Payroll tax

Payroll tax is a State and Territory tax on wages that employers pay employees. The tax is calculated based on the amount of wages you pay employees Australia-wide per month.

Not all businesses have to pay payroll tax, however. For employers in the ACT, you have to pay it only if your total taxable wages, or the total taxable wages of the group of employers you belong to, exceed the payroll tax threshold.

Payroll tax is a self-assessed tax. If you need to pay it, you must lodge a return with the ACT Revenue Office at an agreed frequency (monthly or annually) and pay the tax at that time.

All Australian States and Territories have harmonised their payroll tax administration in a number of key areas. Other areas, such as the tax rates and thresholds, vary between States and Territories.

As of July 2016, the monthly payroll tax threshold in the ACT is $166,666.66, or $2 million per year.

From 1 July 2024, a payroll tax surcharge rate applies for large businesses, at an additional:

• 0.25 per cent on ACT taxable wages above the payroll tax threshold, for businesses with Australia-wide wages above $50 million per annum or $4,166,666.66 monthly; and
• 0.5 per cent on ACT taxable wages above the payroll tax threshold, for businesses with Australia-wide wages above $100 million per annum or $8,333,333.33 monthly.

The payroll tax surcharge does not apply to eligible universities with an ACT campus which includes: Australian Catholic University; Charles Sturt University; The Australian National University; The University of New South Wales; and University of Canberra.

The general and surcharge rates will result in:

• For a payroll tax employer with annual Australia-wide wages under $50 million, payroll tax of 6.85 per cent applying to all ACT taxable wages above the relevant tax-free threshold amount.
• For a payroll tax employer with annual Australia-wide wages between $50 million and $100 million, payroll tax of 7.10 per cent (comprising 6.85 per cent plus 0.25 per cent) applying to all ACT taxable wages above the relevant tax-free threshold amount.
• For a payroll tax employer with annual Australia-wide wages over $100 million, payroll tax of 7.35 per cent (comprising 6.85 per cent plus 0.5 per cent) applying to all ACT taxable wages above the relevant tax-free threshold amount.

Note: The Australia wide wages thresholds apply at the group level.

For current and historic tax rates and thresholds, see Tables 1 and 2 below.

Table 1: ACT payroll tax rates (general and surcharge) and thresholds from 1 July 2024, excluding eligible universities*

Annual Australia-wide wages

Annual general rate

Annual surcharge rate

more than $2 million but not more than $50 million

more than $50 million but not more than $100 million

more than $100 million

* For eligible universities, the payroll tax rate is 6.85 per cent with a threshold of $166,666.66 per month ($2,000,000 per year).

Table 2: ACT payroll tax rates and thresholds from 1 July 2000 to 30 June 2024

Period

Tax rate (%)

Threshold

1 July 2016 to 30 June 2024

$166,666.66 per month ($2,000,000 per year)

1 July 2014 to 30 June 2016

$154,166.66 per month ($1,850,000 per year)

1 July 2012 to 30 June 2014

$145,833.33 per month ($1,750,000 per year)

1 July 2008 to 30 June 2012

$125,000 per month ($1,500,000 per year)

1 July 2001 to 30 June 2008

$104,166.67 per month ($1,250,000 per year)

1 July 2000 to 30 June 2001

$70,833.33 per month ($850,000 per year)

If you have to pay payroll tax in the ACT, you need to register. By law, you must apply to register within seven days after the end of the month you go over the threshold amount.

ACT monthly tax returns and payments for July through November and January through May are due by the seventh day of the following month. The December return is due by 14 January to allow for the Christmas/New Year shutdown period. When the due date falls on a weekend or public holiday, the lodgement and payment due date moves to the next working day. There’s no separate monthly return form for June; simply include June wages in your annual reconciliation return.

The due date for lodging your annual reconciliation return with the ACT Revenue Office – and paying any additional tax calculated in the return – is 28 July of that same year.

Learn more about lodging returns.

Taxable wages

Payroll tax is applied to payments that are ‘taxable wages’. Taxable wages refer to any payment that an employer provides to an employee in return for services. For payroll tax in the ACT, this includes:

• remuneration, wages, salary, commission, bonuses, allowances or other benefits
• superannuation contributions
• payments to contractors
• director's fees
• payments to employees (before or after retirement or termination) that relate to their employment term, such as accrued leave and any other bonuses or loading
• eligible termination payments
• the value of any payments made in kind (where no money is involved but goods or services are exchanged for other goods or services)
• payments to employment agencies
• benefits (see Fringe Benefits circular (PTA003.1))
• wages paid to sick or injured employees
• employer contributions to employee share schemes.

Exempt wages

Some wages are exempt from ACT payroll tax and excluded from taxable wages; these include:

• new starters receiving eligible training
• paid maternity, adoption and primary carer leave
• Paid Parental Leave (PPL)
• the tax-free part of genuine redundancy payments
• workers compensation payments made in accordance with workers compensation schemes. See Workers' compensation payments circular (PTA015)

For a more detailed list of exempt wages, refer to Part 4 of the Payroll Tax Act 2011.

Contractors

Many Australian businesses engage contractors or subcontractors instead of permanent employees. Payments to these contractors are considered taxable wages and are subject to payroll tax unless the contract is exempt.

For more details on the ins and outs of contractors, payroll tax and employer liability, visit our Contractors page.

Employment agents

Regardless of whether the employer or the employment agency pays the wages, employment agencies are the ones who pay the payroll tax on the wages for people they hire out.

In the ACT, employment agents can under certain circumstances exclude from payroll tax any payments they make to independent contractors.

Any GST included in the employment contract is not subject to payroll tax.

If you’re an employment agent and need additional information, contact us or see the Employment Agents circular (PTA074.5).

Overseas payments

You pay payroll tax on wages paid in the ACT for services provided outside Australia for a period of less than six months.

Under circumstances in which an employee is on assignment overseas for more than six months, any wages paid or received in the ACT (including the first six months) are not subject to payroll tax. The six-month period doesn’t have to fall within one financial year, but it must be continuous.

However, if an employee assigned overseas returns to Australia under the following circumstances, it doesn’t count as a break in continuity:

• the employee returns for a holiday
• the employee returns for less than a month to perform work that relates exclusively to the overseas assignment
• in either case, the employee immediately returns overseas to perform further work on the assignment.

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).