Payroll Tax in Australia: State-by-State Variations, Compliance Challenges & What Every Owner/Executive Must Know in 2026

2 hours ago
5 min read

As an Australian Business Owner/Executive, Payroll Tax represents one of the most complex and variable employment-related costs your business faces. In 2026, the landscape is becoming even more challenging due to significant reforms — particularly in the ACT — combined with long-standing differences in thresholds, rates and surcharges across jurisdictions.

Unlike Federal Taxes such as Income Tax or GST, Payroll Tax is administered separately by each State/Territory. This creates a real complexity and huge risk for National or any Multi-State businesses, especially with the rise of Remote workforces. Getting it wrong can lead to unexpected costs, penalties or audit exposure.

Here is a clear, up-to-date overview designed to help you understand the current rules and take practical steps to protect your business.

How Payroll Tax Works in Australia (The Core Rules YOU Must Follow)

Payroll Tax is levied on taxable wages (including salaries, bonuses, certain super contributions, fringe benefits, and some contractor payments) in each state and territory where your business has a NEXus — a sufficient connection that gives that jurisdiction the right to tax the wages.

What is NEXus?

NEXus is the official term used by all State Revenue Offices (SRO) to determine which State has the Tax Right (TR) to an employee’s wages for a given month. It is most commonly triggered by the employee’s principal place of residence or where the work is actually performed. This is especially important for remote, hybrid, or inter-State teams as wages can only be taxed in one jurisdiction per month.

Key compliance rules every Executive should understand:

Grouping of Entities — Related businesses under common control are grouped. All Australian wages are aggregated to assess thresholds and rates. Group members are jointly and severally liable for the tax, and you must appoint a Designated Group Employer (DGE) to handle lodgements.
Inter-State and Remote Workers — Wages must be apportioned according to where the employee performs the work for the business, NOT the Head Quarter (HQ) location.
Registration and Lodgement — Registration to Payroll Tax is required once you exceed the monthly or annual threshold in ANY jurisdiction. Most States require monthly returns, with annual reconciliations in key jurisdictions (e.g. Victoria due 21 July).
Penalties and Audit Risk — State Revenue Offices (SRO) actively use data-matching. Errors in grouping, apportionment or Contractor classification can result in substantial fines and interest.

Just the smallest oversight in any of these areas, unfortunately, can quickly escalate into material financial and reputational risk for your business.

Payroll Tax Variations by State/Territory (as at April 2026)

The table below summarises the current thresholds and rates for the 2025–26 and 2026–27 financial years:

State /Territory	Annual Threshold	Monthly Threshold	Base Rate	Key Variations & Surcharges (2026)
QLD (State)	$1,300,000	~$108,333	4.75% (4.95% above $6.5M)	Regional discount available until 2030. 50% Apprentice/Trainee Rebate extended to 30 June 2026. [3]
NSW (State)	$1,200,000	$100,000	5.45%	Flat rate. No separate levies. [1]
ACT (Territory)	$2,000,000 (until 30 Jun 2026) → $1,750,000 from 1 Jul 2026	~$166,667 → ~$145,833	Tiered / progressive (see below)	Biggest changes in 2026.
VIC (State)	$1,000,000	~$83,333	4.85% (1.2125% regional)	+0.5% Mental Health Levy + 0.5% COVID Debt Surcharge for larger businesses. Annual reconciliation due 21 July. [2]
SA (State)	$1,500,000	~$125,000	Ramped 0%–4.95%	Progressive ramp-up to full rate above ~$1.7M.
NT (Territory)	$2,500,000	~$208,333	5.5%	Highest threshold. Apprentice/trainee wages exempt from 1 Jul 2025. [4]
WA (State)	$1,000,000	~$83,333	5.5%	Flat rate. Diminishing threshold applies $1M–$7.5M.
TAS (State)	$1,250,000	~$104,167	4.0% (higher above $2M)	Tiered for larger businesses.

Definitions within Table:

State: States are partially sovereign. They have their own constitutions, which give them significant independent law-making powers. The Federal Government cannot easily override or change State laws in areas like education, health, policing, transport, and many other responsibilities.
Territory: Territories are legally subordinate to the Federal Government. They do not have their own constitutions. The Australian Parliament (under Section 122 of the Constitution) can make Laws for Territories and can override or change Territory laws at any time.

ACT Payroll Tax – Major Reforms in 2026

From 1 January 2026, businesses (or groups) with Australia-wide wages over $150 million pay a flat 8.75% on ACT taxable wages - THIS IS VERY EXPENSIVE FOR ALL AUSTRALIANS!

From 1 July 2026 (NEW LEGISLATION), the threshold drops to $1.75 million and a progressive structure applies based on Australia-wide wages:

$1.75M – $20M: 6.75%
$20M – $50M: 6.85% (+0.1% surcharge in this band)
$50M – $100M: 7.35%
$100M – $150M: 7.85%
Over $150M: 8.75%
See Reference [5].

These changes make the ACT one of the most complex and potentially expensive jurisdictions for larger or national businesses in Australia.

The Real and Greatest Challenges for Business Owners & Executives

Multi-State and Remote Workforces often create Payroll Tax OBLIGATIONS in Multiple jurisdictions.
Group structures and Contractor arrangements can unexpectedly trigger
aggregation and much higher rates for businesses.
Legislative changes (like the ACT reforms) require proactive modelling and ongoing adjustment and maintenance.
Manual tracking of NEXus, apportionment, and thresholds consumes significant time and increases error risk.
Rising Audit focus from any State Revenue Offices (SRO) on grouping/data accuracy adds compliance pressure to Australian businesses today.

Many businesses end up, without intent, overpaying, facing surprises at reconciliation time or diverting valuable resources away from growth.

Executive Action Plan: 7 Key Checks to Direct to Your Teams to an even better 2026

From now on, your role as Business Owner / Executive truly becomes a strategic oversight to compliant operations. Instruct your Finance, HR, and Payroll teams to complete and report back on these seven (7) actions within the next 30–60 days:

Confirm Group Structure(s) and Designated Group Employer (DGE) appointment — Review all related businesses and ensure proper aggregation and Designated Group Employer appointment.
Map Employee NEXus and Work Locations — Document where each employee (including remote/hybrid staff) performs work to identify all triggering jurisdictions.
Audit a whole Business Wage apportionment — Verify accurate splitting of taxable wages across all States.
Verify Registrations and Threshold Monitoring — Confirm registrations are current and monitoring processes are robust. Check your compliance now on the Payroll Tax Australia website.
Model the impact of proof through the recent ACT 2026 changes — Quantify the financial effect of the new tiered rates and lower threshold from 1 July 2026.
Schedule reconciliations and regular reviews — Set reminders for all deadlines (e.g. Victoria’s 21 July reconciliation) and plan twice-yearly health checks.
Review Contractor classifications and exemptions — Ensure labour-hire arrangements and available exemptions are correctly applied.

Assign Business Delegates (BD), timelines, and review the outcomes in your next Leadership meeting. These steps can materially reduce risk and/or exposure for your business.

How RUNPAY™ Supports Compliance For You

We provide affordable independent by-the-hour practical Executive Support to help Australian Business Owners/Executives manage workforce complexity.

Through our Payroll Systems Marketplace and expert Advisory services, we assist your team by:

Delivering clear, regularly updated insights into State-by-State thresholds, rates, and Legislative Changes via the RUNPAY™ Master Calendar (including the ACT’s 2026 reforms);
HELPING YOU objectively evaluate and compare payroll solutions capable of handling multi-jurisdictional grouping, wage apportionment and compliance requirements; and
Supplying practical tools and guidance like the RUNPAY™ Master Calendar to keep your Leadership Team ahead of business deadlines and all business compliance obligations.