State-based developments in payroll tax

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Published: 
Authors: Leisa Rafter

What employers need to know ahead of annual reconciliations 

State payroll tax continues to evolve, with recent changes reinforcing that payroll tax remains a material compliance and cost item for many employers, particularly for those operating across multiple jurisdictions.

In this article, we delve into two recent developments that are particularly relevant for businesses with operations in the Australian Capital Territory (ACT) and Queensland: 

  • The introduction of a new top payroll tax rate in the ACT for very large employer groups
  • The extension of Queensland’s apprentice and trainee payroll tax rebate. 

Given the ongoing focus by revenue authorities on data quality and substantiation, these updates should be considered alongside broader payroll tax governance, particularly around grouping positions, wage mapping, contractor treatment and document retention. 

Australian Capital Territory: New 8.75 per cent top rate from 1 January 2026 

What has changed? 

From 1 January 2026, employers (or groups of employers) with Australia wide wages exceeding $150 million annually will be subject to a flat 8.75 per cent payroll tax rate on ACT taxable wages. This change follows the passage of the Payroll Tax Amendment Bill 2025, which received Royal Assent in December 2025. 

For the first half of the 2025–26 financial year (1 July to 31 December 2025), the existing ACT rate structure continues to apply: 

  • 6.85 per cent general rate 
  • 0.5 per cent surcharge for groups with Australia wide wages over $50 million 
  • 1.0 per cent surcharge for groups with Australia wide wages over $100 million.

Why these matters 

Midyear rate change 

Employers will need to apply split period calculations for the 2025–26 financial year, with different rates applying before and after 1 January 2026. This increases complexity for: 

  • Monthly payroll tax lodgements
  • The annual reconciliation due by 28 July 2026. 

Grouping and Australia wide wages 

Whether the 8.75 per cent rate applies is determined by total Australia wide wages at the group level, not just ACT wages. This makes accurate grouping analysis essential, particularly for large corporate groups and entities with complex structures. 

Cost impact 

For affected employers, the new rate represents a material increase in ACT payroll tax costs, with flowon implications for budgeting, pricing and workforce planning. 

Practical considerations for employers 

  • Confirm your group structure and Australia wide wage calculation used to determine the correct rate applicable 
  • Ensure payroll systems and ACT Revenue Office portal settings are updated from January 2026 
  • Model the financial impact for FY2025–26 and reflect this in budgeting 
  • Maintain an audit trail supporting your split period methodology for FY2025–26 annual reconciliation. 

Queensland: Apprentice and trainee rebate extended to 30 June 2026 

What has changed? 

Queensland has confirmed the 50 per cent payroll tax rebate for apprentice and trainee wages continues until 30 June 2026. Employers are required to retain records for at least five years. 

Why this matters 

Ongoing payroll tax savings 

The extension provides continued relief for employers investing in apprenticeships and traineeships, particularly in labour-intensive industries. 

Increased compliance focus 

Queensland Revenue Office continues to review rebate claims, with a particular focus on: 

  • The existence and validity of training contracts 
  • Correct payroll coding of apprentice and trainee wages 
  • Whether duties performed align with training arrangements. 

Practical considerations for employers 

  • Perform a year-to-date review of apprentice and trainee wage classifications 
  • Confirm training contracts are current, properly executed and retained on file 
  • Ensure any wages not related to valid trainees/apprentices are correctly excluded from the rebate 
  • Ensure rebate effects in QRO Online reconcile to payroll data prior to lodgement of the annual return. 

Key takeaways for employers 

In light of evolving payroll tax regulations and increased compliance scrutiny, it’s crucial for employers to stay proactive and informed to effectively manage their obligations and maximise eligible rebates. Key takeaways for employers include: 

  • State payroll tax provisions continue to change, particularly for larger employers
  • The ACT’s new top rate significantly increases payroll tax exposure for very large groups from 1 January 2026 and introduces additional reconciliation complexity for FY2025–26
  • Queensland’s rebate extension offers continued relief, but employers should ensure documentation is in place
  • As revenue authorities increasingly rely on payroll data analytics, employers should expect greater scrutiny of payroll tax positions and ensure processes are well documented and applied consistently across jurisdictions. 

How BDO can help

With annual reconciliation season approaching, many employers use this period to validate positions, make adjustments, correct misclassifications and strengthen documentation before lodgement. Our BDO employment tax specialists can assist with both the technical and operational components of payroll tax compliance, particularly where organisations have complex payrolls, multiple systems or cross jurisdictional workforces.

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