As your business grows and begins employing staff across different states or territories, payroll tax quickly shifts from a minor compliance item to a major financial and administrative burden. For many business owners, the risks lie not in what they know—but in what they don’t know.
At Boa & Co. Chartered Accountants, we regularly assist growing businesses with managing their payroll tax obligations across multiple jurisdictions. With data-matching capabilities increasing and state revenue offices stepping up enforcement, it’s never been more important to stay on top of your obligations.
Here are four key risk areas that every employer should be aware of in 2025:
1. When to Register for Payroll Tax
One of the most common traps for growing businesses is not knowing when to register for payroll tax. Each state and territory has its own threshold, and you must register once your total Australian taxable wages exceed that limit.
For example:
- Victoria: Annual threshold is $900,000
- Queensland: Multiple thresholds
- Under $1.3 million: no payroll tax
- $1.3 million–$6.5 million: phased rate
- Over $6.5 million: full rate applies
- ACT: Flat rate of 6.85%, with no tax-free threshold once wages exceed $2 million
Tip: Don’t wait for the state revenue office to come to you. Once you cross the threshold—even by a small amount—you may face interest and penalties if you fail to register in time.
2. Employees in Multiple States or Territories
If your business employs people across multiple states or territories, payroll tax gets more complicated. You must:
- Report taxable wages in each state, based on where the employee physically works
- Register and pay payroll tax in each applicable jurisdiction
- Apportion the tax-free threshold between states, if eligible
This can increase your total tax payable, especially if the tax-free threshold in your home state is reduced due to apportionment.
Many businesses miss this step, particularly when remote or hybrid work arrangements are involved—exposing themselves to penalties during audit reviews.
3. Payroll Tax Grouping Rules
Perhaps the most misunderstood area of payroll tax compliance is grouping. Grouping can apply when:
- You have multiple entities operating in the same or different states
- Entities have common control, shared employees, or financial interdependence
Once grouped:
- Only one entity (the Designated Group Employer) can claim the full tax-free threshold
- All other group members pay tax from the first dollar
- If entities operate in multiple states, the threshold must be split based on total national wages
Failing to identify grouping relationships is a common audit trigger. Many small business owners don’t even realise that their structure may already be grouped under state rules, despite separate ABNs or business activities.
4. Contractors and “Relevant Contracts”
Using contractors? You could still be liable for payroll tax.
Payments to contractors may be taxable if they fall under a “relevant contract”—even if the contractor has an ABN or operates through a company. The rules vary by state and include tests around:
- Nature of the work performed
- Whether the contractor provides services exclusively to your business
- Whether tools and equipment are supplied
- Whether the contract is for labour vs. result
This is one of the most complex and high-risk areas of payroll tax. Without a clear and well-documented process for assessing contractor arrangements, businesses are at high risk of reassessment.
Final Thoughts: Payroll Tax Risk Is Growing—Are You Prepared?
With state revenue offices now actively using data-matching, Single Touch Payroll (STP), ATO records, and superannuation data, we’re seeing an increase in payroll tax audits and reviews—especially for businesses with:
- Interstate operations
- Contractor-heavy workforces
- Unclear group structures
The key is to proactively assess your exposure and apply the rules correctly from the outset. Mistakes can lead to years of backdated liabilities—plus interest and penalties.
Need Help with Payroll Tax?
At Boa & Co. Chartered Accountants, we support businesses of all sizes in navigating their state-based tax obligations. Whether you’re unsure if you’ve crossed a threshold, wondering if your contractors are at risk, or need advice on group structuring—we’re here to help.
Call us on 1300 952 286, email [email protected], or visit www.boanco.com.au to book your personalised consultation.
Let’s make sure you’re compliant, efficient, and confident about your payroll tax position—before the state revenue office comes knocking.