Payroll Tax for Residential Builders in Tasmania

What it is

Payroll tax in Tasmania is a state tax on wages. It is administered by the State Revenue Office Tasmania under the Payroll Tax Act 2008 (Tas). A residential builder that pays Australian taxable wages above the threshold must register, lodge returns through Tasmanian Revenue Online and pay the tax.

The Payroll Tax Act 2008 rewrote the old Tasmanian law and harmonised it with New South Wales and Victoria. So the wage definitions, the relevant contract provisions and the grouping tests read the same way they do on the mainland. The rates do not. Tasmania has two tiers, and the top one is among the highest payroll tax rates in the country.

Threshold and rate

For the 2026-27 financial year Tasmania charges payroll tax in three bands of Australian taxable wages:

• 0 to $1,250,000: nil
• $1,250,001 to $2,000,000: 4 per cent
• $2,000,001 and above: 6.1 per cent

The step from 4 to 6.1 per cent at 2 million dollars is the number a growing builder needs to watch. Crossing it raises the marginal cost of every extra dollar of Tasmanian payroll by more than half again.

Monthly thresholds are not a flat twelfth. They are pro-rated by days: the number of days in the month divided by the number of days in the year, multiplied by 1.25 million dollars, and the same calculation against 2 million dollars for the upper tier. An employer that does not claim a threshold pays 6.1 per cent on every dollar of Tasmanian taxable wages for the month.

Tasmania also runs payroll tax rebates and concessions, including for apprentices and trainees. Eligibility and end dates change, so check the current SRO position before relying on one.

What counts as wages

• Gross wages, salaries, overtime, commissions and bonuses
• Allowances paid in cash
• Superannuation contributions, including the 12 per cent Super Guarantee and salary sacrifice amounts
• Fringe benefits, valued by grossing up the aggregate fringe benefits amount using the Type 2 formula under the Fringe Benefits Tax Assessment Act 1986
• Termination payments, excluding the tax-free part of a genuine redundancy
• Director fees and working-shareholder salaries
• The labour component of contractor payments caught by the relevant contract rules

Super at 12 per cent is what lifts many small Tasmanian builders over the line. A firm on 1.15 million dollars of salaries is over 1.25 million once super is added.

Contractor deeming rules

Division 7 of Part 3 of the Payroll Tax Act 2008 (Tas) contains the relevant contract provisions. Where a contract is a relevant contract, the principal is deemed the employer, the contractor is deemed the employee, and payments made under the contract for the performance of work are deemed wages under section 35 of the Act.

For a builder running a trade subcontract model, the subbie spend is therefore a payroll tax base until an exclusion is proved. The excluded contracts a residential builder actually relies on:

• Services of a kind the principal ordinarily requires for less than 180 days in a financial year
• Services performed by one contractor on no more than 90 days in total during a financial year
• The contractor ordinarily supplies services of that kind to the public generally
• The contractor engages their own employees or subcontractors to perform the work
• The contract is ancillary to the supply of goods, or is an owner-driver arrangement

Once a contractor passes 90 days, the whole year of payments to that contractor becomes taxable, not just the days beyond the ninetieth. Where no exclusion applies, only the labour component of the payment is taxable.

Grouping

Grouping combines the wages of related businesses. A group gets one threshold, claimed by one designated group employer, and the group total decides whether the 4 per cent or the 6.1 per cent rate applies. Grouping follows common control, corporate holding relationships, shared employees and interests traced through trusts.

Two Tasmanian entities each paying 1.1 million dollars of wages have no liability apart. Grouped, they are on 2.2 million dollars and they are in the 6.1 per cent band. The Commissioner can de-group a member, but only on application and only where the businesses are carried on genuinely independently.

Lodgement and what to do

Monthly returns are lodged in Tasmanian Revenue Online by the seventh of the following month, so the September return is due 7 October. Every taxpayer must also lodge an Annual Adjustment Return, which reconciles the year and shows whether a refund is due or more tax is payable. It is due by 21 July, and for monthly lodgers it replaces the June return.

Keep a running total of Australian wages, super, grossed-up fringe benefits and deemed contractor labour, and watch the 2 million dollar line. Map related entities and assume they are grouped. Hold the evidence behind any contract exclusion you claim, because the day counts are the first thing the State Revenue Office tests on audit.