Victorian payroll tax changes: What small business owners need to know

What's changed with the Victorian payroll tax-free threshold?

The payroll tax-free threshold has increased from $700,000 to $900,000 and will increase again to $1 million on 1 July 2025. That's a huge win for small employers.

Source: State Revenue Office Victoria – Payroll tax changes

Payroll taxes are the biggest source of taxation revenue

Predicted revenue for taxes grouped by category in the 2025-26 Victorian budget.

Source: 2025-26 Statement of Finances

Who benefits from the payroll tax-free threshold changes?

• ~6,000 businesses will now pay zero payroll tax
• ~20,000 more will pay less, saving up to $14,550 annually
• Regional employers continue to enjoy a discounted rate of 1.2125% on wages above the threshold
• Businesses with wages between $3MM and $5MM will see the benefit phase out gradually

Source: Victorian Budget

What you should do now as a business owner?

• Track your wages: Know if you'll cross $900k this year or $1m next
• Plan for savings: Use the relief to hire, reinvest, or build a cash buffer
• Review your group structure: The threshold applies to total group wages
• Stay compliant: Lodgement rules haven't changed

FAQs

1. Do I need to do anything to access the new threshold?

No. The new threshold is automatically applied when calculating your payroll tax.

2. What if my wages exceed $900k or $1 million?

You'll only pay payroll tax on the amount above the threshold. And if you're between $3 million and $5 million, the deduction phases out gradually.

3. What happens if I operate multiple businesses?

The combined wages are assessed if your businesses are grouped for payroll tax purposes. Be sure to include all related entities in your calculations.

4. What's the payroll tax rate in Victoria?

It's 4.85% for metro businesses and 1.2125% for eligible regional employers, applied to wages above the threshold.

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