ACT Payroll Tax reforms: Preparing for the 2026–2027 shift

Staying compliant with Australian payroll tax legislation is rarely a “set and forget” task. Just as businesses adjust to one set of rules, regulatory frameworks continue to evolve. The latest example is the Australian Capital Territory’s upcoming payroll tax reforms, which will introduce significant changes for employers from 2026. For organisations operating in the ACT - particularly those with large or multi-state workforces - the reforms represent a structural shift in how payroll tax liabilities will be calculated.

A Move Toward a Tiered System

The ACT Revenue Office is transitioning away from a single flat payroll tax rate to a progressive, tiered structure. Under the new approach, an employer’s payroll tax liability in the ACT will be influenced by their Australia-wide wage bill, rather than solely the wages paid within the territory.

This change means national workforce costs will play a greater role in determining payroll tax obligations, particularly for larger employers operating across multiple jurisdictions.

The reforms will be introduced in two stages during 2026, requiring payroll teams to carefully manage changes partway through the financial year.

Phase One: January 2026

The first stage takes effect on 1 January 2026 and builds on surcharges introduced in July 2025.

Employers with higher Australia-wide wage bills will face additional surcharges on top of the ACT’s general payroll tax rate of 6.85%.

The updated structure will apply as follows:

• Wages $50 million to $100 million: 6.85% plus 0.5% surcharge
  
  
• Wages $100 million to $150 million: 6.85% plus 1.0% surcharge
  
  
• Wages above $150 million: flat rate of 8.75%
  
  

These changes represent a shift toward progressively higher rates for larger national employers.

Phase Two: July 2026

The second phase begins on 1 July 2026 and introduces a fully progressive payroll tax system while also reducing the payroll tax threshold.

The ACT threshold will decrease from $2.0 million to $1.75 million, meaning more employers may fall within the payroll tax regime.

Under the new progressive rate structure:

• $1.75m – $20m: 6.75%
  
  
• $20m – $50m: 6.85%
  
  
• $50m – $100m: 7.35%
  
  
• $100m – $150m: 7.85%
  
  
• Above $150m: 8.75%
  
  

For many employers, these adjustments will require updates to payroll calculations and financial planning.

Managing Mid-Year Change

One of the key challenges introduced by the reforms is the mid-financial-year transition.

Changes to rates and thresholds halfway through the financial year mean payroll teams must ensure liabilities are calculated correctly under both the January surcharge structure and the new July progressive model.

For businesses operating nationally, calculating Australia-wide wages to determine the appropriate ACT tier may also add further complexity.

Ensuring payroll systems can accommodate changing tax rates and thresholds — without manual intervention — will be essential to avoid errors or underpayment penalties.

Preparing for Increasing Payroll Complexity

As payroll tax frameworks continue to evolve, employers must ensure their payroll processes and systems are able to adapt to legislative change.

Monitoring regulatory updates, reviewing payroll configurations, and investing in technology that can manage jurisdictional complexity will become increasingly important.

Astute Payroll continues to monitor payroll tax developments across Australia and supports employers navigating complex workforce compliance requirements.

More information is available at astutepayroll.com