2025-26 Budget Update: Key changes to Australian state taxes - Northern Territory

The Northern Territory is the first State or Territory to deliver its FY2025-26 budget. The budget includes several revenue initiatives relating to payroll tax and stamp duty.

The NT budget brings significant increases to the tax-free theshold and maximum annual deduction, with the consequence of reduced payroll tax for employers with taxable wages of $7.5 million or less. A payroll tax exemption has also been introduced for apprentices and eligible trainees, and there has been a minor broadening of the payroll tax and stamp duty exemptions for charities and non-for-profit entities. This latter concession will be particularly relevant for charitable aged care providers and affordable housing providers who derive a return from their use of the land (as well as other charitable providers of services who derive a return).

Northern Territory

The Payroll Tax Amendment Bill 2024 (NT) was introduced to the NT Parliament on 24 October 2024 and passed 11 February 2025 as the Payroll Tax Amendment Act 2025 (NT). The key changes include:

Payroll tax threshold and annual deduction increase:

• increase of the payroll tax-free threshold and maximum annual deduction from $1.5 million to $2.5 million; and
• change in the rate of reduction of the annual deduction, to $1 for every $2 of taxable wages above the tax-free threshold (from the previous figure of $1 for every $4 of taxable wages above the threshold).

Employers with taxable wages of $2.5 million or below will be exempt from payroll tax, and those with taxable wages between $2.5 million and $7.5 million will pay reduced payroll tax. However, the level of taxable wages at which the deduction is exhausted will remain at $7.5 million.

The Territory Revenue Office anticipates foregone revenue of $12 million per annum from 2025-26, but notes that this does not factor in potential business and economic stimulus arising from the reforms.

Payroll tax exemption for apprentices and trainees:

Wages paid to apprentices and trainees (as defined in the Training and Skills Development Act 2016 (NT)) will be exempt from payroll tax.

There are limitations on the exemption for trainee wages; the trainee must have been employed by the employer for less than 3 months (for full-time employees) or less than 12 months (for part-time or casual employees) immediately before commencing the traineeship.

The measure is expected to result in $5 million of foregone revenue per annum from 2025-26, but is intended to incentivise the hiring of new apprentices and trainees.

The Revenue Legislation Amendment Bill 2025 (NT) was introduced to the NT Parliament this morning and introduces a change to the imposition of payroll tax and stamp duty in the Territory. That change is:

Payroll tax and stamp duty exemptions for non-for-profit entities: with the goal of “simplifying and broadening” these exemptions, the “commercial and competitive” restrictions on the exemptions have been removed.

For payroll tax, charities and non-for-profit entities will no longer be required to substantiate that wages exclude staff engaging in “commercial or competitive activities”. For stamp duty, these entities will no longer be required to substantiate that acquired property is used solely in a manner that is not “commercial or competitive” (through the removal of the requirement that such a property be for an “exempt use”). This will be particularly relevant for charitable aged care providers and affordable housing providers who derive a return from their use of the land.

Regarding the payroll tax exemption – the previous requirement (that the wages be payable to a person engaged “predominantly” in the entity’s carrying on of charitable activities and not engaged in any “commercial or competitive activity”) has now been replaced with the requirement that the wages be payable to a person “engaged exclusively in work of a kind ordinarily performed in connection with the carrying on of charitable activities by the entity”. While the “commercial or competitive” language has been removed, the change of the test from “predominantly” to “exclusively” could place a more stringent burden on non-for-profits to justify their payroll tax exemption.

Given the relatively modest forecast of foregone revenue ($1.3 million per annum) and the stated purpose of “simplifying” the exemption, it seems likely that the administrative burden on the Territory Revenue Office and on taxpayers in substantiating their non-involvement in in commercial activities exceeded the revenue derived from the commercial activities of these non-for-profit entities.

If passed, the changes will be deemed to take effect from 1 July 2025.

More to come

The budgets for the remaining States and Territories are expected over the coming months with Victoria to deliver its budget next Tuesday 20 May.