Payroll tax might not be the most exciting part of running a business—but getting it wrong can be expensive. With compliance checks on the rise and new reporting requirements in place for 2025/26, it’s essential for NSW employers to understand their obligations.
This guide outlines the key payroll tax rules, thresholds, deadlines, and risk areas you need to know to stay compliant and avoid penalties this financial year.
Quick Summary: NSW Payroll Tax 2024/25
- Payroll tax rate: 5.45%
- Annual threshold: $1,200,000
- Reconciliation due: 28 July 2025
- New questions: Reporting for agency payments and GP contractors
- Grouping rules: One threshold shared across related businesses
- Key risk: Misclassification of contractors or underreporting wages
What Is NSW Payroll Tax?
Payroll tax is a state-based tax applied to wages paid by employers. In New South Wales, it’s administered by Revenue NSW—not the ATO (Australian Taxation Office) —and applies when your total Australian wages exceed the threshold.2025/26 Key Figures:
- Tax rate: 5.45%
- Annual threshold: $1,200,000
- Monthly thresholds:
- 28-day month: $92,055
- 30-day month: $98,630
- 31-day month: $101,918
Who Needs to Register for Payroll Tax?
You must register with Revenue NSW if:- Your total NSW taxable wages exceed the threshold
- You employ staff in NSW
- Your business is part of a payroll tax group
What Counts as Taxable Wages?
Payroll tax covers more than just base salaries. A wide range of employee and contractor payments may be subject to tax.Taxable Wage Examples
- Salaries and wages
- Commissions and bonuses
- Superannuation contributions
- Fringe benefits
- Director fees
- Termination payments
- Apprentice and trainee wages
Exempt Payments
- Parental leave (maternity or paternity)
- Jury duty payments
- Payments to emergency service volunteers
- Workers compensation payments
- Trust distributions and dividends
How to Assess Contractors
Contractor payments are often a grey area. If a contractor works under conditions similar to an employee, their payments may be taxable unless an exemption applies. Regular review is essential to ensure correct classification.Payroll Tax Grouping Rules
Businesses with shared ownership, control, or staffing arrangements may be grouped for payroll tax. This can reduce your entitlement to the full threshold.When Grouping Applies
- Shared employees across entities
- Common control or ownership
- Holding and subsidiary company structures
- Tracing more than 50% ownership
- Subsuming provisions that combine smaller groups into one
Key Grouping Considerations
- Only one threshold deduction applies to the group
- The threshold is apportioned based on NSW wage proportions
- All members are jointly liable for payroll tax debts
- A Designated Group Employer (DGE) can be nominated, or a single lodger can be used
Annual Payroll Tax Reconciliation: What’s New in 2024/25?
The Annual Payroll Tax Reconciliation helps you match monthly lodgements with total annual wages and correct discrepancies. It’s due by 28 July 2025.New Fields to Watch
- Employment agency payments now have a separate reporting line
- You must report all agency/labour hire payments made in NSW—even if not taxable
Reporting Labour Hire and GPs
- The updated ‘Workforce Details’ section asks for totals on both taxable and non-taxable agency payments
- Employers paying general practitioner contractors must declare these and assess eligibility for the Bulk Billing Support Initiative rebate
Avoiding Penalties and Errors
Failure to lodge on time or underpayment of tax may result in:- Interest and late payment penalties
- Audit review
- Backdated tax liabilities
Can’t Pay by the Due Date?
Revenue NSW expects all businesses to lodge the reconciliation—even if payment isn’t possible straight away.What To Do:
- Lodge the reconciliation by 28 July 2025 regardless of payment capacity
- Apply for a payment arrangement through your Revenue NSW online account
- Provide a valid reason for hardship
- Commit to regular instalments
Don’t Risk an Audit
Revenue NSW works with the ATO, SafeWork NSW, ASIC, and other agencies to cross-check employer data. You could be flagged for review if:- You misclassify contractors
- You understate taxable wages
- Your business structure suggests grouping but isn’t disclosed
Need Help Navigating Payroll Tax?
Payroll tax is complex, and the consequences of non-compliance can be serious. Working with experienced tax professionals ensures your business:- Registers at the right time
- Classifies wages and contractors correctly
- Claims any exemptions, rebates, or concessions
- Avoids audit risks and late fees
