Payroll Tax Australia 2025: Key Updates & Compliance Guide

Payroll tax is a critical piece of Australia’s state-based tax landscape—impacting tens of thousands of businesses and their employees. With several changes coming into effect in 2025, understanding payroll tax obligations is essential for staying compliant and managing business cash flow effectively.

What Is Payroll Tax and Who Needs to Pay?

Payroll tax is a state and territory tax imposed on businesses whose total Australian wages exceed a set threshold. Unlike income tax, payroll tax is paid by employers, not employees, and only applies if your wage bill crosses the relevant state or territory threshold. The tax is calculated as a percentage of your total wages, including salaries, bonuses, superannuation, and some contractor payments.

• Thresholds and Rates: Each state sets its own payroll tax threshold and rate. In 2025, most thresholds have increased to reflect inflation and wage growth, but rates remain relatively stable.
• Who Is Affected? Businesses with wage bills above the threshold—this could include medium-sized companies, growing start-ups, and even some not-for-profits.

For example, in New South Wales (NSW), the threshold for 2025 is $1.4 million per annum, with a tax rate of 5.45%. In Victoria, the threshold remains at $700,000, with a 4.85% rate for metropolitan employers. Other states like Queensland and Western Australia have also adjusted their thresholds upward this year.

2025 Updates: What’s Changed?

Several states have announced payroll tax changes for 2025 as part of broader economic recovery and business support strategies.

• Higher Thresholds: Most states have lifted their thresholds to help relieve pressure on small and medium-sized businesses. For example, South Australia increased its threshold from $1.5 million to $1.7 million, meaning fewer businesses will pay payroll tax this year.
• Targeted Relief for Certain Sectors: Some states are offering temporary payroll tax relief for hard-hit sectors such as hospitality and tourism. For instance, Queensland has extended its payroll tax rebate for apprentices and trainees through June 2025.
• Digital Lodgement and Compliance: All jurisdictions are now requiring digital lodgement of payroll tax returns, and several have introduced real-time compliance analytics, making accurate record-keeping more important than ever.

These changes are designed to encourage employment growth and ease the cost burden for expanding businesses. However, they also mean that keeping track of your obligations is more complex, especially if you operate across multiple states.

Managing Payroll Tax: Practical Strategies for 2025

Payroll tax can be a significant cost, but proactive planning can help reduce your liability and avoid compliance headaches.

• Monitor Wage Growth: With thresholds rising, regularly review your projected wage bill to avoid unexpected tax liabilities. Automated payroll software can help flag when you approach thresholds in each state.
• Take Advantage of Exemptions: Many payments, such as parental leave and some superannuation contributions, may be exempt from payroll tax. Check your local rules to ensure you’re not overpaying.
• Group Structures: If your business operates through multiple entities, be aware that states may group them for payroll tax purposes, aggregating wages to determine liability. This is a common pitfall for growing businesses in 2025.
• Cross-Border Operations: If you employ staff in more than one state, allocate wages appropriately and keep detailed records to avoid double taxation or missed obligations.

For example, a Melbourne-based tech start-up that expanded into NSW in 2024 must now track payroll in both states. With the new Victorian threshold unchanged but NSW’s raised, its payroll tax planning could look very different in 2025.

Conclusion: Stay Ahead of Payroll Tax in 2025

Payroll tax is no longer just a back-office compliance issue—it’s a strategic consideration for Australian businesses navigating a changing economic landscape. With thresholds rising and digital compliance on the rise, 2025 is the year to review your processes, take advantage of new relief measures, and ensure you’re not caught off guard by changing rules.