iscoverAccountants are increasingly open about the complexities and frustrations surrounding payroll tax and the differences in all parts of Australia, with many professional bodies now urging for change.
ACT payroll tax change set to create complexity, CA ANZ warns
22 October 2025
•
9 minute read
The states and territories of Australia all have differences within their payroll tax, with the ACT making moves to further raise its payroll tax to 8.75 per cent.
Set to be effective from 1 January 2026, the ACT 8.75 per cent payroll tax to be applied to entities with Australian wages of more than $150 million has been openly contested by business and accounting bodies who cited it would undermine businesses, jobs and trust.
You’re out of free articles for this month
To continue reading the rest of this article, please log in.
Create free account to get unlimited news articles and more!
In a submission regarding the Payroll Tax Amendment Bill 2025 (the Bill) to the ACT Standing Committee on Public Accountants and Administration, CA ANZ said the increase would bring an extra layer of complexity to businesses.
Currently, the ACT payroll tax rate ranged from 6.85 per cent to 7.35 per cent and was the highest in Australia, meaning the increase to 8.75 per cent would further set it apart from the rest of the states and territories.
The submission authored by Susan Franks, CA ANZ tax, super and financial services leader, said the change to the payroll tax rate would induce complexity and have adverse impacts on the employment of ACT residents.
“The 3.3 per cent payroll tax differential between the ACT and New South Wales may result in the hiring on NSW rather than ACT residents for cross-jurisdictional roles and the redesign of ACT roles into cross-jurisdictional positions,” she said.
“Altering the payroll tax rate mid-year required significant changes to the Payroll Tax Act that could have been avoided by postponing the 8.75 per cent increase until 1 July 2026.”
According to Franks, it was not wise for ACT to increase the payroll tax rate within the throes of a financial year based on the fact that before a new financial year businesses set budgets and prices.
“If payroll taxes change after this process, it can create extra costs (as well as work) which may not be recoverable since prices are often already fixed,” she said.
“Ideally the ACT government should give businesses substantial notification before the start of a financial year if they propose to make a change to taxes and rates.”
The new payroll tax rate would also impact those seeking work within the ACT as under Revenue Circular PTA039, services performed by an employee in more than in more than one Australian jurisdiction then the first and primary test is that “payroll tax is payable in the Australian jurisdiction in which the employee’s principal place of residence is located”.
As the ACT is surrounded by NSW, this would mean many people living in NSW work in the ACT or both the ACT and NSW.
“Given the 3.3 per cent payroll tax rate differential for entities with Australia wide wages of more than $150 million, such employers may prefer to employ those who live in NSW for cross jurisdictional roles and may have an incentive to redesign jobs so that pure ACT roles become cross jurisdictional roles,” Franks said.
According to analysis by Franks, this would mean if an employee worked across two jurisdictions payroll tax would be payable in the jurisdiction of their principal place of residence.
If an employer employed the ACT resident, they would have a potential payroll tax liability of $17,500 a year to the ACT government, whereas if they employed the NSW resident, they would pay $10,900 to the NSW government.
Therefore, choosing the NSW resident would save the employer $6,600 a year.
Franks said this was a clear example that needed to be taken into account before the payroll tax rate was set to change come the new year.
You need to be a member to post comments. Become a member for free today!
