The payroll tax threshold in Victoria for 2026–27 is $1 million a year, or $83,333 a month, unchanged from 2025–26. The standard VIC payroll tax rate is 4.85%. The threshold works as a deduction, not an exemption: your first $1 million of Australian wages stays tax-free, and the rate applies only to wages above it. Two details catch business owners out. The test counts your total Australian wages, super included, across every entity you’re connected to. And once those wages pass $3 million, the deduction itself starts shrinking, disappearing entirely at $5 million.
Below, we cover the current payroll tax thresholds, who has to register, and the grouping rules that quietly strip the deduction from growing Melbourne businesses.
What Is the Victorian Payroll Tax Threshold?
Payroll tax is a state tax on the wages a business pays its people, administered in Victoria by the State Revenue Office (SRO). The Victorian payroll tax threshold is the tax-free amount deducted from those wages before the 4.85% rate is applied. For 2026–27, the full deduction is worth $1 million.
A quick example makes it concrete. A Melbourne business paying $1.2 million in annual wages, all in Victoria, deducts the $1 million threshold and pays 4.85% on the remaining $200,000. The bill comes to $9,700 for the year. Wages under the threshold stay tax-free even once you’re over it. Only the excess gets taxed.
Because the threshold is a deduction, it can also be reduced. Interstate wages and part-year employment both reduce your entitlement. The phase-out zone, covered below, can remove it altogether.
Current VIC Payroll Tax Thresholds (2025–26 and 2026–27)
The May 2026 state budget left payroll tax settings untouched, so the payroll tax threshold VIC 2025–26 increase (from $900,000 to $1 million) carries straight through to the new year. If you budgeted against the payroll tax threshold VIC 2025–26 figures, nothing changes.
| Financial year | Annual threshold | Monthly threshold | Standard rate |
| 2024–25 | $900,000 | $75,000 | 4.85% |
| 2025–26 | $1,000,000 | $83,333 | 4.85% |
| 2026–27 | $1,000,000 | $83,333 | 4.85% |
Looking back slightly further, the Victoria payroll tax threshold sat at $700,000 as recently as 2023–24. The VIC payroll tax threshold now sits $300,000 higher than it did two years ago, which pulled thousands of smaller employers out of the system entirely. The trade-off arrived at the top end, where the phase-out for wages above $3 million came in from 1 July 2024.
Who Needs to Register for Payroll Tax in Victoria?
Registration with the SRO is required by the 7th day of the month after your wages first exceed the monthly threshold of $83,333.
The wording carries the whole trap: total Australian wages. The payroll tax threshold Victoria applies is tested against every dollar your business pays nationally. A business paying $700,000 in Melbourne and $500,000 in Sydney has $1.2 million in Australian wages and needs to register in Victoria, even though its local payroll sits under the line. The deduction then gets apportioned to the Victorian share of wages, so this business claims a reduced amount, well short of the full $1 million.
In practice, the employers who pay payroll tax in Victoria are those whose national wage bill, grouped entities included, clears the threshold. Plenty of them find out later than they should.
The $3 Million to $5 Million Phase-Out Zone
From 1 July 2024, employers with total annual Australian wages between $3 million and $5 million receive only part of the tax-free threshold, and employers above $5 million receive none. The deduction reduces progressively across that band.
For a full-year employer paying wages only in Victoria, the simplified sum is:
Deduction = $1,000,000 × ($5,000,000 − your Australian wages) ÷ $2,000,000
Worked through with real numbers: a business on $3.6 million in wages gets a deduction of $1,000,000 × ($1,400,000 ÷ $2,000,000) = $700,000. Its taxable wages are $2.9 million, and at 4.85%, the annual bill lands at $140,650.
The practical effect is a higher marginal cost of hiring inside the band. Every extra dollar of wages in the zone strips 50 cents off the deduction while also being taxed itself, an effective rate of about 7.3% until the deduction is gone. Businesses planning a hiring push through this range should model it before the offers go out, and the SRO’s own threshold calculator handles the interstate and part-year versions of the sum.
The Victorian Payroll Tax Rate
The standard VIC payroll tax rate for 2026–27 is 4.85%, and eligible regional employers pay 1.2125% on taxable wages above the deduction. The rate has held at this level for years, so the moving parts worth watching are the thresholds and surcharges, and the wage base itself.
The 85% Regional Employer Rule
The 1.2125% rate applies to employers who pay at least 85% of their taxable wages to regional employees, meaning staff who perform more than half their duties in regional Victoria. Eligibility follows your actual wage mix, so a business straddling metro Melbourne and, say, Ballarat can drift in and out of the concession as headcount shifts.
For most Melbourne-based businesses this rule stays theoretical. Where it earns attention is in expansion planning, because a business genuinely relocating its workforce regionally can qualify, and the gap between 4.85% and 1.2125% on a seven-figure wage bill justifies checking eligibility before assuming the metro rate.
Payroll Tax Surcharges: The Mental Health Levy and COVID Debt Surcharge
Two surcharges sit on top of the standard rate for large employers. The mental health and wellbeing surcharge adds 0.5% on Victorian wages once national wages exceed $10 million, with a further 0.5% above $100 million, and the temporary COVID-19 debt surcharge mirrors those tiers until 30 June 2033. Combined, the loading is 1% above the apportioned $10 million threshold and 2% above $100 million, applied only to wages over each line rather than the whole payroll.
Most small and medium businesses will never pay the mental health levy. We’ve included it because the $10 million test uses national grouped wages, so a company inside a larger corporate group can be dragged over the line by its related entities. For a standalone Melbourne SME, the mental health levy stays off the radar until wages approach eight figures.
What Counts as Wages for Payroll Tax?
The wage base is wider than the payroll report you run each week. Victorian taxable wages include salaries, super, allowances, fringe benefits and many contractor payments. In detail:
- Gross salaries and wages, including leave payments
- Superannuation guarantee contributions, which is the inclusion that surprises owners most
- Bonuses, commissions and most allowances
- Fringe benefits at their grossed-up value
- Payments to some contractors, where the arrangement resembles employment under the SRO’s contractor provisions
- Certain termination payments
Super deserves an extra flag this year. From 1 July 2026, payday super requires employer contributions to be paid within seven business days of each payday, so your taxable wage figure now moves with every pay run instead of stepping up quarterly.
On the other side of the ledger sits the payroll tax exemption framework. Wages paid by certain not-for-profits and charities can qualify for a payroll tax exemption, and specific wage types, such as approved parental leave, are exempt for all employers. Exempt wages come out of the threshold test as well as the tax calculation, which matters for organisations hovering near $1 million. The full exemption list deserves its own guide, so we’ve kept this to the headline points.
Grouping Rules: Why Your Threshold Might Disappear
Victoria’s grouping provisions treat related businesses as one employer, and a group shares a single threshold between all of its members.
Businesses get grouped more easily than most owners expect. Common triggers include related companies under the Corporations Act and entities controlled by the same person or people. Shared staff arrangements, where one business’s employees perform work for another, can group otherwise unrelated companies as well. A tradie who runs the contracting work through one company and holds the equipment in another, with the same directors on both, is very likely a group. So is a couple operating two seemingly separate businesses.
The consequence is blunt. Take two companies, same owners, each paying $600,000 in wages. Grouped, they hold $1.2 million in combined wages and a single $1 million deduction to share, which leaves $200,000 taxable and a bill neither entity budgeted for. Each member must also be registered with the SRO individually and as part of the group.
Grouping is also where early advice pays for itself fastest. Structures are usually set up for asset protection long before payroll tax is on anyone’s radar, and unwinding a grouping problem after the SRO raises it is far harder than flagging it during a growth year. If your accountant or bookkeeper has never asked about your other entities, ask them why.
How Victoria Compares to Other States
The Victoria payroll tax threshold is the easiest in Australia to hit, equal with Western Australia, which is why a wage bill that attracts no tax in Queensland can be taxable here. The 2026–27 payroll tax thresholds across the country:
| Jurisdiction | Annual threshold | Standard rate |
| VIC | $1,000,000 | 4.85% |
| WA | $1,000,000 | 5.5% |
| NSW | $1,200,000 | 5.45% |
| TAS | $1,250,000 | 4% (6.1% above $2m of wages) |
| QLD | $1,300,000 | 4.75% (higher above $6.5m) |
| SA | $1,500,000 | up to 4.95% |
| ACT | $1,750,000 | 6.75%, tiered upward |
| NT | $2,500,000 | 5.5% |
The comparison cuts both ways. Victoria’s threshold arrives earliest, and its 4.85% standard rate is one of the softer ones once you’re in. For a Melbourne business, the practical point is that thresholds are state-specific, so benchmarks quoted by interstate peers need translating before anyone relies on them.
Worked Example
Here’s the shape we see most often, written as a composite so no single client is identifiable. An electrical contracting business in Melbourne’s south-east pays $950,000 in wages across eight staff, comfortably under the payroll tax threshold. Two A-grade electricians join in September on packages that lift the annual run rate to about $1.15 million once super is included.
The monthly wage bill now sits near $96,000, above the $83,333 monthly line, so registration falls due early in the following month. For the full year, the business deducts the $1 million threshold and pays 4.85% on roughly $150,000, a bill of about $7,275. Manageable, once it’s known about. The painful version of this story is the one where nobody notices until an SRO letter arrives, and the same $7,275 shows up with interest, penalty tax, and two years of catch-up returns pulled from records you’re required to keep.
Lodging and Paying Payroll Tax in Victoria
Registered employers generally lodge monthly through the SRO’s PTX Express portal, with returns and payment due within seven days of the end of each month, and a nil return is still required in months where nothing is payable. The annual reconciliation, which squares your monthly returns against actual wages for the year, is due by 21 July. No extensions apply.
June’s figures land inside that reconciliation window, which makes late July an unforgiving stretch if the books are behind. Businesses that keep reconciliations current through the year, the same discipline behind on-time BAS due dates, barely notice 21 July.
Common Mistakes Businesses Make with the Threshold
Four patterns account for most of the payroll tax problems that land on desks in July:
- Counting only Victorian wages in the threshold test, when interstate and grouped wages count as well
- Super gets forgotten, which quietly adds around 12% to the figure being tested
- Each entity in a family of businesses is assumed to carry its own $1 million deduction
- The 21 July reconciliation slips, usually because June is busy and nobody owns the reminder.
None of these mistakes requires negligence. They happen in growing businesses precisely because growth is what pushes wages across lines nobody was watching.
Where This Usually Lands
The threshold is one number. Everything feeding into it moves as a business grows, and the businesses that handle payroll tax well are the ones whose books are reconciled monthly, so a wage bill trending toward $83,333 a month gets seen early rather than discovered.
If your wage bill is heading toward the line, or you suspect it crossed a while ago, our payroll team can review your position, sort the registration and fold the monthly returns into your regular bookkeeping. Contact us, and we’ll tell you plainly whether payroll tax is on your horizon.
FAQs
What is the payroll tax threshold in Victoria?
For 2026–27, the payroll tax threshold Victoria sets is $1 million a year, or $83,333 a month. The figure is a deduction from taxable wages, and several things reduce it, most commonly interstate wages and the $3 million to $5 million phase-out.
How much is payroll tax in Victoria?
The standard rate is 4.85% of taxable wages above the deduction, with eligible regional employers on 1.2125%. A business with $1.4 million in Victorian-only wages would pay 4.85% on $400,000, which is $19,400 for the year.
Does the payroll tax threshold include superannuation?
Yes. Employer super contributions count as taxable wages, both for calculating tax and for testing whether you’ve crossed the payroll tax threshold. With the super guarantee at 12%, a $900,000 salary bill becomes roughly $1,008,000 once super is added, which is over the line.
Who pays payroll tax in Victoria?
Employers whose total Australian wages, grouped entities included, exceed the threshold. The obligation sits entirely with the employer, and employees never see it deducted from their pay.
What happens if my wages fall in the $3 million to $5 million range?
Your tax-free deduction shrinks. It phases out at $1 for every $2 of wages above $3 million, reaching zero at $5 million, so each extra wage dollar through the band carries an effective cost of about 7.3% until the deduction is gone.
