Written by Lisa Fraser
What Is Payroll Tax in NSW?
Payroll tax in New South Wales is a state government tax applied to employers whose total Australian taxable wages exceed the annual threshold. It is administered by Revenue NSW and helps fund essential public services such as healthcare, education, and infrastructure.
What is the Payroll Tax Rate and Threshold?
For the 2025–26 financial year, the annual payroll tax threshold in NSW is $1,200,000. This means businesses only pay payroll tax on the portion of wages above $1.2 million. The payroll tax rate in NSW is 5.45%. There is also a monthly threshold of $100,000, which is important for determining when you must register.
Payroll tax is self-assessed. If your total NSW wages exceed the monthly threshold during the financial year, you must register for payroll tax, even if you may not ultimately exceed the annual threshold. Wages include not only salaries and bonuses, but also certain contractor payments, superannuation contributions, and some fringe benefits.
What to Do If You’re Near the Payroll Tax Threshold?
If your business is approaching $1.2 million in total wages, early planning is essential:
- Monitor wages monthly – Track gross wages carefully to estimate when you might cross the threshold. Forecasting ahead can prevent unexpected liabilities.
- Prepare for registration – If you exceed the monthly threshold, register promptly to remain compliant and avoid penalties.
- Review contractor arrangements – Some contractor payments are taxable for payroll tax purposes. Reviewing agreements early can clarify your obligations.
- Plan for cash flow impact – If you exceed the annual threshold, payroll tax becomes an ongoing expense. Budgeting for 5.45% on wages above $1.2 million will help manage profitability and cash flow.
📞 Need Help with Payroll Tax?
If you’re unsure whether payroll tax applies to your business, or need help with registration, forecasting or compliance, our team can guide you through it.
As your business grows, payroll tax may become an important financial consideration. Staying informed about NSW thresholds and maintaining accurate payroll records will help ensure compliance and support sustainable growth. And, of course, YBM is here to help along the way. Please contact our office if you have any questions about registering for payroll tax, monitoring wages relative to the threshold, or budgeting to ensure cash flow allows you to meet obligations.
FAQs: Quick Answers to Your Payroll Tax Questions
Do small businesses pay payroll tax in NSW?
Only if total wages exceed the $1.2 million threshold.
Is payroll tax based on profit?
No, payroll tax is based on wages paid, not business profit.
When do you need to register for payroll tax in NSW?
You must register when your NSW wages exceed the monthly threshold of $100,000.