Interstate payroll tax apportionment, explained

This is the calculation state revenue office calculators don’t do, because each one only knows about its own state. If you pay wages in more than one Australian state, the tax-free threshold you get in each one is smaller than the full published figure — here is exactly why, and how much smaller.

The core idea

Every state publishes a threshold that assumes your business only pays wages in that state. A business paying $1,200,000 in wages, all in NSW, pays no NSW payroll tax — that’s exactly the threshold. But a business paying $600,000 in NSW and $600,000 in VIC isn’t two separate $1,200,000-wage businesses each sitting exactly at their threshold — it’s one $1,200,000-wage business that happens to operate in two states. Revenue offices apportion the threshold to reflect that.

Worked example

Revenue NSW publishes this example: a business pays $900,000 in NSW wages and $2,100,000 combined in QLD and VIC, for total Australian wages of $3,000,000.

NSW threshold available = $1,200,000 × ($900,000 ÷ $3,000,000) = $360,000
Taxable NSW wages = $900,000 − $360,000 = $540,000

Instead of the full $1,200,000 threshold, this business gets $360,000 in NSW — 30%, matching NSW’s 30% share of its total Australian wages. The same wages, apportionment logic applies in VIC (with its own phase-out layered on top) and, structurally differently, in QLD. See the NSW, VIC and QLD pages for each state’s specifics.

Part-year employers

If you didn’t employ for the full financial year, the threshold is prorated again by days employed divided by days in the financial year, applied on top of the wage-share apportionment above. Revenue NSW’s published example: a business with $1,500,000 in NSW wages, employed 184 of 365 days, gets a threshold of $1,200,000 × (184 ÷ 365) = $604,931.51, leaving $895,068.49 taxable.

Grouping interacts with this too

If your business is grouped with others, the same apportionment applies to the group’s combined wages, not just yours — see how grouping affects your threshold.

Frequently asked questions

Why does paying wages in a second state reduce my threshold?

Each state's threshold assumes it's the only place you pay wages. Once you employ across state lines, every state you operate in apportions its threshold to your share of total Australian wages, so you don't effectively get several full thresholds for one business.

What is the formula?

The general pattern is: state threshold × (wages paid in that state ÷ total Australian wages). NSW and, at a further step, Victoria apply this directly to their threshold. Queensland works differently — its deduction is calculated from total Australian wages first and then subtracted directly from Queensland wages, without a separate apportionment-by-share step.

Does this apply per employee or to the whole business?

To the whole business (or group, if you're grouped). It's based on total wages paid in each state over the financial year, not calculated separately for each employee.

Do WA, SA, TAS, ACT and NT wages count?

Yes. Even though this tool doesn't calculate a separate liability for those states yet, wages paid there count toward your total Australian wages, which reduces the threshold available in NSW, VIC and QLD.

What if I only employ for part of the year as well as interstate?

Both apportionments apply together — the threshold is reduced for your state wage share, and separately prorated for the portion of the year you employed. Order matters, and getting it wrong produces a plausible-looking but incorrect result. The calculator below applies both correctly.