What is the Payroll Tax Threshold for 2025?

If you’re running a business with employees in Australia, understanding payroll tax thresholds is essential for accurate budgeting and compliance. Payroll tax is a state and territory-based tax on wages paid by employers when their total wage bill exceeds specific thresholds. These payroll tax thresholds and rates vary across Australia, making it crucial to stay informed about the specific requirements in your jurisdiction for the 2024-25 financial year.

Understanding Payroll Tax Fundamentals

Payroll tax is a self-assessed state and territory tax that employers must pay on wages when their total wage bill exceeds the applicable threshold amount set by their state or territory government. What makes payroll tax particularly complex is that each state and territory has its own rules, annual payroll tax threshold, and payroll tax rate.

For payroll tax purposes, the term “wages” includes more than just basic salaries. It typically covers employee wages, salaries, and commissions, as well as bonuses and allowances. Superannuation contributions, some contractor payments, directors’ fees, termination payments and accrued leave, fringe benefits, and salary sacrifice arrangements are also included.

Understanding the payroll tax threshold that applies to your business is the first step in determining whether you need to register for and pay payroll tax.

State and Territory Payroll Tax Thresholds for 2025

New South Wales (NSW)

For the 2024-25 financial year, the annual payroll tax threshold in NSW is $1,200,000, with the current payroll tax rate set at 5.45%. This means businesses with an annual wage bill below this threshold do not need to pay payroll tax. The NSW payroll tax threshold is also calculated on a monthly basis, depending on the number of days in the month. For a 28-day month, the threshold is $92,055. For a 30-day month, it is $98,630, and for a 31-day month, it is $101,918.

If you employ staff for only part of the financial year, your threshold will be proportionately reduced based on the number of days you employed staff. Revenue NSW is responsible for administering payroll tax in New South Wales, and businesses must ensure they pay payroll tax on time to avoid penalty tax.

Victoria (VIC)

Victoria has increased its payroll tax threshold to $900,000 per annum from July 2024, with a monthly threshold of $75,000. The standard payroll tax rate is 4.85%, while regional employers in Victoria benefit from a reduced rate of 1.2125%.

Victoria also applies two surcharges for businesses with higher total Australian wages. The mental health and wellbeing surcharge and the COVID-19 debt temporary surcharge both apply to businesses with Australian wages exceeding $10 million and increase for those with wages over $100 million.

Queensland (QLD)

Queensland’s payroll tax threshold for 2024-25 is $1,300,000 in annual Australian taxable wages. The payroll tax rate is 4.75% for employers with taxable wages of $6.5 million or less, and 4.95% for employers with taxable wages exceeding $6.5 million.

Regional employers in Queensland receive a 1% discount on the payroll tax rate until June 30, 2030. Queensland also imposes a mental health levy for businesses with higher wage bills.

South Australia (SA)

The payroll tax threshold in South Australia is $1,500,000. The payroll tax rate varies depending on your total wages. For wages between $1.5 million and $1.7 million, there is a variable rate between 0% and 4.95%. For wages above $1.7 million, there is a fixed rate of 4.95%.

Employers in South Australia receive a deduction of up to $600,000 annually or $50,000 monthly from gross wages when calculating payroll tax liability.

Western Australia (WA)

Western Australia has set its payroll tax threshold at $1,000,000 for the 2024-25 financial year, with a payroll tax rate of 5.5%. WA applies a diminishing threshold for employers with annual taxable wages between $1 million and $7.5 million.

Northern Territory (NT)

The Northern Territory is making significant changes to its payroll tax system. The current threshold is $1,500,000 with a payroll tax rate of 5.5%. From January 1, 2025, payroll tax will be waived for employers with taxable Australian wages of $2.5 million or less for liabilities incurred between January 1, 2025, and June 30, 2025. From July 1, 2025, the tax-free threshold will permanently increase to $2.5 million, and wages paid to apprentices and trainees will be exempt from payroll tax.

Australian Capital Territory (ACT)

The ACT maintains a payroll tax threshold of $2,000,000 with a payroll tax rate of 6.85%. For 2024-25, the ACT Budget introduced a 0.25% surcharge for businesses with Australia-wide wages above $50 million and a 0.5% surcharge for even higher wage bills. The ACT’s payroll tax laws are administered by the territory government.

Tasmania (TAS)

Tasmania has a tiered payroll tax threshold system. For wages between $1.25 million and $2 million, the rate is 4%. For wages above $2 million, the rate is 6.1%. Tasmania’s monthly threshold varies based on the number of days in the month.

How to Calculate Your Payroll Tax Liability

Calculating payroll tax liability involves determining if your total taxable wages exceed the applicable threshold for your state or territory. If they do, you’ll pay the payroll tax rate on the amount above the threshold.

For example, if your business in NSW has annual wages of $1,500,000, the NSW payroll tax threshold is $1,200,000. The taxable amount is $300,000, calculated as $1,500,000 minus $1,200,000. The payroll tax liability is $16,350, which is $300,000 multiplied by 5.45%.

The calculation becomes more complex if your business operates in multiple states or territories, or if you’re part of a group of businesses.

Special Considerations for Businesses

Operating in Multiple States

If your business pays wages in multiple states or territories, your threshold is typically calculated based on the proportion of wages paid in each jurisdiction. Each state or territory government has its own rules for managing interstate wages and payroll tax rates.

Group Employers

Businesses that are part of a group generally share a single payroll tax threshold. This means the combined employee wages of all group members are considered when determining if the threshold has been exceeded and when calculating payroll tax liability.

Part-Year Employment

If you start or cease employing during the financial year, most states will provide an apportioned threshold based on the number of days you paid wages.

Planning Ahead for Payroll Tax

Understanding your payroll tax obligations helps with financial planning and ensures compliance with state and territory payroll tax laws. Here are practical steps to take.

Monitor your wage bill regularly to determine if you’re approaching the payroll tax threshold. Register for payroll tax when required, which is typically within 7 days of exceeding the threshold. Understand the specific calculation methods for your state or territory, including monthly threshold requirements and due dates. Consider whether any exemptions apply to your business structure. Plan for the payment schedule, which is typically monthly by the seventh day of the following month, or the next business day if the due date falls on a public holiday.

Conclusion

Payroll tax thresholds and payroll tax rates vary significantly across each Australian state and territory for the 2024-25 financial year, with thresholds ranging from $900,000 in Victoria to $2,500,000 in the Northern Territory from July 2025. For businesses in New South Wales, the payroll tax threshold NSW is $1,200,000, and the NSW payroll tax rate is 5.45% for this period. Staying informed about these differences is crucial for businesses operating in multiple jurisdictions and helps you pay payroll tax accurately.

For personalised advice on how these payroll tax thresholds, including the payroll tax threshold NSW and the NSW payroll tax rate, affect your business and to ensure you meet your payroll tax obligations, our team at ACT Tax Group is here to help. We can guide you through payroll tax laws, help you calculate your payroll tax liability, and ensure you lodge returns and pay payroll tax on time.