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Employers in Australia will fall under two different thresholds for payroll tax rates depending on how much they spend on employee taxable wages. These thresholds are:
| Taxable income (AUD) | Tax rate |
|---|---|
| If paying under $6.5 million in Australian Taxable wages per year | 4.75% |
| If paying over $6.5 million in Australian Taxable wages per year | 4.95% |
As of 2023, there will also be a new levy added to support mental health service access for employees. This new level will only apply for employers who spend more than $10 million on Australian taxable wages.
There are five progressive income tax thresholds that determine how much employees owe in taxes each year. These thresholds are:
| Taxable Income (AUD) | Tax rate 2023 |
|---|---|
| $0 – $18,200 | 0% |
| $18,201 – $45,000 | 19% |
| $45,001 – $120,000 | 32.5% |
| $120,001 – $180,000 | 37% |
| $180,001 upwards | 45% |
There are a range of tax deductions and tax offsets, as well as schemes for low income earners that allow them to pay less tax.
Australia does not have an explicit social security tax system like other developed nations. However, employers are obliged to make certain contributions as part or on top of their employees salary. These contributions are broken down into
| Contribution item | Contribution rate |
|---|---|
| National Pension Fund | 4.5% (up to KRW 5.53M) |
| National Health Insurance | 3.545% |
| Long Term Care Contribution | 6.405% |
| Employment Insurance | 1.05-1.65% (based on no. of employees) |
| Industrial Accident Compensation Insurance Variable based on industry | Min. 0.76% |
Employees are required to contribute a 2% levy annually to Medicare, the Australian public health system. If they have not registered with a private health insurance provider, they will be required to pay an added 1.5% on top of this.
| Contribution item | Contribution rate |
|---|---|
| National Pension Fund | 4.5% |
| National Health Insurance | 3.545% |
| Long Term Care Contribution | 6.405% |
| Employment Insurance | 0.9% |
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Your business can easily hire employees in Australia without opening a local entity. We handle local employment law, complex tax regulations, and international payroll in 180+ countries worldwide. All you need to do is focus on your business.
The Australian Taxation office (ATO) is the principle revenue service in Australia. However each state also has their own revenue bureau that connects directly to the ATO.
Payroll tax contributions vary by state and there are threshold limits to whether or not employers are exempt to paying payroll taxes. If an employer makes pays over a certain limit a month towards their payroll, then they will be subject to payroll tax rate of 4.75% or 6.85% depending on state where their payroll is registered.
In Australia, payroll tax is also known as a state or territory tax and is only paid if a business goes over a certain wage bill threshold in a month timeframe. Each state has a different tax-free threshold. For example, in the Australian Capital Territory (ACT), if your business pays over $166,666.66 or $2 million per year on payroll, then the business will be subject to pay 6.85% in payroll taxes. It is possible to check the different threshold limits and rates for any of the states or territories through the dedicated Australian Government Business website.
Australia – 2023 tax rates
