NSW Payroll Tax for Accountants

NSW payroll tax applies when an employer pays NSW wages and its Australian taxable wages exceed the relevant threshold. Prepare your client’s return by confirming registration and group status, reconciling wage components and obtaining authority to lodge through Revenue NSW.

Establish Your Client’s NSW Liability

Test registration using total Australian taxable wages, including the wages of any payroll tax group. Looking only at the NSW payroll can miss a registration obligation. Revenue NSW administers this tax, including accounts previously described as OSR or Office of State Revenue accounts.

Revenue NSW’s registration instructions require registration within seven days after a month in which Australian wages exceed the monthly threshold. The employer must also pay NSW wages. Establish when employment started and whether the business belongs to a group before completing the application.

The registration trigger and annual deduction answer different questions. Crossing a monthly threshold requires registration even when the eventual annual assessment is nil. A registered employer still lodges an annual return.

Revenue NSW’s thresholds and rates show an annual threshold of $1.2 million and a 5.45% rate for 2026-27. The published 2025-26 and 2024-25 figures are the same. The NSW deduction reduces for interstate wages and can reduce for part-year employment. A group receives one deduction.

The governing legislation is the Payroll Tax Act 2007 No 21 (NSW). The year is part of the Act’s name. It does not identify the version applying to a particular return. Select the historical version for the employer’s reporting period in the NSW legislation register.

Section 17 covers employer superannuation contributions, Part 4 covers exemptions and Part 7 covers registration and returns.

Match every exclusion to the client’s circumstances. Revenue NSW’s exempt-employer guidance requires an application, including for eligible charities and public benevolent institutions. Charity registration alone does not grant a payroll tax exemption.

For a charitable organisation, assess its purposes and the work performed by each employee. Retain the exemption decision, governing documents and evidence of employee duties. A partial exemption needs a workpaper separating exempt duties from taxable activities.

Obtain Revenue NSW Access

Obtain the employer’s written authority to handle its NSW payroll tax account before accessing its records. Confirm the entity name and ABN or ARBN, the authorised business contact and your practice’s scope of work. An ATO nomination does not establish authority for a Revenue NSW account.

Use the official Payroll Tax Online login. It requires the employer’s Client ID and Correspondence ID. These appear on Revenue NSW letters or assessments. Keep account-access information in your practice’s restricted records, separate from the wage workpaper sent for approval.

A Correspondence ID lasts 16 months. If access fails, check the entity and use the most recent correspondence before trying again. Revenue NSW’s access guidance says only an authorised contact can request a missing Correspondence ID. Have that contact arrange recovery with Revenue NSW. Do not request someone’s personal sign-in credentials.

Before lodging for the employer, have your practice’s business name, ABN and contact details ready. Check the account’s business details and grouping record against the client file. Access is ready when the correct employer account opens and the authorised contact details agree with the engagement.

Reconcile NSW Taxable Wages

Build the NSW wage workpaper from payroll reports and financial records, then assess amounts paid outside payroll. Reconcile gross wages to the accounts, explain adjustments and allocate taxable amounts under the NSW nexus rules. Keep interstate taxable wages in a separate column. The national payroll tax guide explains why interstate wages affect a state deduction.

Use the return’s financial year to select rates. For a 2025 or 2026 enquiry, first establish whether the client means a calendar year or a financial year ending in that year. Save the applicable official rate row with the workpaper. A future-year enquiry needs that year’s published rule, while an older return needs its historical rule.

The following fictional workpaper assumes a non-grouped employer that employs throughout 2026-27. Its NSW allocation has already been reviewed. Contractor amounts exclude GST and reflect a separate liability review.

Wage component	NSW	Interstate	Record supporting the amount
Gross salaries and wages	$1,100,000	$275,000	Payroll reports reconciled to accounts
Employer super contributions	$132,000	$33,000	Contribution records and timing review
Taxable fringe benefits after gross-up	$37,736	$9,434	Benefit calculation and allocation
Liable contractor payments	$30,264	$7,566	Contracts and reviewed payment schedule
Total taxable wages	$1,300,000	$325,000	Signed reconciliation

Australian taxable wages total $1,625,000. The NSW share is 80%, so the annual NSW deduction is $1,200,000 multiplied by 80%, or $960,000. The taxable excess is $340,000. At 5.45%, the annual liability is $18,530 before crediting payments already made.

For a hypothetical 30-day period in that same financial year, assume NSW taxable wages of $110,000 and interstate taxable wages of $27,500. Revenue NSW publishes a $98,630 monthly threshold for a 30-day period. With the same 80% NSW share, the monthly deduction is $78,904. The actual-wages calculation is ($110,000 less $78,904) multiplied by 5.45%, or $1,694.73.

A monthly deduction is not automatically one-twelfth of the annual deduction. Use the reporting year’s published day-based amount and the employer’s actual entitlement.

NSW fringe-benefit rules use the Type 2 gross-up factor on the combined Type 1 and Type 2 aggregate amounts. For the example, NSW taxable benefit values of $20,000 multiplied by 1.8868 produce $37,736. Interstate values of $5,000 produce $9,434. These are payroll tax values, not the FBT payable or employee reportable-benefit totals.

Record the actual or alternative fringe-benefit method used. The alternative method requires at least 15 months of fringe-benefit history before the financial year starts. It uses the prescribed preceding FBT return for monthly amounts and reconciles against the return preceding financial year-end. Keep both returns where that method applies.

Employer super contributions are taxable wages, including effective pre-tax salary sacrifice. Employee after-tax contributions are already part of gross wages and must not be counted twice. Review when contributions are paid or payable and the specific treatment of the contribution type.

A change to super payment timing can move the payroll tax reporting period. It does not change the NSW payroll tax rate. Reconcile clearing-house records and outstanding contributions across the year-end so Payday Super changes do not cause omissions or duplicate amounts.

Review the NSW Group Record

Identify the designated group employer (DGE), any group single lodger (GSL) and every member paying Australian taxable wages. Related corporations, common control and shared employees can create grouping. Separate ABNs do not establish separate deduction entitlements.

Compare the client’s entity chart with Revenue NSW’s grouping record. Ask the client to explain acquisitions, changes of control and shared staffing during the return year. Record when each change occurs and retain the supporting ownership or employment records. Update incorrect group details through Payroll Tax Online.

A DGE or GSL needs the other members’ NSW and interstate wages, plus the Client IDs of NSW employing members. A member that does not claim the threshold supplies the DGE’s Client ID or name. Reconcile each member’s schedule before calculating the group’s Australian wages and NSW share. Mark which employer claims the deduction so it cannot appear again in another member’s calculation.

Consider a fictional full-year group with $2 million of NSW wages and $500,000 of interstate wages. Its NSW share is 80%, giving a group deduction of $960,000 on the stated annual threshold. The NSW excess is $1,040,000 and the group liability is $56,680 before payments or other adjustments. Allocate that result through the applicable DGE or GSL arrangements. Do not give every member a separate $960,000 deduction.

Review contractor payments separately from the employee payroll. Start with contracts and the accounts-payable schedule, including arrangements labelled consulting or subcontracting. Revenue NSW’s contractor guide explains relevant contracts and the complete exemption tests. An ABN or invoice alone does not establish an exemption. Retain the contract assessment and evidence for each claimed exclusion, then carry the reviewed liable amount into the wage workpaper.

Lodge the NSW Annual Return

Lodge the annual return from the approved full-year wage workpaper and reconcile the liability against payments already made. The annual return performs the annual reconciliation. It includes the final wage period of the financial year, which has no separate monthly return or payment.

Follow Revenue NSW’s annual-return instructions in this order.

1. Confirm business identifiers, employee numbers and any part-year employment dates. Check ultimate holding company details where relevant.
2. Enter your agent details and the reviewed NSW wage components. Include interstate wages and the group information required for the employer’s status.
3. Compare the calculated liability with the workpaper. Explain any difference before asking the client to approve the figures.
4. Retain the client’s approval, then complete lodgement. Save the confirmation and reference number.
5. Assign payment to the agreed person and retain proof of payment against the account. A lodgement confirmation does not prove payment.

Employers with an annual NSW liability above $20,000 must pay monthly. Monthly payments and the annual reconciliation have separate responsibilities. Set the payment owner in the engagement and keep that owner informed when an adjustment changes the amount due.

The ordinary monthly deadline is seven days after period-end, with the next business day applying where required. The holiday-period return has a separate published deadline. Use Revenue NSW’s period-specific deadline table for that exception and annual lodgement and payment. Record the applicable calendar deadline in the client’s task list. Check it again if a downloaded calendar has not been updated.

Correct the NSW Client Record

Trace an incorrect amount to its source before changing the client’s payroll tax record. Keep the original workpaper and lodged return, then prepare a correction showing what changed and why.

Problem	Evidence to check	Corrective action
Super omitted from wages	Contribution records and period allocation	Recalculate wages and disclose affected returns to Revenue NSW
Fringe benefits overstated	Benefit values, gross-up and method	Prepare the corrected return calculation and refund evidence
Registration missed	Historical Australian wages and group membership	Contact Revenue NSW, register and resolve the affected periods
Group deduction duplicated	Member schedules and DGE or GSL record	Correct group details and recalculate each affected liability
Payment missing from the account	Bank record and payment reference	Ask Revenue NSW to trace the payment before paying twice

Use the Revenue NSW payroll tax contact route for access, correction and payment enquiries. Quote the Client ID and employer ABN or ARBN. Supply the affected return period, lodgement reference and a reconciliation of the original and corrected figures. For a payment enquiry, add the payment reference and bank evidence through the channel Revenue NSW requests.

For an underpayment, make a voluntary disclosure of the affected amounts and periods. Interest can still apply. For an overpayment, retain the refund request and subsequent correspondence. Revenue NSW permits prior-year refund reassessment requests within five years of the initial assessment.

Keep relevant records for at least five years. The handover file needs source schedules, the final workpaper, client approval, lodgement confirmation and payment or refund evidence. Close the task when the account agrees with the corrected liability and every outstanding payment or enquiry has a named owner.