Multi-State Payroll Tax Apportionment

The problem

Australian payroll tax is administered state-by-state, but thresholds are assessed against Australia-wide group wages. When an employer pays wages in more than one jurisdiction, each state's tax-free threshold is apportioned proportionally — preventing employers from claiming the full threshold in multiple states simultaneously.

The formula

The formula applied to every state is:

Deduction = BaseThreshold × (State Wages ÷ Total Australian Wages)

Taxable wages are then the excess of state wages over this apportioned deduction, multiplied by the state's applicable rate.

Worked example

A group with $5,000,000 in Australia-wide wages, of which $2,000,000 are paid to NSW employees:

• NSW share = $2,000,000 ÷ $5,000,000 = 40%
• NSW apportioned threshold = $1,200,000 × 40% = $480,000
• NSW taxable wages = $2,000,000 − $480,000 = $1,520,000
• NSW payroll tax = $1,520,000 × 5.45% = $82,840

Critical nuances

Victoria phases out the $1.0M threshold between $3M and $5M of Australian wages (reducing $0.50 per dollar of excess over $3M). Queensland's deduction diminishes $1 for every $4 above $1.3M (reaching $0 at $6.5M). Western Australia uses a wider $1.0M–$7.5M taper window. Each state's threshold, taper, and rate logic applies independently after the apportionment ratio is calculated.

The DGE rule

Only the Designated Group Employer (DGE) — a single nominated entity within a grouped structure — may claim the threshold. All other group members pay payroll tax from the first dollar of wages. Failure to nominate the optimal DGE is a common and costly error. See our grouping and DGE guide.

Verify your figures

Use our multi-state calculator to model your group structure. Every figure is verified against the administering revenue office — see our editorial policy.