State and territory revenue 

Income tax and GST are the two taxes students meet first, but a significant share of Australia's overall tax take is raised by the states and territories themselves, under their own separate legislation. This article surveys that state and territory layer — principally duty, payroll tax and land tax — and explains why it exists alongside, rather than as part of, the Commonwealth taxes covered elsewhere in this module.

Why a separate layer exists

As explained in the article on income tax fundamentals, income tax has been an effectively exclusive Commonwealth field since the uniform tax cases of the 1940s, and GST — though collected by the Commonwealth — is distributed to the states and territories under a national funding arrangement rather than levied by them directly. Neither of those Commonwealth taxes is something a state or territory government imposes or varies itself. To fund the services and infrastructure within their own responsibility, the states and territories therefore each maintain their own revenue bases, raised under their own legislation, at rates and thresholds that they individually set and can individually change. That is why duty, payroll tax and land tax are properly described as a separate layer: they sit beside Commonwealth income tax and GST rather than beneath a single national scheme, and a rule stated for one state or territory cannot be assumed to hold in another.

Duty on property and other dutiable transactions

Every state and territory imposes a form of duty — sometimes called stamp duty or transfer duty — on certain transactions, most commonly the transfer of real property. A conveyancing duty is typically calculated by reference to the value of the property or the consideration for the transaction, whichever the relevant jurisdiction's legislation treats as the dutiable value, and is generally payable by the transferee. Depending on the jurisdiction, dutiable transactions can extend beyond straightforward land transfers to other dealings that the relevant Act specifically brings within the duty base — in New South Wales, s 8 of the Duties Act 1997 charges duty on a transfer of dutiable property and on an agreement for its sale or transfer.¹ Each state and territory sets its own duty rates, thresholds and concessions — including concessions sometimes available to first home buyers or on other specified transactions — and these differ, and change, from jurisdiction to jurisdiction, so a rate or concession must always be checked against the specific jurisdiction's current Act rather than assumed to apply generally.

Payroll tax

Payroll tax is levied by each state and territory on wages paid by an employer, but only once an employer's total taxable wages exceed a threshold set by that jurisdiction's own legislation — with the practical effect that payroll tax is chiefly a concern for larger employers rather than small businesses whose payrolls sit below the relevant threshold. Because payroll tax is assessed by reference to a single employer's threshold, most jurisdictions also contain grouping provisions, which treat related businesses, for example businesses under common control, as a single employer for threshold purposes, so that an employer cannot avoid or reduce payroll tax liability simply by dividing its workforce among related entities. As with duty, the threshold, the rate and the detail of the grouping rules are set separately by each state and territory and must be checked in the specific jurisdiction's current legislation.

Land tax

Land tax is an annual tax levied by the states and territories on the value of land a taxpayer holds, generally assessed against the total value of land owned in that jurisdiction as at a particular date each year, and often only once total landholdings exceed a threshold set by the relevant Act. A person's principal place of residence is commonly, though not universally, given some form of exemption or concessional treatment, along with other categories of land specified in the relevant jurisdiction's legislation. Land tax is a distinct tax from local government rates, which are levied by local councils for different purposes and under different legislation again, and the two should not be conflated in a problem answer.

Reading this layer alongside the rest of the module

Because duty, payroll tax and land tax are all state and territory taxes, none of them is administered through the same national framework described in the article on tax administration for income tax and GST. Each jurisdiction has its own revenue office, its own objection and review pathway, and its own legislation, and a student answering a problem question involving any of these three taxes must identify the specific state or territory in issue before going further.

Applying this in a problem question

1. Identify the specific state or territory whose legislation governs the transaction or landholding in the facts — never assume a national rule.
2. Classify the issue as duty (a transaction), payroll tax (an employer's wages) or land tax (an annual landholding), since each has its own trigger and its own Act.
3. For duty, identify the dutiable transaction and who is liable to pay.
4. For payroll tax, consider whether the employer's wages exceed the relevant jurisdiction's threshold, and whether grouping provisions bring related entities into account.
5. For land tax, consider whether a principal-residence or other exemption is likely to apply, and confirm it against the specific jurisdiction's current legislation.
6. Do not state a specific rate, threshold or dollar figure — direct the reader to check the current legislation of the relevant jurisdiction.