Guide to Payroll Tax in Australia For FY-25-26

Small business owners wear many hats, especially during the early stages of running a business. Often, one of those hats is managing things like payroll and taxes. Although this might seem daunting, it’s easy to stay on top of your payroll tax obligations once you understand how the system works. 

In this guide, we’ll explain everything you need to know about payroll tax in Australia. To get started, simply keep reading, or jump ahead to a topic:

• What is payroll tax? 
• Payroll tax in Australia 
• What happens if your business has employees in different states? 
• How to register for payroll tax 
• When to register for payroll tax 
• How to check if I have to register? 
• How to calculate payroll tax 
• How to pay payroll tax 
• Penalties and compliance 
• QuickBooks can help you with payroll tax payments

Key takeaways

• Payroll tax is a state/territory tax on employee wages and is separate from PAYG withholding (a federal ATO obligation deducted from employees’ pay).
• You only pay if you exceed your state/territory threshold. Thresholds and rates differ by location.
• If you operate in multiple states, you should test your total Australian wage bill against the payroll tax threshold for each state.
• Registration is self-assessed, and lodgement frequency varies depending on the state.
• Penalties apply for failing to register, late lodgement/payment, or underreporting.
• Accounting software such as QuickBooks Online can help you stay compliant with less effort.

What is payroll tax? 

Payroll tax is a state (or territory) tax on the wages your business pays to employees. It’s levied by the state/territory in which your business operates and calculated based on the taxable wages you pay your employees.

Payroll taxes are self-assessing, which means you need to do your own research to find out whether your business needs to register to pay this tax. If your business needs to lodge a return to pay tax due, your state/territory will require you to lodge either monthly, quarterly, or annually.

Each state/territory has different rules, but there are a number of similarities (which we’ll explore in more detail in the sections below). You should maintain your payroll records for five years.

PAYG vs payroll tax: What is the difference?

PAYG (Pay As You Go withholding) is a system where employers withhold income tax from employees’ wages and remit it to the ATO on their behalf. The PAYG system makes sure that employees meet their income tax obligations throughout the year.

Payroll tax, on the other hand, is a state or territory tax that businesses may need to pay if their total wages exceed a certain threshold. It’s not deducted from employees’ pay, which means it’s an employer liability.

Here are the key differences:

Payroll tax in Australia

Each state and territory sets a payroll tax threshold, i.e. the minimum amount of total wages you can pay in a year before payroll tax applies. If your total wages are below the threshold, you don’t pay payroll tax. Once your wage bill goes above it, you’ll need to register and pay payroll tax on the amount over the threshold. 

Because thresholds (and tax rates) vary between states and territories, it’s important to check the rules in the locations where you pay your employees. These next sections provide information about payroll tax rates, threshold amounts, and deadlines by state for the upcoming financial year: 

Payroll tax rates and thresholds by state for FY 25-26

Payroll deadlines by state for FY 25-26

What happens if your business has employees in different states?

Payroll and tax becomes a little bit more complicated if your business employs people in more than one state/territory. In this instance, you don’t just look at wages in one location—you need to consider your total Australian wage bill when working out whether you’ve crossed a threshold. 

Once your total wages exceed the threshold, each state or territory where you pay employees may expect payroll tax. The tax is then apportioned across the states based on how much of your wages are paid in each location. 

Example scenario 

Imagine your business pays: 

• $1,100,000 in wages to employees in Victoria 
• $1,400,000 in wages to employees in Queensland 

Together, that’s $2.5 million in total Australian wages. Since this is above both Victoria’s and Queensland’s thresholds, your business would generally need to register for payroll tax in both states. You’d then report wages separately in each state, based on what was paid there. 

Because the rules can vary, it’s always worth checking with each state or territory’s revenue office to confirm how payroll tax applies to your situation.

How to register for payroll tax 

If your taxable wages in Australia exceed the state payroll tax threshold and you pay wages in that state, you’ll need to register for payroll tax. If an employer is part of a group and pays taxable wages, registration is required if the group's taxable wages exceed the threshold. 

Here’s how to register for payroll tax in a few simple steps: 

1. Determine if you need to register: Check the payroll tax threshold for your state or territory. If your total wages (or your group’s wages, if applicable) exceed this threshold, registration is required.
2. Gather your business details: Have the following information ready before you start your application: 
3. Australian Business Number (ABN) 
4. Legal business name and trading name 
5. Contact details for the business 
6. Details of your employees and their wages
7. Choose the correct state revenue office: Payroll tax is administered at the state or territory level. You’ll need to register with the revenue office in each state where your taxable wages exceed the threshold.
8. Complete the registration form online: Most states allow you to register through their revenue office websites. Fill in the required information, including your business details, ABN, and estimated wages.
9. Submit your application: Review your information carefully and submit the form. Some states may issue a payroll tax registration number immediately, while others may take a few business days to process.
10. Confirm registration and keep records: Once registered, keep a copy of your registration confirmation. This will be needed for filing returns, making payments, and reconciling at the end of the financial year.
11. Update details if circumstances change: If your business expands, joins a group, or starts paying wages in additional states, update your payroll tax registration with the relevant revenue office(s).

When to register for payroll tax 

You should register for payroll tax if you operate a business that pays wages at a level that exceeds your state/territory’s payroll tax threshold. 

If your business operates in multiple states, you’ll need to register in each of the states if the wages paid exceed each state’s threshold. For example, if you have businesses in both NSW and QLD, you will need to review their respective thresholds to ensure you follow both states' rules. If your wage bill falls under the threshold, you don't need to register to pay.

How to check if I have to register?

The federal government provides Australian payroll tax resources for business owners. You can find details of the threshold for your state or territory from the local revenue office. The limits may vary from state to state, but you need to register for payroll tax if the wages paid exceed the threshold amount. 

How to calculate payroll tax

Calculating payroll tax can seem tricky at first, but the basic concept is straightforward: you pay a percentage of your total taxable wages above your state or territory’s threshold. 

Here’s a simplified approach:

1. Determine your total taxable wages: Add up all wages you pay to employees in the relevant state, including salaries, bonuses, and some allowances.
2. Check the payroll tax threshold for your state: Each state has a different threshold. 
3. Subtract the threshold from your total wages: Only the portion of wages above the threshold is subject to payroll tax.
4. Apply the payroll tax rate: Multiply the taxable amount by your state’s payroll tax rate.

Working example: New South Wales 

• Total wages for the year: $1,500,000 
• NSW payroll tax threshold: $1,200,000 
• NSW payroll tax rate: 5.45% 

Step 1: Calculate taxable wages 

$1,500,000 − $1,200,000 = $300,000

Step 2: Apply the payroll tax rate 

$300,000 × 5.45% = $16,350

So, the payroll tax payable for the year would be $16,350.

Getting help with taxes for payroll 

It can be tough to work out all the different deductions for each of your individual employees, especially if you’re busy juggling other aspects of your business. To make your life easier, the ATO helpfully provides a number of tax withheld calculators.

We recommend using a specialist firm or payroll software to work out your payroll taxes. Especially as your business grows, it will likely take up too much time to crunch your own numbers. 

How to pay payroll tax

The good news is that the Australian Tax Office (ATO) provides a number of options for paying your payroll taxes. Although the ATO encourages businesses to lodge and pay online, there are other ways of paying payroll tax. These methods include:

Pay with BPAY

BPAY is a quick and secure way to pay your payroll tax directly through your online banking. 

Here’s how it works: 

1. Find your Payment Reference Number (PRN): Your PRN is unique to your business and the type of tax you’re paying. For example, you’ll have a different PRN for income tax and activity statements. Always use the correct PRN when paying payroll tax to make sure your payment is processed correctly. 
2. Enter the ATO’s BPAY Biller Code: The ATO’s BPAY Biller Code is 75556. Enter this code in the Biller Code field of your online banking. 
3. Enter your PRN: Add your PRN into the Reference field every time you pay. This ensures your payment is allocated to the right account. 
4. Submit your payment: Once you’ve entered the Biller Code, PRN, payment amount, and date, select Pay (your bank may call this “Submit” or “Pay bill”).

Pay with online services

You can make secure payroll tax payments directly through the ATO’s online services. 

What you’ll need: 

• Your Payment Reference Number (PRN) 
• A Visa, MasterCard, or American Express card (note: your card provider may charge a small fee) 

How it works: 

1. Log in to the ATO’s online services: 

• Individuals & sole traders: via myGov (linked to the ATO) 
• Businesses: via Online services for business 
• Foreign investors: via Online services for foreign investors 

1. Enter your PRN, select your card, and make your payment. 

Important to know: 

• Card payment fees are set by your provider, not the ATO. 
• Payments can take up to 4 business days to process, so allow enough time before the due date.

Electronic transfer

You can transfer payroll tax payments directly from your bank account to the ATO.

What you’ll need:

• Bank details for the ATO
• Bank: Reserve Bank of Australia
• BSB: 093 003
• Account number: 316385
• Account name: ATO direct credit account
• Your Payment Reference Number (PRN)

How it works:

• Set up a transfer from your financial institution using the details above.
• Enter your PRN in the payment reference field so the payment can be correctly matched to your account.
• Some banks may support faster payments using Osko or PayID, but the ATO does not currently offer PayID—always use the account details above.

Note: Payments can take up to 4 business days to reach the ATO and appear on your account.

Direct debit

You can set up a direct debit to have payments automatically deducted from your Australian cheque or savings account, or from a credit/debit card. 

Ways to set up direct debit: 

• Individuals and sole traders: Use ATO online services. 
• Businesses: Use Online services for business. 
• By phone: Call 13 11 42 (Mon–Fri, 8:00 am–6:00 pm). 

Note: Only the card holder can set up a direct debit from a credit or debit card. 

For bank account direct debits: 

• Your registered tax or BAS agent can set it up online or by phone. 
• Alternatively, you can complete and return a direct debit request form. Allow at least 7 working days for processing. (The form can’t be used for credit or debit card payments).

Government EasyPay

The ATO’s Government EasyPay service lets you pay payroll tax quickly without needing to log in to online banking. 

How to pay: 

• Online: Use the Government EasyPay website to make your payment. 
• By phone: Call 1300 898 089 to pay using the service.

In person at Australia Post

You can make payroll tax payments at Australia Post using cash, EFTPOS (within daily limits), or cheque. 

What to know: 

• You must provide an ATO barcode with your payment. 
• Cheques and money orders should be: 
• In Australian dollars 
• Made payable to ‘Deputy Commissioner of Taxation’ 
• Marked ‘Not Negotiable’ 
• Not post-dated
• The ATO is moving away from cheques and encourages electronic payments where possible. 
• Payments cannot be made at ATO sites or shopfronts. 
• Foreign investment application fees cannot be paid at Australia Post, and GST at settlement can be paid via e-conveyancing.

Mail

Although the ATO is moving away from cheques and encourages electronic payments, you can still pay by mail if needed. 

How to pay by mail: 

• Include a payment slip from your ATO notice, or provide: 
• Full name, address, and phone number 
• Account identifier (TFN or ABN) 
• Payment type (e.g., activity statement or income tax) 
• Cheques or money orders must be: 
• In Australian dollars 
• Payable to ‘Deputy Commissioner of Taxation’ 
• Marked ‘Not Negotiable’ 
• Not post-dated 
• Mail to: 
• AUSTRALIAN TAXATION OFFICE 
• LOCKED BAG 1936 
• ALBURY NSW 1936 

Don’t send cash through the mail. Be aware of postal delivery times—it may take up to 4 business days after receipt for your payment to be allocated to your ATO account. Fees may apply from your bank or post office. 

Note: The ATO cannot accept foreign cheques, and foreign investment application fees cannot be paid by mail.

International payments

If you need to pay payroll tax from an overseas bank account, you can make a transfer using SWIFT in Australian dollars. 

Bank details for international payments: 

• Bank: Reserve Bank of Australia, 65 Martin Place, Sydney NSW 2000 
• Bank identifier: RSBKAU2S BSB: 093 003 
• Account number: 316385 
• Account name: ATO direct credit account 
• Field 70 / Details of payment: Your PRN 

Important tips: 

• Payments can take up to 4 business days to be received and appear on your ATO account. 
• Always use your correct PRN in Field 70—any other text may delay processing. 
• Bank handling and exchange fees may be deducted automatically by both your overseas bank and the corresponding Australian bank, so factor these fees into your payment.

Penalties and compliance

Managing payroll tax correctly is essential to avoid penalties and ensure your business stays compliant. Here are the key areas to keep in mind:

Interest charges for late payments

If you miss a payroll tax payment or lodge your return late, the ATO or state revenue office may charge interest on the outstanding amount. Interest accrues daily, so the sooner you pay, the less it will cost.

Penalties for non-registration or underpayment

Failing to register for payroll tax when required, or underreporting your taxable wages, can result in significant penalties. These can include fines based on a percentage of the unpaid tax, and in some cases, additional administrative penalties.

Record-keeping requirements

You must maintain accurate payroll records for at least five years, including wage payments, deductions, and any adjustments. Proper records help you calculate tax correctly and respond quickly if your compliance is ever reviewed.

QuickBooks can help you with payroll tax payments  

QuickBooks cloud payroll software makes it easy to manage your payroll tax obligations, from providing Single Touch Payroll to rostering. This means you don't need to worry about payroll tax rates every month or panic over how much tax you will pay. 

QuickBooks Payroll offers a wide range of functions for businesses such as:

• Employee self-service kiosk
• Timesheet and rostering
• Automated calculation of super, leave, and termination payments
• Award wages calculations
• Customised payslips

Once you input the relevant information, QuickBooks will take it from there with income tax calculations, the appropriate Medicare levy, and tax rates. It even makes your annual tax return a cinch. Schedule a free payroll setup session today.