Payroll Tax in Victoria (and Across Australia)
Payroll tax is a state and territory tax on wages that employers must pay when their total taxable wages exceed a certain threshold. It’s an important cost of doing business for many employers, and the rules (including thresholds and rates) differ slightly depending on where you operate in Australia. State Revenue Office
How Payroll Tax Works in Victoria
In Victoria, payroll tax is calculated on taxable wages — this includes most salaries, wages, allowances and some contractor payments. You are liable to register and pay payroll tax if your total Australian wages exceed the threshold for the financial year. State Revenue Office
2025–26 Thresholds in Victoria
From 1 July 2025:
- Annual tax-free threshold: $1,000,000
- Monthly threshold: $83,333
If your total wages exceed these amounts, payroll tax will apply to the excess. State Revenue Office+1
Payroll Tax Rates in Victoria
- Standard rate: 4.85% on taxable wages above the threshold.
- Regional employers: can qualify for a lower rate of 1.2125%. State Revenue Office
Phase-Out on Threshold Entitlement
Victoria has special rules that reduce the payroll tax threshold for larger employers:
- Employers with annual Australian wages between $3 million and $5 million have their threshold gradually reduced.
- If your annual wages exceed $5 million, there’s no tax-free threshold available — meaning payroll tax applies from the first dollar above $0. SRO Victoria
Surcharges for Large Employers
Large Victorian businesses (with Australian wages over $10 million) face additional payroll tax surcharges:
- Combined surcharge of 1% for $10M+ payroll
- Combined surcharge of 2% for $100M+ payroll
These apply only to the Victorian share of wages above the relevant threshold. State Revenue Office
Payroll Tax Across Other Australian States & Territories
Each state and territory has its own payroll tax threshold and rate. Here’s a helpful comparison:
|
State/Territory |
Annual Threshold |
Payroll Tax Rate |
Notes |
|---|---|---|---|
|
New South Wales (NSW) |
$1,200,000 |
5.45% |
Threshold apportioned if interstate wages. Revenue NSW |
|
Queensland (QLD) |
$1,300,000 |
4.75% – 4.95% |
Tiered: 4.75% up to $6.5M, 4.95% above; mental health levy for large employers. Acciyo |
|
Western Australia (WA) |
$1,000,000 |
5.5% |
Uses a diminishing threshold as wages increase. Acciyo |
|
South Australia (SA) |
$1,500,000 |
0% – 4.95% |
Progressive rate structure up to 4.95%. Acciyo |
|
Tasmania (TAS) |
$1,250,000 |
4.0% – 6.1% |
Lower rate for $1.25M–$2M wage range, higher above. Acciyo |
|
Northern Territory (NT) |
$2,500,000 |
5.5% |
Higher threshold reduces tax liability for medium employers. Acciyo |
|
Australian Capital Territory (ACT) |
$2,000,000 |
6.85% |
Highest base rate in Australia. ISM Accountants |
(Thresholds and rates may adjust annually by the respective revenue offices.) ISM Accountants
Interstate Employers and Payroll Tax
If your business employs staff in more than one state or territory, payroll tax becomes more complex:
- You must register in each jurisdiction where you pay wages once your total Australian wages exceed that state’s threshold. Payroll Tax Australia
- The payroll tax threshold in each jurisdiction may be reduced proportionally depending on how much of your total wages are paid in that state. Revenue NSW
This means a business with employees in NSW and Victoria, for example, may only get a portion of the full threshold in each state based on where wages are paid. Revenue NSW
Why Payroll Tax Matters for Businesses
Payroll tax is a significant expense for employers, especially as wage bills grow. Understanding the thresholds and rates can help:
- Forecast tax liabilities more accurately
- Decide on staffing or wage strategies
- Determine cash flow impact
- Ensure timely registration and payment
Failing to register or pay payroll tax on time can lead to penalties and interest charges imposed by state revenue offices.
Final Thoughts
In Victoria, payroll tax thresholds are increasing from 1 July 2025 — providing relief to more small and medium businesses. State Revenue Office However, Victoria’s threshold is still lower than several other mainland states, meaning more employers become liable sooner compared with NSW or QLD. PBO
For any employer with interstate operations or a rapidly growing wage bill, it’s essential to review payroll tax obligations across all jurisdictions to stay compliant and avoid surprises.