What You Need to Know About Australia Payroll Tax

Australia's 12% Superannuation Guarantee is one of the highest mandatory retirement contributions in the world, and it is just one piece of the payroll puzzle. Add PAYG withholding, state-based payroll taxes that range from 4% to 6.85%, and the ATO's Single Touch Payroll reporting requirement on every pay run, and your obligations stack up quickly. Here is how each component works and what you need to do to stay compliant.

1. What is payroll tax?

Payroll tax in Australia covers several employer obligations related to employee wages. The main components are:

PAYG Withholding (Pay As You Go): Income tax withheld from employee wages and remitted to the ATO
Superannuation Guarantee (SG): Mandatory employer contributions to employee retirement funds, currently at 12% of ordinary time earnings
State/Territory Payroll Tax: A state-level tax on wages once your total wage bill exceeds the threshold for your state or territory
Single Touch Payroll (STP): The reporting system used to send payroll data to the ATO each pay run

Employers must calculate, withhold, and remit the correct amounts for each component.

2. Who does it apply to?

This usually applies to:

All employers in Australia who pay wages to employees
Businesses with total Australian wages above the state payroll tax threshold
Employers of full-time, part-time, and casual workers (for PAYG and super)
Employers of contractors in some cases (for state payroll tax and super)
Companies that are part of a group (grouped wages count toward the state payroll tax threshold)

3. Why does it matter?

Understanding payroll tax helps you:

Stay compliant with the ATO and state revenue offices
Avoid penalties for late STP reporting and PAYG payments
Keep proper records of all employee pay and deductions
File and pay correctly through Single Touch Payroll
Plan your cash flow better by budgeting for superannuation and tax obligations

4. How does it work?

Here's the basic process:

Register with the ATO as an employer and obtain a PAYG withholding registration
Register for state payroll tax if your wages exceed your state's threshold
Set up STP-compliant payroll software
Each pay run, calculate PAYG withholding, superannuation, and any state payroll tax
Report payroll information to the ATO through STP on or before each payday
Pay PAYG withholding to the ATO (monthly or quarterly)
Pay superannuation contributions to employee super funds by the quarterly due date
Lodge and pay state payroll tax returns (monthly or annually, depending on your state)

5. What forms are involved?

STP Report (Single Touch Payroll) - Submitted to the ATO every pay run, reporting employee wages, tax withheld, and superannuation
BAS (Business Activity Statement) - Used to report and pay PAYG withholding (and GST) to the ATO on a monthly or quarterly basis
PAYG Payment Summary - No longer required for STP-enabled employers (the information is reported through STP and available via myGov)
State Payroll Tax Return - Filed with your state or territory revenue office (monthly or annually) to report and pay payroll tax
SuperStream - The electronic system used to make superannuation contributions to employee super funds

6. What information do you need?

Before handling payroll tax, make sure you have:

ABN and ATO employer registration
Tax File Numbers (TFNs) for all employees
Completed TFN Declarations from each employee
Employee super fund details (or default fund nomination)
STP-enabled payroll software
State payroll tax registration (if applicable)
PAYG withholding tax tables from the ATO

7. Important deadlines

STP reporting: Each payday (report within the same day using your payroll software)
PAYG withholding payment: Monthly (by the 21st of the following month) for medium to large withholders, or quarterly with your BAS for small withholders
Superannuation payment: Quarterly, due 28 days after the end of each quarter. From 1 July 2026, super must be paid on each payday (Payday Super reform)
STP finalisation: Due by 14 July each year for the previous financial year
State payroll tax: Monthly returns (typically due by the 7th of the following month) or annual returns, depending on your state and size

Quarterly super due dates (until 30 June 2026):

Q1 (July-September): 28 October
Q2 (October-December): 28 January
Q3 (January-March): 28 April
Q4 (April-June): 28 July

8. Common mistakes to avoid

Paying superannuation late (the Superannuation Guarantee Charge applies, which is not tax-deductible)
Not including all ordinary time earnings when calculating super (overtime is excluded, but allowances may be included)
Forgetting to register for state payroll tax when your wages exceed the threshold
Not grouping related businesses for state payroll tax purposes
Failing to report through STP on each payday
Using outdated PAYG withholding tax tables at the start of a new financial year
Not accounting for contractor payments that may be subject to state payroll tax

9. Simple example

You employ one staff member in New South Wales with an annual salary of $70,000 ($5,833 per month).

Employee deductions (from their pay):

PAYG withholding (income tax): approximately $1,048 per month (based on ATO tax tables)

Employer costs (on top of salary):

Superannuation (12%): $700 per month
State payroll tax: $0 (only applies when total Australian wages exceed $1,200,000 in NSW)

Total monthly employer cost: $5,833 salary + $700 super = $6,533

If your total wage bill exceeds $1,200,000 in NSW, you would also pay state payroll tax at 5.45% on wages above the threshold. For example, if your annual wage bill is $1,500,000:

Taxable wages: $1,500,000 - $1,200,000 = $300,000
State payroll tax: $300,000 x 5.45% = $16,350 per year ($1,363 per month)

10. FAQ

Q: What is the current superannuation rate? A: The Superannuation Guarantee rate is 12% of an employee's ordinary time earnings for the 2025-26 financial year. From 1 July 2026, the Payday Super reform requires super to be paid with each pay run instead of quarterly.

Q: Do I pay state payroll tax in every state? A: You only pay state payroll tax in the states or territories where you have employees. Each state has its own threshold and rate. If your total Australian wages exceed any state's threshold, you must register and lodge returns in that state.

Q: What are the state payroll tax rates? A: Rates vary by state. NSW charges 5.45% (threshold $1.2 million), Victoria charges 4.85% (threshold $700,000), and Queensland charges 4.75% (threshold $1.3 million). Other states and territories have their own rates and thresholds.

Q: What is Single Touch Payroll (STP)? A: STP is the ATO's digital reporting system. Each time you run payroll, your STP-enabled software automatically sends employee pay, tax, and super details to the ATO.

Q: What happens if I pay super late? A: You must lodge a Superannuation Guarantee Charge (SGC) statement with the ATO. The SGC includes the unpaid super amount, interest of 10% per annum, and an administration fee of $20 per employee per quarter. The SGC is not tax-deductible.

11. Final takeaway

Australian payroll tax involves PAYG withholding, 12% superannuation, and state payroll tax for larger employers. Report every pay run through Single Touch Payroll, pay super quarterly (moving to payday from July 2026), and register for state payroll tax if your wages exceed the threshold.

Caption

What you need to know about Australia payroll tax: Superannuation is 12%, PAYG withholding is reported through Single Touch Payroll, and state payroll tax applies when your wages exceed the threshold.

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