1. Australia / New Zealand Payroll Implementation Guide
  2. Understanding Australian State Payroll Taxes

Understanding Australian State Payroll Taxes

The Australian Tax Office (ATO) has created legislation that requires employers to remit payroll taxes in the states and territories of Australia. This payroll tax is a general revenue tax that is assessed on employees' assessable earnings that are paid or payable by an employer. The tax is a self-assessed tax, and requires that employers calculate their own tax liability and pay the calculated amount to the Office of State Revenue of their respective states and territories. When calculating tax liability, each employer must take into consideration:

  • Total wages paid in Australia.

  • Wages paid in individual Australian states.

  • Applicable rates and tax-free thresholds.

The requirements for tax calculations are based on state law. Therefore, the requirements for calculating tax liability differ between each state and territory. Australia has eight states and territories to which the state payroll tax laws apply:

  • Australian Capital Territory (ACT)

  • New South Wales (NSW)

  • Northern Territory (NT)

  • Queensland (QLD)

  • South Australia (SA)

  • Tasmania (TAS)

  • Victoria (VIC)

  • Western Australia (WA)

To calculate state payroll taxes for Australia, you must first set up state tax information, which includes defining wage eligibility and tax calculation rules and defining which pay types, deductions, and benefits are eligible for state taxation. After you set up the state tax information, you enter timecards for employees. When you enter timecards, you specify the state in which the employee worked. After you enter timecards, you process the employees through payroll cycles. The payroll cycle generates autopay timecards for autopay employees. These timecards also contain the state in which the employee worked.

When you process the payroll cycle, the system calculates and stores employee wage information, including the state in which the employee worked. After you have finished processing payrolls for a given period, you then calculate state tax liability to determine how much your organization must pay to each state or territory. You can also run reports to review state tax information.

You use the Australia State Payroll Tax Workbench program (P75A0400) to access all of the programs that enable you to set up tax calculation rules and process state tax information.