Payroll tax thresholds in victoria 2025/2026
A simple, practical guide for Victorian business owners & payroll managers
Updated 21 Jan 2026 • Thresholds and rates effective from 1 July 2025 (2025–26 financial year)
Written by
Steve Harris
This guide provides general information about Victorian payroll tax and State Revenue Office (SRO) guidance as at the date of publication. It is not legal, financial, employment, payroll, or tax advice and should not be relied on as a substitute for advice tailored to your situation.
Payroll tax thresholds, rates, and surcharge settings can change, and your obligations can depend on factors like grouping, interstate wages, and what counts as taxable wages. Always confirm current requirements on the State Revenue Office Victoria website and/or seek advice from a registered tax agent.
No liability: RosterElf Pty Ltd, its directors, employees, and authors expressly disclaim any and all liability for any loss, damage, cost, or expense (whether direct, indirect, consequential, or otherwise) arising from or in connection with reliance on the information in this guide.
Quick summary for time-poor owners
If you only read one section, read this:
- Payroll tax is a Victorian state tax on wages paid by employers.
- In Victoria, you may need to register and pay payroll tax if your total Australian wage bill exceeds the tax-free threshold.
-
From 1 July 2025 (2025–26):
- Annual threshold: $1,000,000
- Monthly threshold: $83,333
-
The "threshold" isn't a magic exemption. It's a tax-free amount/deduction that reduces taxable wages. It can be reduced if:
- your total Australian wages are between $3m and $5m (phase-out), or
- you have interstate wages, or
- you employed for part of the year.
- Standard Victorian payroll tax rate: 4.85%
- Regional employer rate: 1.2125%, if you meet the 85% rule (most Victorian taxable wages paid to "regional employees").
- Large employers: extra payroll tax surcharges apply if Australian wages exceed $10m (and higher if above $100m). These are calculated on Victorian taxable wages over thresholds.
-
Once registered, you must:
- lodge a monthly return every month (even if no tax is payable), and pay by the 7th of the next month, and
- lodge your annual reconciliation by 21 July (no extensions).
What payroll tax is
Payroll tax is a state tax on wages paid by employers. In Victoria, it applies to individuals, companies, and can apply to groups of related businesses.
Key idea: payroll tax is not "company tax" and it's not calculated on profit. It's calculated on taxable wages.
Who pays payroll tax in victoria
You may be liable if:
- You're an employer paying Victorian taxable wages, and
- Your total Australian wage bill exceeds the threshold settings (including phase-out rules for $3m–$5m).
Important: "total Australian wages" matters
Victorian payroll tax thresholds and surcharges look at Australian wages, not just the wages you pay in Victoria. If you pay wages in multiple states, the Victorian threshold/surcharge thresholds can be adjusted based on the Victorian share and/or part-year employment.
If you're part of a group
Payroll tax rules can group businesses that share ownership, control or employees. Grouping can change how thresholds and surcharges apply (and can create surprise liabilities).
2025/26 victorian payroll tax thresholds
Current thresholds (from 1 July 2025 onward)
| Period | Threshold (maximum deduction) |
|---|---|
| Annual threshold | $1,000,000 |
| Monthly threshold | $83,333 |
Why the word "threshold" can be misleading
The SRO describes this as a tax-free threshold / maximum deduction. In practice, it functions like a deduction against taxable wages when calculating payroll tax.
Previous year comparison (useful for audits/backpay checks)
From 1 July 2024, the threshold increased (2024–25):
- Annual: $900,000
- Monthly: $75,000
- Phase-out rate then was 45%
Threshold phase-out (the $3m–$5m "grey zone")
If your total annual taxable Australian wages are between $3 million and $5 million, you may still be eligible for a threshold — but it's reduced progressively (phase-out).
Phase-out rate (very important)
- 45% in 2024–25
- 50% from 2025–26 onwards
No threshold once you're "too big"
If your total annual taxable Australian wages are above $5 million, you're not eligible for any tax-free threshold.
How the reduced threshold is worked out (plain English)
The SRO sets out a step-by-step method that factors in:
- how much of your wages are paid in Victoria, and
- whether you employed for the full year, and
- the phase-out rate.
Practical tip:
Most businesses shouldn't hand-calculate the reduced threshold every time. Build (or embed) a calculator (see interactive section below) and cross-check against the SRO's guidance.
2025/26 payroll tax rates in victoria
Standard rate (metro / general)
4.85%
Regional employer rate
1.2125% (lower rate) if you qualify as a regional employer.
The 85% rule (how you qualify)
To get the lower rate, you must pay at least 85% of your Victorian taxable wages to regional employees, and those employees must perform more than half of their work for you in regional Victoria (with specific rules about how to treat time worked outside Victoria).
Also note:
- For monthly returns, the 85% rule is assessed monthly.
- For your annual reconciliation, you must meet it across the full year to receive the lower rate overall (which can lead to refunds/true-ups).
Payroll tax surcharges in victoria
Two surcharges can apply in addition to standard payroll tax if your Australian wages exceed $10 million:
- Mental health and wellbeing surcharge (introduced 1 Jan 2022, ongoing)
- COVID-19 debt temporary surcharge (from 1 Jul 2023 to 30 Jun 2033)
Surcharge rates (combined)
| Australian wages threshold | Combined surcharge rate |
|---|---|
| Over $10m | 1% (0.5% + 0.5%) |
| Over $100m | 2% (additional 0.5% + additional 0.5%) |
What the surcharges apply to
- Surcharges apply only to Victorian taxable wages above the relevant thresholds.
- If you're part of a group, the wage thresholds apply at the group level and are claimed by the designated group employer (DGE).
- If you have interstate wages or are a part-year employer, the surcharge thresholds can be adjusted proportionately.
- Wages that are exempt from payroll tax are also exempt from the surcharges.
What counts as "wages" (and what doesn't)
Payroll tax is calculated on taxable wages, and in Victoria "wages" is broader than just salary.
Common wage components that count (typical inclusions)
Wages can include:
- regular pay (hourly/weekly/monthly)
- bonuses and commissions
- leave payments (annual leave, sick leave, etc.)
- allowances (meals, laundry, overtime allowances, etc.)
- superannuation contributions (including salary sacrifice)
- fringe benefits (e.g., company car, free accommodation)
- termination payments (e.g., unused leave)
- directors' fees
- employee shares or options
Contractors and payroll tax
Some contractor payments can be treated as wages depending on the type of work and payment arrangements.
Some payments may not be wages / may be exempt
The SRO notes that some payments are not counted as wages (e.g., certain reimbursements, certain motor vehicle and accommodation allowances) and that there are exemptions (e.g., caregiver leave and Commonwealth paid parental leave). The safest approach is to confirm specific payments via the SRO's A–Z list of taxable/exempt items.
Grouping rules (why your "threshold" might disappear)
Grouping is one of the biggest "gotchas" for payroll tax thresholds.
When businesses can be grouped
The SRO explains that businesses may be grouped if they share ownership, control or staff. Grouping can arise through:
- related corporations (holding/subsidiary and common holding company relationships)
- employees performing duties for another business
- commonly controlled businesses (controlling interests)
- tracing, amalgamations, and other provisions
Grouping can apply across states
Grouping provisions apply regardless of where businesses operate — meaning Victorian and interstate entities can still be grouped, which affects the group's total Australian wages (and the threshold/deduction entitlement in Victoria).
Exclusions can be possible (sometimes)
The Commissioner may have discretion to exclude a member from some types of groups, but not where the group is formed due to being "related corporations" under the Corporations Act meaning. The SRO notes that if you're uncertain, you can seek a private ruling.
Registration requirements for groups
Each member must be registered individually and as part of the group. Group changes must be updated promptly in PTX Express.
Get advice early
If you suspect you're grouped (shared owners, common control, related companies, shared employees), treat this as a "get advice early" area — grouping errors are a high-risk compliance issue.
Lodgement & due dates (monthly + annual)
Once you're liable and registered, Victorian payroll tax is largely managed through PTX Express.
Monthly returns
- You must lodge a return every month, even if no payroll tax is payable that month.
- If tax is payable, you must pay by the 7th of the next month (or next business day if the 7th falls on a weekend/public holiday).
Annual reconciliation (end-of-year "true-up")
- If you are liable, you must lodge the annual reconciliation via PTX Express.
- The deadline is 21 July each year (or next business day) and the SRO notes extensions are not available.
- You do not lodge a June monthly return — June wages are included in the annual wage amount provided in the annual reconciliation.
- Missing the annual deadline can trigger penalty tax (up to 25%) plus interest.
Worked examples (simple sanity checks)
These are simplified illustrations for understanding thresholds and phase-out. Your real calculation can vary with grouping, interstate wages, part-year employment, exemptions, and wage types.
Example 1: you just exceed the $1m threshold (metro employer, no grouping, full year)
- Victorian taxable wages for the year: $1,200,000
- Tax-free threshold (maximum deduction): $1,000,000
- Taxable wages after threshold: $1,200,000 − $1,000,000 = $200,000
Payroll tax (4.85%): $200,000 × 4.85% = $9,700
Example 2: You're in the $3m–$5m phase-out range (metro employer, full year, only VIC wages)
- Victorian wages: $4,200,000
- Phase-out rate (2025–26 onward): 50%
A simplified way the SRO notes can apply when you employ all year and only pay wages in Victoria is:
( $5,000,000 − wage bill ) × phase-out rate
- Threshold (deduction) estimate: ($5,000,000 − $4,200,000) × 50%
- $800,000 × 50% = $400,000
- Taxable wages after threshold: $4,200,000 − $400,000 = $3,800,000
Payroll tax at 4.85%: $3,800,000 × 4.85% = $184,300
Example 3: regional employer rate check (the "85% rule")
If you pay $100,000 of Victorian taxable wages in a month:
- To qualify as a regional employer for that month, you generally need at least $85,000 (85%) paid to "regional employees" (as defined) for that month.
- If you don't meet it in a given month, you may pay the standard rate for that month — but your annual reconciliation looks at the full year's mix.
Example 4: surcharges (large employer concept check)
If your total Australian wages exceed $10m, surcharges may apply and are calculated on Victorian taxable wages above thresholds. The combined surcharge is 1% over the first threshold and effectively 2% over the second threshold (>$100m).
Step-by-step compliance plan (practical process)
Step 1: Confirm whether you're likely liable
Estimate your total Australian wages (not just Victoria). Check if you're near: $83,333/month or $1,000,000/year, and $3m–$5m phase-out zone, and $10m/$100m surcharge zones.
Step 2: Validate what you're counting as wages
Ensure your wage base includes super, fringe benefits, allowances, termination payments, etc., and consider contractor rules. Use an internal wage mapping table (GL codes → payroll tax wage category).
Step 3: Check grouping risk early
Review ownership/control and shared staff arrangements to determine if grouping likely applies. If in doubt, get advice or pursue a private ruling path.
Step 4: Decide if regional employer rate might apply
Track regional vs metro wages monthly and at year end against the 85% rule.
Step 5: Register and set up PTX express (once you're liable)
Register for payroll tax and manage obligations via PTX Express.
Step 6: Put lodgement and payment dates on autopilot
Monthly return cycle: lodge monthly and pay by the 7th of the next month. Annual reconciliation: lodge and pay by 21 July (no extensions).
Step 7: Reconcile annually and clean up errors
Use the SRO's wage worksheet approach (or your own equivalent) and correct misclassifications before lodging the annual reconciliation. Regular payroll reconciliation throughout the year helps prevent year-end surprises.
Common mistakes (that cause underpayment, penalties, or audits)
Only looking at Victorian wages, not total Australian wages: Thresholds and surcharges depend on Australian wages.
Forgetting the $3m–$5m phase-out: Assuming you still get the full $1m threshold when you don't.
Ignoring grouping: Related entities push you over thresholds unexpectedly.
Missing wage components: Not including super, fringe benefits, directors' fees, or certain contractor payments.
Claiming the regional rate without meeting the 85% rule: Not tracking it correctly across the year.
Not lodging nil monthly returns after registration: Monthly reporting is required even if you owe no payroll tax for that month.
Missing 21 July annual reconciliation: Can trigger penalty tax (up to 25%) plus interest.
FAQ
Common questions about Victorian payroll tax thresholds, rates, and compliance:
Final takeaways
- The Victorian payroll tax "threshold" is a deduction/tax-free amount, not a blanket exemption.
-
From 1 July 2025, the key figures are:
- $1,000,000 annual / $83,333 monthly threshold
- Phase-out between $3m–$5m at 50% (2025–26 onward)
- 4.85% standard rate; 1.2125% regional rate (if eligible)
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If you're anywhere near the threshold, the biggest risk areas are:
- grouping,
- interstate wages, and
- wage component classification (super/FBT/allowances/contractors).
- Automate compliance: build a threshold calculator, due-date reminders, and a wages mapping process so payroll tax doesn't become a July panic.
Official victorian resources
Key government resources for Victoria payroll tax compliance:
Frequently asked questions
- From 1 July 2025, the threshold is $1,000,000 annually (or $83,333 monthly). This is the maximum tax-free deduction/threshold amount.
- No. Employers and groups with total annual taxable Australian wages above $5,000,000 are not eligible for any tax-free threshold/deduction.
- You may still get a threshold, but it is reduced progressively using a phase-out model. The phase-out rate is 50% from 2025–26 onwards.
Related compliance tools
Free calculators and checkers for Australian employers
Break compliance calculator
Check whether employee breaks are compliant based on shift length.
Underpayment risk calculator
Assess your underpayment risk based on time tracking and pay practices.
Backpay exposure estimator
Estimate potential backpay liability if employees have been underpaid.
Simplify your payroll tax compliance
RosterElf keeps accurate time and attendance records that feed directly into payroll—giving you the data you need for payroll tax calculations and compliance.
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