If you are an employer in Victoria and your wage bill goes over a monthly threshold, you will have to pay payroll tax.
Frequently asked questions about payroll tax
1. Your wage bill determines your obligations
Payroll tax applies if you pay wages in Victoria and your Australian wages exceed the monthly threshold of $58,333.
Mental health and wellbeing surcharge
The mental health and wellbeing surcharge commenced from 1 January 2022. You must pay the surcharge if you pay Victorian taxable wages and your Australian wages exceed the first annual threshold of $10 million, with a first monthly threshold of $833,333.
More about the surcharge
Registering for payroll tax
You must register with us to pay payroll tax. Registering with us is simple, although you will need your payroll records handy to help you. Penalties and interest may apply if you do not register.
Register now for payroll tax
Paying is easy
Once registered, use our secure online system Payroll Tax Express (PTX Express) to lodge monthly returns, pay your tax, complete your annual reconciliation, apply for a refund and update your records.
Log in to PTX Express
You or your group of employers pay this state tax the wages you pay in Victoria and your Australian wages exceed certain thresholds.
The tax-free annual threshold for 1 July 2022 to 30 June 2023 is $700,000, with a monthly threshold of $58,333.
The annual threshold is adjusted if you are not an employer for a full financial year.
The payroll tax rate is 4.85% except for regional Victorian employers.
More about interstate wages
Regional Victorian employers
For 2022-23, the rate of payroll tax for regional Victorian employers is 1.2125%. There is also a special payroll tax rate for businesses in bushfire affected local government areas.
From 1 July 2019, you are a regional Victorian employer if you are paying at least 85% of your wages to regional employees. For wages paid before 1 July 2019, you must also satisfy the business location test.
When do I pay?
If you are registered to lodge and pay monthly, you must submit your wage details every month, even if you do not have a payroll tax liability. Employers self-assess their liability on a monthly basis, and pay by the seventh day of the following month or the next business day.
All employers must lodge an annual reconciliation by 21 July each year.
What are wages?
Wages are defined under the Payroll Tax Act 2007 (the Act) and include:
- employer (pre-tax) superannuation contributions such as:
- fringe benefits within the meaning of the Fringe Benefits Tax Assessment Act 1986 (Cth),
- the value of shares and options granted to employees, directors, former directors and some contractors,
- payments to some contractors,
- payments by employment agencies arising from employment agency contracts,
- remuneration paid by a company to company directors, and
- employment termination payments and accrued leave.
Payments (considered wages) to employees engaged on a permanent, temporary or casual basis are always subject to payroll tax.
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Some wages are exempt from payroll tax. These include:
- Primary and secondary caregiver leave (formerly adoption and maternity parental leave).
- Commonwealth paid parental leave.
- Contributions to redundancy benefit schemes.
- Wages paid to employees absent from work to volunteer as firefighters or respond to other emergencies.
- Wages paid to a person while on military leave as a member of the Defence Forces.
- Bone fide redundancy or early retirement payments.
- Wages paid from non-profit group training organisations. From 1 July 2018, this also includes for-profit group training organisations.
Use our checklist
Wages taxable in Victoria
When an employee provides services wholly in Victoria, payroll tax is paid in Victoria in a calendar month on their wages.
Where the employee provides services in more than one Australian jurisdiction in a calendar month, or partly overseas in a calendar month, a four-tiered test is used to determine payroll tax liability.
This test uses the location of the employee’s principal place of residence and can take into account other factors related to the employer’s business.
- Non-profit organisations having as their whole or dominant purpose a charitable, benevolent, philanthropic or patriotic purpose (but not including a school, an educational institution, an educational company or an instrumentality of the state), for wages paid or payable to a person engaged exclusively in work of a religious, charitable, benevolent, philanthropic or patriotic nature for the institution or non-profit organisation (there are qualifications on exemptions available to organisations engaging in commercial activities).
- Public benevolent institutions where persons are engaged exclusively in work of a public benevolent nature.
- Religious institutions where persons are engaged exclusively in religious work of that institution.
- Non-profit non-government schools where persons are providing education at or below secondary level.
- Healthcare service providers (i.e. public hospitals, non-profit hospital, denominational hospital, public health service, registered community health centre, multi-purpose service, ambulance service and the Victorian Institute of Forensic Mental Health) for wages paid for work ordinarily performed in connection with the conduct of the healthcare service provider.
- Municipalities, other than wages paid or payable in connection with specified business activities such as the supply of water or electricity.
- State school councils within the meaning of the Education and Training Reform Act 2006.
- From 1 July 2018, approved for-profit group training organisations (GTOs) for wages paid to a new entrant apprentice and trainee on-hired to their host clients. These approved GTOs are exempt from payroll tax in respect of wages paid to those apprentices and trainees.
Apply for a payroll tax exemption
Payments to contractors are deemed wages and taxable in certain circumstances. The person or entity engaging the contractor is deemed to be an employer and is liable to payroll tax on those deemed wages.
Contractors include sub-contractors, consultants and outworkers. The provisions apply regardless of whether the contractor provides services via a company, trust, partnership or as a sole trader.
Several exemptions are allowed, and if any one of the exemptions applies to a particular contract, the payments are not taxable. People on-hired under an employment agency contract are subject to different provisions.
More about contractors
Employment agents are liable for payroll tax on payments made under employment agency contracts to 'on-hire' a worker (service provider) to their client, where the client and service provider do not enter into any form of agreement between themselves.
Where there is an employment agency contract, the employment agent is deemed to be an employer, the on-hired person an employee and payments made as wages.
A contract includes an agreement, arrangement or undertaking. However, a contract is not an employment agency contract if it is, or results in the creation of, a contract of employment between the service provider and the client, which is typically known as a placement arrangement. In these circumstances, the client is liable for payroll tax as the employer.
Employment agency contracts are not eligible for contractor exemptions.
More about employment agencies
Businesses may be grouped together and effectively treated as a single entity for payroll tax purposes.
A payroll tax group exists where:
- Corporations are related bodies corporate within the meaning of s50 of the Corporations Act 2001 (commonly known as a holding and subsidiary relationship).
- Employees are shared between businesses.
- The same person or the same persons together have a controlling interest in at least two businesses.
- An entity has a controlling interest in a corporation.
A company includes all bodies and associations (corporate and unincorporated) and partnerships.
A corporation has the same meaning as in s9 of the Corporations Act 2001 (Cth).
Effect of the grouping provisions
The grouping provisions have the effect of deeming businesses to be related and including these businesses in a group. The wages of these related businesses are then added together, with only one member of the group entitled to claim the threshold amount.
Therefore, in most cases, although each member of the group must register for payroll tax and lodge a separate return, the businesses constituting the group are effectively treated as one entity and their payroll tax liability is calculated on the group’s total wages.
All members of the group, irrespective of whether they are employers, become jointly and severally liable for the debts of the group that are incurred while they are group members. This means that if one member defaults in paying tax, that amount may be recovered from any of the other group members.
More about grouping
Registering for WorkSafe insurance
If you engage workers or contractors deemed to be workers and you pay, or expect to pay, more than the current threshold limit per year in rateable remuneration (as defined in the Workplace Injury Rehabilitation and Compensation Act 2013), or if you engage apprentices or trainees, you must register for WorkSafe insurance.
There are differences between wages for payroll tax purposes and remuneration for WorkSafe insurance purposes.
Payroll Tax Australia
All Australian states and territories have a payroll tax system, and have worked together to ensure their legislation is aligned (excluding rates and thresholds).
More about Payroll Tax Australia
Getting it right
Our priority is to help you pay the right amount of tax at the right time. Learn more.
Last modified: 1 July 2022