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If you or your company is new to Payroll Tax, our step-by-step guide will walk you through what you need to do to meet your obligations.
Payroll tax is a state tax. It's assessed on the wages paid or payable to employees by an employer (or group of employers) whose total Australian taxable wages exceeds the threshold amount.
Each state and territory has its own payroll tax legislation, with different rates and thresholds.
The definition of ‘wages’ is any remuneration paid or payable by an employer to an employee for services provided. These payments are liable for payroll tax:
The following payments are not liable for payroll tax:
Businesses can be grouped with other businesses for payroll tax. A group can exist if there is common control, common ownership or common employees with another business. There are rules that decide if a business is grouped with another business.
For more information, read the grouping page.
All the wages paid to an employee for a month’s service are taxable in one jurisdiction (state or territory). The nexus provisions determine in which jurisdiction a wage is taxable.
For more information, read Revenue Ruling PTA 039 and the common errors page.
Some wages are exempt if they’re paid by a non-profit organisation that is a religious institution, charity or other benevolent organisation.
Wages paid to employees on maternity leave, paternity leave, adoption leave or military leave can also be exempt.
In NSW, any additional wages paid to meet the requirements of the JobKeeper Scheme will also be exempt from payroll tax. You can find more information on how to calculate the exempt and liable components of wages here.
For a full list, read the exempt wages page .
All wages (including superannuation, allowances and fringe benefits) paid to apprentices and trainees are liable for payroll tax and must be included in your returns.
However, you can claim a payroll tax rebate on wages paid to approved apprentices and new entrant trainees who are recognised by Training Services NSW.
For more information, read the apprentice and trainee rebate page.
If you pay wages in NSW and they exceed the monthly threshold, you must register for payroll tax. If you’re a member of a group, the total Australian wages paid or payable by all members of the group will determine whether you should register for payroll tax.
You should monitor your wage levels to be sure you register for payroll tax within seven days after the month you exceed the threshold.
The monthly threshold is calculated using the number of days in the month, divided by the number of days in the year, multiplied by the threshold. Take a look at the monthly calculation examples.
When monitoring your wage levels, include all forms of taxable wages, such as superannuation contributions, fringe benefits, payments to contractors, allowances, directors’ fees, shares and options.
If your estimated tax payable in a financial year is:
The 2020/21 NSW State Budget has announced a temporary reduction in the payroll tax rate to 4.85 per cent for the 2020/21 and 2021/22 financial years. The threshold will also increase to $1,200,000 for the 2020/21 and subsequent financial years. These changes will apply retrospectively from 1 July 2020.
For more information, please see our frequently asked questions.
The threshold is the maximum deduction available. The full threshold applies if you employ solely in NSW and for the full financial year.
| Tax year | Threshold | Tax rate |
|---|---|---|
| 1 July 2020 to 30 June 2021 | $1.2 million | 4.85% |
| 1 July 2019 to 30 June 2020 | $900,000 | 5.45% |
| 1 July 2018 to 30 June 2019 | $850,000 | 5.45% |
| 1 July 2017 to 30 June 2018 | $750,000 | 5.45% |
| 1 July 2016 to 30 June 2017 | $750,000 | 5.45% |
Several factors determine whether you get the full threshold entitlement.
If you start or stop employing in NSW within a financial year you’re not entitled to the full threshold. You’ll receive a proportion of the threshold equal to the number of days you employ to the number of days in a year.
If you pay wages in another Australian state or territory, the threshold is calculated as a proportion equal to the ratio of NSW wages to total Australian wages. For example, if 80 per cent of your total wages are paid in NSW, you’re entitled to 80 per cent of the threshold.
If your business is part of a group of businesses, only one threshold applies to the whole group.
Only one member of a group can claim the group’s NSW threshold entitlement. Grouped employers are required to nominate a Designated Group Employer (DGE) for their group. If you’re not the DGE, you do not receive any threshold entitlement. To qualify for DGE status, the individual wages for the nominated DGE member must be more than the threshold for that period.
If no members qualify to be the DGE, because no group member’s individual wages are above the threshold, you must nominate a Group Single Lodger who is responsible for lodging and paying payroll tax on behalf of all members of the group.
Find out more about DGE, group single lodger and grouping.
If you’re working out your payroll tax for the first time, we have a range of services to help you.
By answering a series of questions, payroll tax assist can help you work out if you’re meeting your payroll tax obligations.
Our payroll tax tools help you:
Revenue NSW administers the Payroll Tax Act 2007 and the Taxation Administration Act 1996.
Copies of rulings and case summaries can be found in our resource library.
Our case studies can help you further with payroll tax.
If you have a question about payroll tax and can’t find the answer on this website, contact us.