Step-by-step guide to payroll tax

1. What is payroll tax?

Payroll tax is a state tax. It's assessed on the wages paid or payable to employees, including directors and contractors, by an employer (or group of employers) whose total Australian taxable wages exceed the threshold amount.

Each state and territory has its own payroll tax legislation, with different rates and thresholds.

Liability for payroll tax

If you're an employer who pays wages in NSW, you must register for payroll tax if your total Australian wages exceed the relevant monthly threshold.

For details on what is defined as wages, see the section titled ‘Wages’, later in this guide.

If you're a member of a group, the total Australian wages paid by all members of the group are combined to determine whether you should register for payroll tax.

Read more about how to determine if you are part of a group on our grouping page.

Rates and thresholds

The NSW Government has announced a reduction in the payroll tax rate to 4.85 per cent for the 2020/21 and 2021/22 financial years

The threshold has also increased to $1,200,000 for the 2020/21 and subsequent financial years.

These changes will apply retrospectively from 1 July 2020.

For more information about these changes, please see our frequently asked questions on the payroll tax page.

Tax yearThreshold
1 July 2018 to 30 June 2019 $850,000
1 July 2019 to 30 June 2020 $900,000
1 July 2020 to 30 June 2021 $1.2 million

The current payroll tax rate is 4.85 per cent.