Understand how payroll tax applies when your business pays wages in different parts of Australia.
Payroll tax applies if you pay wages in Victoria and your Australian wages exceed the Victorian monthly threshold. Australian wages mean your Victoria wages plus your interstate wages.
Interstate wages and payroll thresholds
Interstate wages are wages that are taxed in another state or territory. If your business pays wages in Victoria and interstate, you can’t claim the full payroll tax threshold in Victoria. The amount you can claim is reduced based on how much of your total Australian wages are paid in Victoria.
For example, if half your wages are paid in Victoria and half in other states, you can only claim half of the Victorian threshold. This helps make sure businesses that operate across states pay their fair share of tax.
The monthly threshold is calculated based on the estimated Victorian and Australian wages. Employees provide these estimates in the prior year’s annual reconciliation or when registering.
The annual threshold is calculated based on the actual Victorian and Australian wages declared in the annual reconciliation.
If your business is grouped and you are the designated group employer, you must include the taxable wages of all group members when calculating the threshold.
Example threshold calculations
Example 1 – Non-grouped employer paying interstate wages
Red Pty Ltd provided estimates of its 2024–25 wages in the prior year’s annual reconciliation as:
- Victoria $500,000
- New South Wales $400,000
- Queensland $100,000
- Total $1,000,000
The monthly deduction is calculated:
$75,000 (monthly threshold) × $500,000 ÷ $1,000,000 = $37,500
If the gross taxable Victorian wages for Red Pty Ltd for October 2024 were $40,000, the tax payable would be:
($40,000 – $37,500) × 4.85%* = $121.25
*Lower rates apply in regional Victoria
Example 2 – Grouped employer paying interstate wages
Green Pty Ltd is grouped with Blue Pty Ltd (the group) and employs in Victoria and Queensland. Blue Pty Ltd only employs in Queensland.
Green Pty Ltd estimates the group’s Victorian and Queensland wages for 2024–25 in the prior year’s annual reconciliation as:
- Victoria $1 million
- Queensland $2 million
- Total group Australian wages are $3 million
The monthly deduction is calculated:
$75,000 (monthly threshold) × $1,000,000 ÷ $3,000,000 = $25,000
If the gross taxable Victorian wages for Green Pty Ltd for October 2024 were $40,000, the tax payable for that month would be:
($40,000 – $25,000) × 4.85%* = $727.50
*Lower rates apply in regional Victoria
Employees working across multiples states and overseas
Sometimes, in a calendar month, employees work in more than one state or overseas. To figure out which state payroll tax applies to, Victoria uses a 4-step test called the nexus provisions. You follow these steps in order:
- Payroll tax is payable in the jurisdiction where the employee lives. This is based on where their principal place of residence is that month.
- If an employee does not live in Australia during the relevant month, look at where the employer is based. This is where they have their Australian Business Number (ABN) address. If the employer does not have a registered ABN address (or has more than one ABN addresses in different jurisdictions), they pay tax in the jurisdiction where the principal place of business is located.
- If none of the above apply, payroll tax is based on where the wages are paid or where the employee’s bank account is. If wages are paid in multiple jurisdictions, the tax is paid in the jurisdiction where most of the wages go. If wages go straight into the employee's bank account, the tax is paid in the jurisdiction where that bank account is held.
- If the employee and employer are both overseas, and the wages are not paid in Australia, payroll tax can still apply. If more than 50% of the time worked that month is in Victoria, then payroll tax is paid in Victoria.
Read more about the nexus provisions in Revenue Ruling PTA-039. If you are still unsure after applying the nexus provisions, contact us on 13 21 61.
Payroll Tax Australia
Payroll tax rates and thresholds vary between states and territories.
To make it easy for you to meet your obligations in different jurisdictions, Payroll Tax Australia gives you:
- rates and thresholds for each state and territory
- a comparison table of revenue rulings
- contact details for each revenue office.
