Payroll tax is the state tax most growing tradie businesses trip over — it kicks in once your total wages cross a threshold, the rate and threshold differ in every state, and payments to subbies can count as wages. Here is how it works and the construction traps.
When you become liable
Payroll tax is a state tax on your total Australian wages, payable once you cross that state's threshold (annual, or a pro-rated monthly figure as you grow). The thresholds and rates differ everywhere — indicative 2025-26 figures below, but these move, so confirm with your state revenue office:
| State | Rate (approx) | Threshold (approx) |
|---|---|---|
| NSW | 5.45% | $1.2M |
| VIC | 4.85% metro / 1.2125% regional | $1.0M |
| QLD | 4.75% (tiered) | ~$1.3M |
| WA | ~5.5% | $1.0M |
| SA | tiered | ~$1.5M |
| TAS | tiered | ~$1.25–1.5M |
| ACT | 6.85% | >$2M |
| NT | 5.5% | $2.5M |
Only wages above the threshold are taxed, and a multi-state employer shares one national wage base, sliced by state.
What counts as "wages"
More than you would think: ordinary and overtime pay, site/travel/tool allowances (unless specifically exempt), bonuses and commissions, employer super, grossed-up fringe benefits, and director payments. Workers'-comp premiums are excluded, and some construction redundancy/portable-LSL contributions are excluded (state-specific).
The contractor trap
This is the big construction catch: payments to contractors are deemed wages unless an exemption applies. Common exemptions are services to the public generally (multiple clients), plant supplied with an operator where the equipment outweighs the labour, the short-engagement (10/30/90-day) rules, and owner-drivers. The risk: a long-term subbie (chippy, brickie, concreter) working regularly and mostly for you is likely taxable unless a clear exemption fits. Start from "includable", test each contractor against your state's exemption list, and keep a contractor register documenting the basis.
Grouping — you cannot split to dodge it
If you run related entities — a head-contractor company, a labour-hire entity, plant hire, project SPVs — under common control, they are grouped and share one threshold. You cannot split the business into pieces to get multiple thresholds, and for a construction group grouping almost always applies.
Apprentice & trainee relief — use it
Most states give payroll-tax relief on apprentice and trainee wages — it is documentation-heavy, so claim it properly. QLD runs a 50% rebate (extended to 30 June 2026); WA, the NT (from 1 July 2025) and the ACT (first-year new-entrant trainees) exempt various apprentice/trainee wages; and NSW and TAS run rebates. Confirm your state's current relief.
Lodgement
Register once you are over (or expect to be over) the threshold; lodge monthly returns plus an annual reconciliation (around 28 July in NSW); and register separately in each state you operate in. Keep records for at least 5 years.
Common mistakes
- Leaving subbie payments out of the wage base, or not grouping related entities.
- Missing apprentice/trainee relief.
- Treating allowances and super as outside wages — they are usually in.
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