How Payroll Tax Threshold Changes in 2025 Will Impact Australian Businesses
Australian businesses are preparing for changes to the payroll tax threshold in 2025, which will affect how employers calculate and pay payroll tax. These updates could mean less payroll tax liability for some, but also new payroll tax obligations for others depending on where wages are paid and the total Australian wages for each business.
Current Payroll Tax Framework in Australia
Payroll tax is a state and territory tax that applies to wages paid by employers once they exceed the payroll tax threshold set by each state or territory. The payroll tax rate and annual threshold amount vary across Australian states and territories. For example, the NSW payroll tax threshold is currently $1.2 million, while Queensland’s threshold sits at $1.3 million. The payroll tax rates also differ, so it’s important to check with your local revenue office or other revenue offices if you pay wages in more than one state or territory.
Payroll tax legislation requires employers to register for payroll tax once their total Australian wages exceed the monthly payroll tax threshold or annual threshold in their state or territory. Taxable wages include not only salaries but also allowances, superannuation, fringe benefits, and certain contractor payments. The payroll tax threshold is calculated based on total Australian wages, including any interstate wages if the business operates in more than one state or territory.
Preparing for payroll tax changes in 2025?
Consult with us to ensure your business is ready.
Major Payroll Tax Threshold Changes Coming in 2025
Several states are revising their payroll tax thresholds and payroll tax rates for the 2025 financial year. These changes will affect how businesses pay payroll tax and may alter their payroll tax obligations, including how payroll tax is calculated on wages paid during a public holiday, periods of parental leave, or when services provided extend across multiple states. Employers should also be mindful of how these changes affect payroll tax calculations if wages are paid on a business day that falls after a public holiday or within seven days of the end of a pay period, as due dates for payment and lodging returns may shift accordingly.
Northern Territory’s Major Threshold Increase
From January 1, 2025, the Northern Territory will increase its tax-free threshold from $1.5 million to $2.5 million. This means that businesses with taxable wages below the new threshold amount will not need to pay payroll tax for the period from January to June 2025, even if those wages include payments for public holidays, parental leave, or services provided over a weekend. From July 1, 2025, this higher threshold becomes permanent, reducing payroll tax liability for many employers and potentially changing when you need to register for payroll tax. Employers should also note that if a due date falls on a public holiday or weekend, payment is typically required by the next business day, and returns must generally be lodged within seven days after the end of each month or pay period.
Victoria’s Progressive Threshold Adjustments
Victoria is gradually increasing its payroll tax threshold. After moving from $700,000 to $900,000 in 2024, the threshold will reach $1 million from July 1, 2025. This change helps employers with wages paid between the old and new thresholds, as they may no longer need to pay payroll tax or lodge returns if their total Australian wages stay below the new threshold. Employers should consider how wages paid for parental leave, public holidays, or services provided outside standard business days may impact their total taxable wages and payroll tax obligations.
Changes in Other States and Territories
While not all states have announced new payroll tax rates or threshold increases, it’s important to monitor updates from your local revenue office. The trend is toward higher thresholds and targeted exemptions, especially for small to medium businesses. For example, the NSW payroll tax threshold and payroll tax rates are reviewed annually, so employers should check for any updates each financial year, especially if wages paid include payments for public holidays, parental leave, or services provided over a seven-day period.
Financial Implications for Businesses
The payroll tax threshold changes will have different impacts depending on your business size, where you pay wages, and whether you operate in multiple Australian states or territories.
Relief for Small to Medium Enterprises
Employers with total Australian wages below the new threshold in their state or territory will benefit the most. For instance, a Northern Territory business with taxable wages of $2 million will no longer need to pay payroll tax after the threshold increases. This means fewer payroll tax obligations, no need to lodge an annual return, and more funds available for business growth.
Impact on Multi-State Operations
If you pay wages in more than one state or territory, your payroll tax threshold is calculated based on the proportion of wages paid in each location. This harmonised payroll tax administration means you must include all Australian wages when determining if you exceed the monthly threshold or annual threshold in any state. For example, if you pay both NSW wages and Queensland wages, you’ll need to apply the relevant tax rates and thresholds for each state and consider any reduced deduction or threshold phase-outs.
Special Considerations for 2025
Besides changes to the payroll tax threshold, there are other key areas to keep in mind, including how the monthly threshold and tax-free threshold apply to your business throughout the year.
Apprentice and Trainee Wage Exemptions
From July 1, 2025, the Northern Territory will exempt wages paid to apprentices and trainees from payroll tax calculations. This exemption helps businesses investing in training and can reduce payroll tax liability for those who employ apprentices, especially if their total wages remain under the monthly threshold or the updated tax-free threshold.
Groups of Related Businesses
If your business is part of a group, the payroll tax threshold—including both the monthly threshold and the overall tax-free threshold—applies to the combined total Australian wages of all group members. Only one employer in the group can claim the threshold, so it’s important to coordinate payroll tax obligations and ensure accurate reporting to avoid penalty tax.
Preparing Your Business for the Changes
With new payroll tax thresholds and payroll tax rates on the horizon, it’s a good time to review your payroll systems and stay informed about payroll tax legislation updates.
Review Your Record-Keeping Systems
Accurate records of wages paid, including allowances, fringe benefits, and contractor payments, are essential for calculating payroll tax liability. Make sure your systems can handle changes to the payroll tax threshold and any exemptions that apply.
Monitor Legislative Developments
Payroll tax legislation and revenue rulings can change throughout the financial year. Stay in touch with your local revenue office, check due dates for lodging returns, and keep an eye on updates to payroll tax Australia-wide. If you’re unsure about your payroll tax obligations, contact details for each state revenue office are available online.
Conclusion
Payroll tax threshold changes in 2025 will bring relief for many businesses, especially those whose total Australian wages are below the new threshold amount. By understanding how these changes affect your payroll tax liability and payroll tax obligations, you can plan ahead and avoid unexpected tax issues.
If you have questions about payroll tax rates, thresholds, or how to register for payroll tax, reach out to our team for tailored advice. Staying informed and proactive will help your business make the most of these changes and keep your payroll tax obligations stress-free.