that state.
Scenario: You own a company that operates in Western Australia and Victoria. In a single year, your Victoria office pays out $600,000 [threshold $700,000], while your Western Australia office pays out $900,000 in taxable wages [threshold $1 million] — for a total amount of $1.5 million. As the employer's total taxable Australia-wide wages exceed the threshold in both states, the company is liable for payroll tax in both Western Australia and Victoria.
How do businesses register for payroll tax?
You can register for payroll tax in each Australian state or territory here:
The importance of keeping payroll tax records
Failure to register for, report or pay your payroll taxes could result in a number of penalties, up to and including a fee of 75% of the arrearage — as well as possible prosecution.
You could also face a full tax audit, which may uncover other missed payments or tax-related mistakes.
Knowing how much you pay in taxes for payroll will also give you insight into the financial health of your business — and into the true cost of hiring new employees. This is especially important for growing businesses approaching their applicable threshold, as crossing it will increase operating costs.
Factors to consider when creating payroll tax records:
Start and end dates for the reporting period
Employee salaries and cumulative wages
Additional payments in pensions, benefits and other employer contributions
Cumulative payouts for sick leave or family leave of absence
Monetary values of any non-monetary remunerations or gifts for employees
Automate and simplify payroll taxation with MYOB
As your team grows larger and spreads inter-state, your company’s payroll taxes will become increasingly complex and time-consuming to manage. This is especially true if you’re doing this work manually.
Thankfully, MYOB’s cloud payroll software is here to help. MYOB calculates and records all payroll tax-related information automatically. With clear insight as to what you owe, where and why, you can easily factor your payroll taxes into the overall cost of running your business — and will always be prepared to pay up when the time comes.
Ready to get started? Sign up now to try MYOB for free.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.