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Learn how to calculate and declare your interstate wages in your payroll tax returns for New South Wales.
On this page
How interstate wages are treated for payroll tax
Interstate wages are any wages liable for payroll tax under the legislation of another Australian state or territory.
If your business pays wages in New South Wales (NSW) and in another Australian state or territory it will not be entitled to the full annual tax-free threshold for NSW, which is currently $1,200,000.
Your business will be entitled to a reduced tax-free threshold, which is based on the ratio of NSW wages to total Australian wages.
For example, if 80 per cent of your total Australian wages are paid in NSW you are entitled to 80 per cent of the full threshold. Your annual tax-free threshold would currently be $960,000.
The amount of tax payable is calculated only on wages that exceed the threshold amount in a financial year. The current payroll tax rate in NSW is 5.45%.
Employees who work in multiple Australian states or territories
If your business pays interstate wages use the following formula to calculate your tax-free threshold for NSW.
Tax-free threshold for your business = (Total NSW wages ÷ Total Australian wages) x NSW payroll tax threshold
For businesses that are part of a payroll tax group, only the Designated Group Employer (DGE) or the Single Lodger (SL) is entitled to the tax-free threshold. Use the following formula to calculate your tax-free threshold for NSW.
Tax-free threshold for your group = (Total group NSW wages ÷ Total group Australian wages) x NSW payroll tax threshold
How to declare interstate wages
In your annual return you need to correctly declare your taxable wages paid:
in NSW, and
in other states and territories (determined by payroll tax legislation in each state or territory).
For more details on taxable wages in another jurisdiction contact the revenue office in that state or territory or visit their website.
Interstate wages need to be included in your NSW returns even if your taxable wages do not exceed the tax-free threshold in that state or territory.
Errors in your returns may result in the underpayment of payroll tax, which is also known as a tax default.
Interest will be imposed on any underpayments. Your business may also be liable for penalty tax. Read the interest and penalty tax page for more details.
Always maintain relevant records showing how your NSW and interstate wage figures were calculated. Records must be:
retained for at least 5 years
sufficient for a payroll tax liability to be properly assessed
in English, or a form easily translated to English, and
readily available to us if requested, for example as part of a payroll tax audit.
Grouped businesses
When lodging as a DGE or a SL you must:
report NSW and interstate wages of all group members in your annual return, and
include interstate wages paid by all group members in the relevant fields of your annual return.
If you are a Non-Threshold Claiming (NTC) group member you must declare your taxable NSW and interstate wages in your annual return.
Group members that only pay interstate wages
If you are the DGE or SL for a group, and the group has members that only employ interstate, you must declare these interstate wages in your annual return.
Entities that do not employ in NSW should not register for payroll tax in NSW.
all interstate wages paid by all group members, including those only employing outside NSW, as “Gross interstate wages paid by other members of the group”
the Client IDs of group members that lodge NSW payroll tax returns as a NTC, and
the correct “Number of interstate only clients” that are part of the group.
Declare the Client IDs of all entities that pay wages in NSW.
The SL should declare under its Client ID:
its NSW wages, and
the interstate wages paid by itself and all members that only pay interstate wages.
The SL should declare under the Client IDs of the non-lodgers:
their NSW wages, and
interstate wages.
Examples
Example 1: Non-grouped entity that employs interstate
Business A is not grouped and employs in NSW and Queensland (QLD).
During the 2024-25 financial year the business paid:
Jurisdiction
Wages
NSW
$1,000,000
QLD
$2,000,000
Total Australian
$3,000,000
Applying the formula, the NSW tax-free threshold in 2024-25 for Business A is $400,000.
$400,000 = ($1,000,000 ÷ $3,000,000) x $1,200,000 Business A's tax-free threshold = (Total NSW wages ÷ Total Australian wages) x NSW payroll tax threshold
How to lodge
Business A must declare the $2,000,000 in the “Total interstate figure” field in their annual return.
Example 2: DGE when only one member pays wages in NSW
Business A is grouped with Business B.
Business A employs in NSW and QLD. Business B only employs in QLD.
During the 2024-25 financial year the group paid the following wages:
Jurisdiction
Business A
Business B
Group wages
NSW
$1,000,000
-
$1,000,000
QLD
$2,000,000
$1,000,000
$3,000,000
Total Australian
$3,000,000
$1,000,000
$4,000,000
Applying the formula, the available NSW threshold in 2024-25 for the group is $300,000.
$300,000 = ($1,000,000 ÷ $4,000,000) x $1,200,000 Group's tax-free threshold = (Total group NSW wages ÷ Total group Australian wages) x NSW payroll tax threshold
How to lodge
As there is only 1 group member employing in NSW that member, Business A, must lodge as the group’s DGE as follows:
Declare that they are grouped and the DGE.
In the “Enter group details” section:
leave “Other NSW group member Client IDs” empty, and
enter 1 in “Number of interstate only clients”.
In the “Wage details” section declare the:
$2,000,000 in interstate wages paid by Business A as “Interstate wages”, and
$1,000,000 in interstate wages paid by Business B as “Gross interstate wages paid by other members of the group”.
Example 3: Two or more members pay wages in NSW
Business A is grouped with Business B and Business C. Business A employs in NSW, QLD, and Victoria (VIC).
Business B employs in NSW and VIC.
Business C only employs in VIC.
During the 2024-25 financial year the group paid the following wages:
Jurisdiction
Business A
Business B
Business C
Group wages
NSW
$1,000,000
$1,000,000
-
$2,000,000
QLD
$1,000,000
-
-
$1,000,000
VIC
$1,000,000
$500,000
$1,500,000
$3,000,000
Total Australian
$3,000,000
$1,500,000
$1,500,000
$6,000,000
Applying the formula, the available NSW threshold in 2024-25 for the group is $400,000.
$400,000 = ($2,000,000 ÷ $6,000,000) x $1,200,000 Group's tax-free threshold = (Total group NSW wages ÷ Total group Australian wages) x NSW payroll tax threshold
How to lodge
Either Business A or Business B can claim the threshold for the group by lodging as the DGE or SL. Read more about claiming the threshold on the what is payroll tax grouping page.
Business C does not pay wages in NSW so should not be registered for payroll tax in NSW.
Lodging as a DGE
If Business A lodges as a DGE they must lodge as follows:
Declare that they are grouped and the DGE.
In the “Enter group details” section:
add the Client ID of Business B in “Other NSW group member Client IDs”, and
enter 1 in “Number of interstate only clients”.
In the “Wage details” section declare the $2,000,000 wages paid by both Business B ($500,000) and Business C ($1,500,000) as “Gross interstate wages paid by other members of the group”.
Lodging as a SL
If Business A lodges as the SL they must lodge as follows:
Declare that they are grouped and the group SL.
In the “Enter single lodger group details” section declare:
NSW wages of $1,000,000 and interstate wages of $3,500,000 against the SL’s Client ID. The interstate wages figure being the $2,000,000 in interstate wages they pay + the $1,500,000 interstate wages paid by Business C, and
NSW wages of $1,000,000 and interstate wages of $500,000 against the Client ID of Business B.
In the “Wage details” section declare NSW wage components that total $2,000,000 and interstate wages figure of $4,000,000.
Common errors with interstate wages
Payroll tax audits often uncover errors with interstate wages in payroll tax returns.
If your taxable wages amount for other states or territories changes after your NSW annual reconciliation has been lodged, you must amend it.
This will most often occur following a payroll tax investigation by another state or territory.
Find out more about amending your previous returns by making a voluntary disclosure.
Voluntary disclosure
Contact us to make a voluntary disclosure if you have not declared all liable amounts in your monthly and/or annual returns, including previous financial years.
Voluntary disclosures attract a reduced level of penalty tax compared to cases where we identify an underpayment. Interest will still be imposed.
Non-compliance identified through our data matching activities will result in penalty tax and interest charges, in addition to any underpayments detected.
