Payroll tax Victoria rules for 2026-27 are the same as 2025-26: you pay payroll tax when your taxable Australian wages go over the $1 million annual threshold ($83,333 a month). The standard rate is 4.85%, and eligible regional employers pay 1.2125%.
Payroll tax is a state tax on wages, collected by the State Revenue Office Victoria (SRO). It is a business cost, not something taken out of your employees’ pay, and it sits completely apart from the PAYG withholding and super you report to the ATO.
Below we cover the threshold, the rates, who has to register, what counts as wages, how the threshold phases out between $3 million and $5 million, and a worked example showing the old and new rules side by side.
Key takeaways
- The tax-free threshold is $1,000,000 a year ($83,333 a month) from 1 July 2025 onward, up from $900,000 in 2024-25.
- The rate is 4.85%, or 1.2125% for regional employers who pay at least 85% of their Victorian wages to regional employees.
- The threshold is tested against your total Australian wages, including grouped businesses and interstate staff.
- Between $3 million and $5 million of Australian wages, the threshold shrinks by 50 cents for every dollar over $3 million. Above $5 million there is no threshold.
- Monthly returns are due by the 7th of the following month, and the annual reconciliation is due by 21 July.
| Item | 2026-27 setting |
|---|---|
| Annual tax-free threshold | $1,000,000 |
| Monthly threshold | $83,333 |
| General rate | 4.85% |
| Regional employer rate | 1.2125% |
| Phase-out | 50% of Australian wages over $3 million, nil threshold at $5 million |
| Surcharges (large employers) | Combined 1% over $10 million, combined 2% over $100 million |
| Monthly return due | 7th of the following month |
| Annual reconciliation due | 21 July |
Source: SRO payroll tax current rates, which lists these settings as applying from 1 July 2025 onward.
What is the payroll tax threshold in Victoria for 2026-27?
The tax-free threshold is $1,000,000 for annual returns and $83,333 for monthly returns. It went up from $900,000 ($75,000 a month) on 1 July 2025, and the SRO current rates page shows the same figures for every year from 1 July 2025 onward, so they carry into 2026-27.
The threshold works as a deduction. You only pay tax on Victorian taxable wages above it. It is reduced if:
- You pay wages interstate. You get the share of the threshold that matches your Victorian share of Australian wages. If 30% of your wages are paid in Victoria, you get 30% of the threshold.
- You did not employ for the full year. The threshold is cut to the share of the year you employed. Someone who starts employing on 1 January 2027 and pays wages to 30 June 2027 (181 days) gets $1,000,000 x 181/365 = $495,890.
- Your Australian wages are over $3 million. The phase-out (covered below) applies.
- You are part of a group. One threshold is shared by the whole group.
What are the payroll tax Victoria rates?
The general rate is 4.85%. Regional employers pay 1.2125%. To use the regional rate, the SRO regional employer rules say you must pay at least 85% of your Victorian taxable wages to regional employees, meaning employees who do more than half of their work for you in regional Victoria. A regional business address on its own is not enough.
Large employers also pay two surcharges: the mental health and wellbeing surcharge (from 1 January 2022) and the COVID-19 debt temporary payroll tax surcharge (from 1 July 2023 until 30 June 2033). Together they add 1% once your Australian wages go over $10 million, and 2% once they go over $100 million. They only apply to your Victorian share of wages above those thresholds.
Who has to register for payroll tax in Victoria?
You must register if you pay wages in Victoria and your taxable Australian wages go over the threshold. The SRO’s registration page notes that penalties and interest can apply if you don’t register when you should. Registration is done online through PTX Express. Our guide to payroll tax registration in Australia walks through what you need to have ready.
Look at the whole business, not just one entity. A Geelong plumbing company paying $900,000 of Victorian wages looks under the threshold on its own. If a related NSW company pays another $300,000, the group has $1.2 million of Australian wages. Victoria still doesn’t tax the NSW wages, but they count when working out whether the group is over the threshold and how much of it the Victorian business can claim.
Watch out
Businesses can be grouped if they share ownership, control or employees. Under the SRO grouping rules, related companies are grouped where one holds more than 50% of the shares, controls the board or controls more than 50% of the votes of another. Common control and shared staff can also create a group. Check this before you assume each business gets its own threshold.
What counts as taxable wages?
According to the SRO, taxable wages include more than salaries. They include:
- salaries and wages
- superannuation contributions (including the super guarantee you pay for employees)
- fringe benefits
- certain contractor payments
- termination payments.
Contractors catch a lot of businesses out. Under the SRO contractor provisions, payments to a contractor who provides services exclusively or primarily for one principal in a financial year can be treated as wages, unless an exclusion applies. This applies whether the contractor works through a company, trust, partnership or as a sole trader. If you’re not sure how someone should be classed, our employee vs contractor guide is a good place to start.
How does the threshold phase out between $3 million and $5 million?
From 1 July 2025 the phase-out rate is 50% (it was 45% in 2024-25). The SRO threshold and phase-out page sets out four steps:
- Multiply the full $1,000,000 threshold by your Victorian share of wages and the share of the year you employed.
- Multiply $3 million by the same two percentages.
- Subtract the Step 2 figure from your total Victorian wages, then multiply by 50%.
- Subtract the Step 3 figure from the Step 1 figure. If the result is negative, you get no threshold.
For a full-year employer with all wages paid in Victoria, it looks like this:
| Australian wages | Threshold available | Payroll tax at 4.85% |
|---|---|---|
| $1,000,000 | $1,000,000 | Nil |
| $3,000,000 | $1,000,000 | $97,000 |
| $4,000,000 | $500,000 | $169,750 |
| $5,000,000 | Nil | $242,500 |
How much payroll tax would a Melbourne business pay? A worked example
This example shows how payroll tax Victoria bills changed when the threshold and phase-out rate both moved on 1 July 2025. It compares the 2024-25 rules with the rules that apply in 2025-26 and 2026-27. The 2024-25 figures come from the SRO historical rates.
The facts
- A Melbourne metropolitan business (not eligible for the regional rate).
- Employs for the full financial year.
- Pays $4.2 million of taxable wages, all in Victoria, with no interstate wages and no related businesses.
- Total Australian wages are under $10 million, so no surcharge applies.
Old rules (2024-25): $900,000 threshold, 45% phase-out
- Step 1: $900,000 x 100% x 100% = $900,000
- Step 2: $3,000,000 x 100% x 100% = $3,000,000
- Step 3: ($4,200,000 – $3,000,000) x 45% = $540,000
- Step 4: $900,000 – $540,000 = $360,000 threshold
- Taxable wages: $4,200,000 – $360,000 = $3,840,000
- Payroll tax: $3,840,000 x 4.85% = $186,240
New rules (2025-26 and 2026-27): $1,000,000 threshold, 50% phase-out
- Step 1: $1,000,000 x 100% x 100% = $1,000,000
- Step 2: $3,000,000 x 100% x 100% = $3,000,000
- Step 3: ($4,200,000 – $3,000,000) x 50% = $600,000
- Step 4: $1,000,000 – $600,000 = $400,000 threshold
- Taxable wages: $4,200,000 – $400,000 = $3,800,000
- Payroll tax: $3,800,000 x 4.85% = $184,300
The business pays $1,940 less a year under the new rules. A smaller business gains more in percentage terms: with $1.2 million of wages, payroll tax falls from $14,550 ($300,000 x 4.85%) under the old $900,000 threshold to $9,700 ($200,000 x 4.85%) under the $1 million threshold.
Tip
Monthly returns use the $83,333 monthly threshold, so the 12 monthly amounts won’t always add up to your final annual figure. The annual reconciliation uses actual wages for the year and squares it up. For a quick look at what your staff take home, try our Australian pay calculator.
What are the payroll tax Victoria due dates?
Once you’re registered, the SRO sets these deadlines:
- Monthly returns: lodge and pay by the 7th of the following month. If the 7th falls on a weekend or public holiday, it moves to the next business day.
- Annual reconciliation: lodge by 21 July each year. For 2025-26 that was 21 July 2026, and for 2026-27 it will be 21 July 2027.
Late or missed payments can lead to a default assessment with penalty tax and interest. It pays to tag wages by state and type in your payroll software from day one. Our Single Touch Payroll setup guide and Payday Super guide cover the federal reporting that runs alongside payroll tax.
What are the common payroll tax mistakes?
- Testing only the Victorian payroll. The threshold is based on Australian wages, including interstate staff and grouped businesses.
- Leaving super and contractors out. Both can be taxable wages and can push you over the threshold.
- Assuming the regional rate applies. You need at least 85% of Victorian wages paid to regional employees, not just a regional address.
- Mixing payroll tax up with PAYG withholding. Payroll tax goes to the SRO. PAYG withholding is withheld from employees’ pay and reported to the ATO.
- Skipping the annual reconciliation. Monthly returns don’t replace it.
If you also hold investment property in Victoria, our Victorian land tax rates guide covers the other big SRO tax.
Frequently asked questions
What is the payroll tax threshold in Victoria for 2026-27?
The threshold is $1,000,000 a year, or $83,333 a month. It has applied from 1 July 2025 and the SRO lists it as continuing for later years. It is reduced for interstate wages, part-year employers, grouped businesses and Australian wages over $3 million.
What is the payroll tax rate in Victoria?
The general rate is 4.85%. Regional employers that pay at least 85% of their Victorian taxable wages to regional employees’ pay 1.2125%. Surcharges of a combined 1% (wages over $10 million) or 2% (over $100 million) also apply to large employers.
Is superannuation included in payroll tax in Victoria?
Yes. Superannuation contributions are taxable wages, along with salaries, fringe benefits, certain contractor payments and termination payments.
When is the Victorian payroll tax annual reconciliation due?
The annual reconciliation is due by 21 July each year. Monthly returns are due by the 7th of the following month.
Is payroll tax the same as PAYG withholding?
No. Payroll tax is a state tax paid by the employer to the SRO. PAYG withholding is tax withheld from employees’ pay and sent to the ATO.
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Talk to a registered tax agent
Not sure whether you need to register, how grouping affects you, or whether your contractors count as wages? Speak with a registered tax agent at Nanak Accountants & Associates on 1300 626 258, or book a consultation with our team. We look after payroll and payroll tax and business accounting for employers across Victoria.
This article is general information only and is not personal financial or tax advice. Information checked against ATO and State Revenue Office Victoria sources on 2 November 2026.
