Payroll tax thresholds by state for Australian builders

Payroll tax thresholds for builders range from $1 million in Victoria and WA to $2.5 million in the NT. The threshold is generally tested against total Australian taxable wages, with grouping and interstate rules affecting the final bill.

Payroll tax thresholds for 2026-27

Payroll tax is run by each state and territory. It is separate from PAYG withholding, super and workers compensation. You may need to register in more than one jurisdiction if your crews work across borders.

Here is the practical comparison for the financial year from 1 July 2026 to 30 June 2027. These are the main thresholds and rates. Levies, regional concessions, grouping and reduced threshold deductions can change the amount payable.

State or territory	Main annual threshold	Main payroll tax rate	What builders should watch
New South Wales	$1.2 million	5.45%	The threshold is apportioned when the employer or group has interstate wages.
Victoria	$1 million	4.85%	A 1.2125% regional rate may apply to eligible regional employers. Separate surcharges can apply to larger payrolls.
Queensland	$1.3 million	4.75% up to $6.5 million, then 4.95%	Eligible regional employers may receive a 1 percentage point discount. Mental health levies can apply above higher wage levels.
Western Australia	$1 million	5.5% main rate	The deductible threshold begins tapering for larger payrolls and is gone at the top end.
South Australia	$1.5 million	Variable up to 4.95% between $1.5 million and $1.7 million, then 4.95%	The rate rises through the transition band rather than jumping straight to the full rate.
Tasmania	$1.25 million	4% from $1.25 million to $2 million, then 6.1%	The applicable rate changes when annual taxable wages pass $2 million.
Australian Capital Territory	$2 million	6.85%	Australia-wide wages can reduce the available ACT threshold.
Northern Territory	$2.5 million	5.5%	The threshold deduction phases out as wages increase.

The NSW annual threshold is $1.2 million and the rate is 5.45%, as at October 2026. Victoria's annual threshold is $1 million and its standard rate is 4.85%, as at October 2026. The NT threshold is $2.5 million and its main rate is 5.5%, as at October 2026.

Rates can change through state budgets. Check the relevant revenue office before lodging a return, particularly if a project begins in a new financial year.

The threshold is not always a simple cut-off

Think of the published figure as the starting point, not an automatic tax-free amount for every business.

If your building company only employed people for part of the year, the threshold may be reduced. It may also be apportioned when part of the group's wages are paid in another state or territory.

Some jurisdictions use a diminishing deduction. That means the benefit of the threshold gets smaller as total wages rise. WA and the NT are examples. South Australia uses a variable rate between $1.5 million and $1.7 million rather than a single cliff.

Monthly registration thresholds are usually based on the annual figure, but payroll tax is reconciled annually. A large progress push, overtime run or project completion bonus can take a builder over the monthly registration level even if earlier months were quiet.

Which construction payments count as wages

Start with ordinary employee pay. Taxable wages commonly include:

• Base wages, overtime and many allowances.
• Bonuses, commissions and some termination payments.
• Employer super contributions.
• The taxable value of fringe benefits, using the required gross-up method.
• Director fees.
• Payments to employment agencies or labour-hire providers where the local rules place liability on the client or agency.
• Contractor payments caught by the relevant contract provisions.

Do not assume a payment is outside payroll tax because the worker has an ABN or sends an invoice. Each jurisdiction has contractor rules that can deem the labour component to be taxable wages.

Construction contracts often mix labour, materials, plant and specialist services. Some contractor exemptions may apply, such as where a contractor provides services to the public, hires their own labour or supplies services for a limited period. The wording and evidence requirements differ by jurisdiction.

Keep the signed contract, invoices, scope of works, worker details and evidence supporting any exemption. A general ledger label such as subcontractors is not enough on its own.

Grouping catches builders out

Payroll tax grouping can combine related businesses and treat them as one employer. This can apply where companies share ownership, control, employees or operational links.

Say one entity employs carpenters, another employs project managers and a third holds the building contracts. If the businesses are grouped, they generally share one threshold. They do not each receive a separate $1 million or $1.2 million allowance.

Grouping can also reach businesses using the same workers under an arrangement. Revenue offices may consider who controls the workers, who benefits from their labour and how the entities operate together.

A de-grouping application may be available in limited cases where businesses operate independently. It requires facts and supporting records. It should not be treated as automatic.

Working across state borders

A worker's home address does not always decide where wages are taxable. Payroll teams need to apply the relevant nexus rules, which look at where the work is performed and, in some cases, the worker's principal place of residence or the employer's registered office.

This matters for civil crews, project managers and specialist trades moving between sites. Track work locations through timesheets, rosters or site access records. Do not wait until annual reconciliation to reconstruct ten months of interstate work.

Australian taxable wages also affect threshold apportionment. Even if only a small amount is taxable in one state, wages paid elsewhere can reduce the threshold available there.

For more practical checks covering pay runs, records and state liabilities, visit the payroll operations hub. You can also use the compliance audit tool to review contractor treatment, grouping and wage categories before reconciliation.

A simple monthly process

Run these checks after each construction payroll:

1. Total taxable wages by state, including super and taxable allowances.
2. Add contractor or labour-hire payments that may be caught.
3. Include all grouped entities, not just the main building company.
4. Compare year-to-date and monthly wages with registration levels.
5. Record interstate work locations and threshold apportionment.
6. Set aside funds for payroll tax and any separate state levy.
7. Reconcile payroll reports to the general ledger before lodging.

Payroll tax is usually self-assessed. The builder is responsible for classifying payments correctly, registering on time and retaining evidence. When a contract or allowance is unclear, get advice before treating it as exempt.