Grouped for payroll tax? What it means for your businesses and what to do next

Plenty of owners never think about payroll tax grouping until a letter turns up. Maybe it follows a routine review, or a question about why two businesses with the same directors each claim a full threshold. Either way, the letter says the revenue office now treats your businesses as one employer. The tax bill that comes with it can stretch back years.

The good news is that a grouping decision isn’t always the last word. Here’s how grouping works, what it does to the numbers in your state, and the steps worth taking before you pay, object or borrow.

What does “grouped for payroll tax” actually mean?

Payroll tax is a state and territory tax, but the grouping rules are almost identical across Australia, because the states harmonised them years ago. When businesses are grouped:

• Their wages are added together. The group is tested against the threshold as if it were one employer.
• Only one threshold is available. Revenue NSW puts it simply: “Only one member of a payroll tax group can claim the annual tax-free threshold.” That member is the designated group employer (DGE).
• Everyone shares the debt. RevenueSA says all group members, “irrespective of whether or not they employ”, are jointly and severally liable for the group’s debts incurred while they were members. So a holding trust with no staff can still be pursued.

The rules exist to stop one business being split across several entities so each can claim its own threshold. They catch plenty of ordinary family businesses that were never set up with that in mind.

How do businesses end up grouped?

Revenue NSW’s practice note on grouping sets out four ways a group forms. The same tests apply in other states.

Grouping test	What triggers it	Common real-world example
Related corporations	Companies related under section 50 of the Corporations Act, e.g. a parent and a subsidiary	A holding company that owns 100% of two operating companies
Common employees	Staff of one business work for, or mainly for, another business	One bookkeeper or manager on one payroll running both businesses
Common control	The same person or people hold a controlling interest (generally more than 50%) in each business	A couple who own both a café company and a catering trust
Tracing of interests	Someone holds a controlling interest in a company directly or indirectly, through other entities	A family trust that controls a company that controls another

Two traps catch regional families often. First, discretionary trusts: a beneficiary of a discretionary trust can be treated as controlling it, so a trust and a company the family also controls can be grouped. Second, shared staff: in a country town, the same person often does the books or the rosters for two family businesses. That alone can be enough.

Smaller groups can also be combined into a larger one. Owners with several entities across family members should map the whole structure, not just the two businesses named in the letter.

Why grouping can create a bill out of nowhere

Each business on its own may be well under your state’s threshold. Combined, they may not be. For 2026–27 the annual thresholds are $1m in Victoria and WA, $1.2m in NSW, $1.25m in Tasmania, $1.3m in Queensland, $1.5m in South Australia, $1.75m in the ACT and $2.5m in the Northern Territory. The payroll tax comparison has the rates, phase-outs and regional discounts.

Illustrative example (NSW): a couple in Newcastle own a café through one company, with wages of $800,000 including super, and a catering business through a family trust, with wages of $650,000. Neither business alone reaches the $1.2m NSW threshold. Grouped under common control, the combined wages are $1.45m, which is $250,000 over the threshold. At 5.45%, that’s about $13,625 a year. If the revenue office assesses two past years, the bill is around $27,250 before interest and penalty tax are added.

Revenue NSW warns that failing to tell it about group membership “may result in a tax default by all members of the group”, with interest and penalty tax possible. Penalty tax can often be reduced when you disclose voluntarily or cooperate with an audit, so how you respond matters.

What about groups that cross a state border?

This is where location really changes the maths. A group uses its total Australian wages. Each state then gives the group a share of its own threshold, in proportion to the group’s wages paid in that state.

Illustrative example (Albury–Wodonga): one family runs a trades business through a trust in Albury, NSW, with wages of $500,000, and a hardware store through a company in Wodonga, Victoria, with wages of $700,000. Grouped, their Australian wages are $1.2m.

• NSW: five-twelfths of the wages are in NSW, so the group gets five-twelfths of the $1.2m threshold, which is $500,000. No NSW payroll tax is payable.
• Victoria: seven-twelfths of the wages are in Victoria, so the group gets seven-twelfths of the $1m threshold, about $583,333. Roughly $116,667 of Victorian wages become taxable. A business based in regional Victoria may qualify for the state’s much lower regional rate.

Cross-border towns such as Albury–Wodonga, Tweed Heads–Coolangatta and Queanbeyan–Canberra see this a lot. The payroll tax checker runs the apportionment, and our guide to moving a business interstate covers the other registrations that come with a second state.

If an assessment like this has just landed and the cash isn’t sitting there, see what your business could qualify for. Enquiring doesn’t touch your credit file.

Can you get out of a group?

Sometimes. Every state lets the commissioner exclude a member from a group, but with limits:

• Related companies generally can’t be excluded. If the group exists only because companies are related under the Corporations Act, an exclusion isn’t available. RevenueSA notes an exception where the shares are held by a trustee.
• Other groups can apply. If you’re grouped through common control, shared employees or tracing, you can apply to be excluded. The test in NSW is whether your business is “carried on substantially independently of, and is not substantially connected with” the other members’ businesses.

Revenue offices look at the whole picture: who makes management decisions, shared premises, staff, bank accounts or loans, trading between the businesses, and whether dealings are on arm’s-length commercial terms. Small connections can add up.

In Victoria, you apply online through the SRO’s exclusion form. If the SRO refuses, you have 60 days to lodge an objection. Other states have similar forms and objection windows; the deadline is on your notice.

Practical things that strengthen an application, or reduce your exposure from here:

1. Separate the people. Put staff who work across both businesses on the payroll of the business they actually serve, or charge properly for shared services.
2. Separate the money. Inter-entity loans and shared bank facilities point towards connection.
3. Document independent management. Show who actually runs each business day to day.
4. Get advice on structure before you restructure. Changing ownership can trigger duty, CGT and other costs that outweigh the payroll tax saved.

What to do in the first fortnight after the letter

1. Read the dates. Note the objection deadline and the payment due date. Diarise both.
2. Check the grouping basis. Which test is the revenue office relying on? Is the ownership information correct and current?
3. Check the wage figures. Make sure super, contractor payments and exempt wages are counted correctly for each year. Errors are common in back assessments.
4. Talk to your accountant about objecting or applying for exclusion. Lodging an objection usually doesn’t pause the debt, so plan for payment anyway.
5. Ask about a payment arrangement. Revenue offices generally prefer an agreed plan to chasing a debt, especially if you contact them early.
6. Work out the ongoing cost. Grouping changes every future month, not just the past. Build the extra monthly payroll tax into pricing and cash flow.
7. Check your other obligations. If the DGE changes, someone needs to register, lodge and reconcile on the group’s behalf. Our registration checklist walks through it.

Free help is available too. Each state has a small business commissioner or advisory service, listed in our small business commissioners guide. They can’t decide tax disputes, but they can help you get organised.

How do owners fund a grouping assessment?

A grouping assessment usually lands on a business that’s trading well. The issue is timing: years of tax due at once, plus a higher monthly bill from now on. Owners commonly use:

• Unsecured or line-of-credit finance, typically $5,000 to $500,000, sized on turnover and bank statements. This suits a moderate assessment or carrying the new monthly cost while prices adjust.
• Property-secured business loans from $20,000 to $5,000,000 against residential or commercial property, for larger multi-year assessments or where you’d rather spread the cost over a longer term.
• A payment arrangement with the revenue office, plus finance for the gap. For example, finance can clear the arrears so the business only carries the ongoing liability.

Payroll tax debts, ATO debts and past credit issues are looked at case by case. The earlier you act, the more options you usually have.

Grouped and staring at a bill? Let’s see where you stand

Being grouped isn’t a sign you’ve done something shady. More often it means the family has built more than one good business. We work with owners in that spot regularly, and a payroll tax assessment doesn’t put us off.

Telling us about it takes around 60 seconds, and there’s no credit check when you first enquire. We don’t send your details to a pile of lenders, so your phone won’t light up with calls from strangers. A real person who knows how payroll tax works in your state reads your situation and calls you to talk it through. Please fill the form in accurately, including the size of the assessment and what security you have, so we can match the right option the first time.

See if you qualify →