Payroll Tax Calculator

Understanding payroll tax in Australia

Payroll tax is a state and territory tax on wages paid by employers. Each jurisdiction sets its own rate and tax-free threshold. Employers whose total Australian taxable wages exceed the threshold must register and lodge payroll tax returns - typically monthly.

Taxable wages include salaries, bonuses, commissions, allowances, superannuation contributions, fringe benefits, and payments to certain contractors. If you operate across multiple states, you must register in each state where you have a nexus (employees working), and the threshold is apportioned based on the proportion of wages in each state. Payroll tax is one of several total employment costs that businesses need to budget for alongside employer super obligations.

Grouping provisions are particularly important: if your business is part of a group of related entities (common ownership or control), the threshold is shared across the group. Many businesses discover this during a state revenue office audit, resulting in back-payments and penalties.

How to use this payroll tax calculator

1. Select the state or territory where your employees are based.
2. Enter your total annual taxable wages for that jurisdiction, including salaries, super, allowances, and deemed contractor payments.
3. If you operate in multiple states, add each jurisdiction separately - the calculator adjusts the threshold proportionally.
4. Review your estimated monthly and annual payroll tax liability for each state.

What are the payroll tax rates and thresholds in each state?

Payroll tax rates and thresholds differ substantially across Australia. The table below summarises the key rates for FY2025-26. These differences make multi-state compliance particularly challenging for businesses with distributed workforces.

For the most up-to-date thresholds and rates, check with your state revenue office. The NSW Revenue website is a useful starting point for NSW-based businesses.

Worked example: Sydney construction business

Consider a Sydney-based construction business with $2.5 million in annual taxable wages. Under NSW rules for FY2025-26, the tax-free threshold is $1.2 million. This means taxable wages above the threshold are $2,500,000 - $1,200,000 = $1,300,000. At the NSW rate of 5.45%, the annual payroll tax liability is $1,300,000 x 5.45% = $70,850 per year, or approximately $5,904 per month. This is a significant cost that many growing businesses fail to budget for until they cross the threshold.

Grouping provisions

If you operate related businesses, their payrolls may be grouped under payroll tax legislation and only one threshold applies across the entire group. This catches many business owners off-guard. Common triggers for grouping include:

• Shared directors or common management between entities
• Common ownership above 50% (including through trusts and related parties)
• Shared employees or interchangeable workers across entities

For example, if you run two companies - one for plumbing and one for electrical - and both share the same directors, the state revenue office will likely treat them as a group. Their combined wages are assessed against a single threshold, potentially pushing you above the registration threshold even if each entity individually falls below it.

Are contractors included in payroll tax calculations?

In most states, payments to contractors who are deemed employees for payroll tax purposes are included in taxable wages. This typically applies when the contractor works exclusively or primarily for one business, uses the business's equipment, or is directed on how to do the work. The ATO and state revenue offices have specific tests to determine whether a contractor relationship is genuine or should be reclassified. For industrial businesses that rely heavily on subcontractors, getting accounts payable processes right is essential to accurate payroll tax reporting.

When are payroll tax returns due?

Monthly returns are due by the 7th of the following month in most states. Annual reconciliations are due by 28 July (21 July in some states). Late lodgement attracts penalties and interest, so maintaining accurate wage records throughout the year is critical. Businesses that automate their AP process are better positioned to reconcile contractor payments quickly at year-end.

How does AP automation help with payroll tax compliance?

Accurate payroll tax calculation depends on correctly classifying all payments as taxable wages - including contractor payments that may be deemed wages under the relevant state legislation. Automating your accounts payable process ensures contractor invoices are captured, coded, and flagged for payroll tax review before they slip through. For industrial businesses managing dozens of subcontractors across multiple states, this visibility is critical to avoiding unexpected audit assessments.

Disclaimer: This calculator provides estimates only and does not constitute tax, legal, or financial advice. Payroll tax rates, thresholds, and rules are subject to change and may vary by jurisdiction. Always consult a qualified tax professional or your state/territory revenue office before making decisions based on these calculations.