Payroll Tax Thresholds by State — What Australian Businesses Need to Know When Working with an Indian Bookkeeper

State Payroll Tax Thresholds and Rates — 2025–26

These are the annual thresholds and rates for each Australian state and territory for the 2025–26 financial year. Thresholds apply to the total Australian wages of the employer (and any associated group entities — see grouping rules below).

Note: Thresholds and rates are reviewed annually by each state government and can change. The Indian CA team confirms the current rates at the start of each financial year before preparing returns. Always verify with the relevant state revenue office for the most current figures.

How the Threshold Works — Monthly Liability Calculation

Payroll tax is calculated monthly, not annually, but with an annual threshold. Each month, the business claims a portion of the annual threshold as a monthly deduction:

• Monthly threshold deduction = Annual threshold × (Days in month / 365)
• Taxable wages for the month = Total wages paid in the month − Monthly threshold deduction
• Monthly payroll tax = Taxable wages × State rate

If total wages in a month are below the monthly threshold deduction, no payroll tax is payable for that month. This means seasonal businesses — where wages fluctuate significantly month to month — may pay payroll tax in busy months and nothing in slow months, even if annual wages exceed the threshold.

At the end of the financial year, an annual reconciliation return is lodged. The true annual liability is calculated on the annual wage total, and any over or underpayment from the monthly returns is settled in the annual reconciliation.

What Counts as Wages for Payroll Tax

Payroll tax applies to a broader definition of wages than just salary and wages. The Indian CA team reviews all of the following for payroll tax inclusion:

• Salary and wages: Base pay, overtime, bonuses, commissions, allowances
• Director fees: Fees paid to company directors are wages for payroll tax purposes
• Superannuation: Employer super contributions above the Superannuation Guarantee minimum are typically included. Some states include all super contributions.
• Fringe benefits: The grossed-up taxable value of fringe benefits is included as wages in most states
• Termination payments: Certain components of termination payments are included (unused annual leave, long service leave — rules vary by state)
• Contractor payments: Certain contractor payments are deemed wages under the contractor provisions — see below

Items that are generally excluded from payroll tax wages include: reimbursements of genuine business expenses, genuine redundancy payments above the tax-free limit, and workers compensation payments.

The Grouping Rules — Why Related Businesses Are Combined

Payroll tax grouping rules prevent businesses from splitting payroll across multiple entities to stay under the threshold. Two or more businesses are grouped if:

• One entity has a controlling interest (50% or more) in another
• The same person or persons have a controlling interest in both entities
• The businesses are otherwise associated under the grouping provisions

When businesses are grouped, only one threshold applies across the entire group. The group cannot claim one threshold per entity. The Indian CA team identifies grouped entities at the start of each engagement and calculates payroll tax on a consolidated group basis where required.

For Australian businesses operating multiple companies — a common structure for family businesses and franchise groups — this is one of the most important payroll tax issues to get right. Failing to apply grouping rules can result in years of underpaid payroll tax plus penalties and interest.

How the Indian CA Team Handles State Payroll Tax

As part of the outsourced bookkeeping service, the Indian CA team handles payroll tax compliance as follows:

1. Registration: If the business reaches the payroll tax threshold and is not yet registered, the Indian team assists with registration through each relevant state revenue office portal.
2. Monthly wage extraction: Each month, wages paid in each state are extracted from Xero Payroll or MYOB. The Indian team tracks which employees are based in which state.
3. Monthly return preparation: The monthly payroll tax return is prepared for each state — wages, threshold deduction, taxable wages, and liability. The return is reviewed by the business owner before lodgement.
4. Portal lodgement: Returns are lodged through the relevant state revenue portal (Revenue NSW, RevenueSA, OSR Queensland, etc.) using credentials provided by the business owner. The Indian team never holds or stores portal login credentials independently.
5. Annual reconciliation: At 30 June each year, the Indian team prepares the annual reconciliation return comparing total wages paid against the annual threshold and settling any differences from the monthly returns.

If the business operates in multiple states, the Indian team prepares separate returns for each state where the business has employees. Multi-state employers with the dedicated Indian accountant service have a single point of contact managing all state payroll tax obligations.

Contractor Provisions — When Contractor Payments Become Wages

Each state has contractor provisions that deem certain contractor payments to be wages for payroll tax purposes. A contractor's payments are typically deemed wages if the contractor:

• Works substantially exclusively for one business (usually more than 80–90% of their work)
• Performs services similar to or the same as employees
• Is paid for labour rather than a specific result or deliverable

There are exemptions — for example, if the contractor uses their own tools and equipment, works for multiple clients, or has publicly advertised their services to the general public. The Indian CA team reviews all contractor arrangements at the start of each financial year and identifies any that may be caught by the contractor provisions in the relevant state.

Frequently Asked Questions