Payroll Tax for Residential Builders in the ACT

What it is

Payroll tax in the Australian Capital Territory is a tax on the wages an employer pays. It is administered by the ACT Revenue Office under the Payroll Tax Act 2011 (ACT). A residential builder becomes liable once the total taxable wages it pays Australia-wide, or the wages of the group it belongs to, go above the ACT threshold.

The ACT Act is harmonised with the state legislation on the core concepts. Wages, relevant contracts, grouping and nexus read the same way. Rates and thresholds are where the ACT differs.

Threshold and rate for 2026-27

From 1 July 2026 the ACT tax-free threshold is 1.75 million dollars a year, or $145,833.33 a month. That is a cut from the 2 million dollar threshold that applied up to 30 June 2026, announced in the 2026-27 ACT Budget.

The general rate from 1 July 2026 depends on Australia-wide wages, measured at group level.

Annual Australia-wide wages	General rate
More than $1.75 million, not more than $20 million	6.75 per cent
More than $20 million, not more than $50 million	6.85 per cent
More than $50 million, not more than $100 million	7.35 per cent
More than $100 million, not more than $150 million	7.85 per cent
More than $150 million	8.75 per cent

Almost every residential builder in Canberra sits in the first band, so the working number is 6.75 per cent on wages above 1.75 million dollars.

Registration, returns and the annual reconciliation

Registration must be applied for within seven days after the end of the month in which wages first went over the threshold. Returns are lodged through the ACT Revenue Office Self Service Portal.

• Monthly returns for July to November and January to May are due by the seventh day of the following month
• The December return is due by 14 January
• There is no separate June return. June wages go into the annual reconciliation
• The annual reconciliation return is due 28 July

What counts as wages

Taxable wages are wider than the payroll ledger. The ACT base includes wages, salary, commissions, bonuses and allowances, superannuation, payments to contractors, director fees, termination payments, payments in kind, payments to employment agencies, fringe benefits and employer contributions to employee share schemes. Wages paid to sick or injured employees are taxable too.

Contractor payments

This is where residential builders get caught. The Payroll Tax Act 2011 taxes payments made under a relevant contract. The definition is broad and covers most contracts for the supply of services, so a bricklayer, a carpenter or a plasterer engaged on a project starts inside the net. Payments under a relevant contract are wages, including superannuation and fringe benefits, and excluding GST.

A contract escapes only if it fits an exemption, several of which sit in section 32 of the Act:

• Labour is secondary to the supply or use of goods the contractor owns, for example a supply-and-install air conditioning contract, or a contractor working with their own backhoe
• The services are not ordinarily required by the builder and the contractor supplies those services to the public generally
• The contractor conveys goods in a vehicle they own
• The contractor runs a genuine independent business and ordinarily supplies those services to the public. For this one the builder must apply to the Commissioner for ACT Revenue for a determination

Where a contract has a labour and a non-labour component, a flat deduction rate set by trade may reduce the taxable amount. Those rates sit in circular PTA018.

The exemptions are all or nothing. If a contract includes work outside the exempt description, the exemption does not apply and the whole contract is taxable.

Grouping

Part 5 of the Payroll Tax Act 2011 groups related businesses. A group exists where corporations are related bodies corporate under section 50 of the Corporations Act 2001, where employees are used in more than one business, where the same person or set of persons has a controlling interest in two or more businesses, where an entity traces a controlling interest into a corporation, or where a person is part of two or more groups.

Only one member of a group claims the threshold. Every member is jointly and severally liable for the debts of the group incurred while it was a member. A builder running a construction company, a separate development entity and a plant hire trust should assume all three are grouped, and get advice before assuming otherwise.

What to do about it

Track total Australian wages every month, including super, fringe benefits and the labour component of subcontractor invoices, and start modelling payroll tax once the running total passes 1.5 million dollars. Map every related entity and treat them as one group until an adviser says otherwise. Keep the evidence for any contractor exemption in the project file, because the ACT Revenue Office will ask for it on audit.