The Multi-State Tax Trap: Why Australian eCommerce Brands Pay Twice What They Should
Updated:
August 5, 2025
7 min read
The Multi-State Tax Trap: Why Australian eCommerce Brands Pay Twice What They Should
Selling nationally across Australia sounds simple-one country, one tax system. Then you hire your first employee in Victoria while your warehouse sits in NSW, your registered office is in Queensland, and suddenly you're navigating five different state regimes with different thresholds, different rates, and different compliance requirements.
Most Australian eCommerce businesses discover multi-state tax obligations through penalty notices. By then, back taxes, interest, and penalties have accumulated. Tax optimisation isn't about cutting corners-it's about working smarter within the law. Multi-state planning is where smarter matters most.
The Payroll Tax Minefield
Payroll tax is a state tax on wages. Each state sets its own threshold and rate. The trap: once you exceed the threshold in ANY state, you're potentially liable in ALL states where you have employees-even if those individual state wages are below that state's threshold.
Current Thresholds (2024-25)
State/Territory | Annual Threshold | Rate |
|---|---|---|
NSW | $1,200,000 | 5.45% |
VIC | $900,000 | 4.85% |
QLD | $1,300,000 | 4.75% |
WA | $1,000,000 | 5.50% |
SA | $1,500,000 | 4.95% |
TAS | $1,250,000 | 4.00% |
ACT | $2,000,000 | 6.85% |
NT | $1,500,000 | 5.50% |
The Grouping Rules
Related companies (common ownership/control) are grouped for payroll tax purposes. Your wages across all grouped entities count toward the threshold.
Scenario: Company A (NSW) pays $800K in wages. Company B (VIC, same ownership) pays $300K. Grouped total: $1.1M. Exceeds NSW threshold, triggering liability.
This grouping extends to contractors treated as employees for payroll tax purposes-common in eCommerce fulfillment arrangements.
Payroll Tax Optimization Strategies
Legitimate Structures:
Ensure only genuinely related entities are grouped
Review contractor arrangements for deemed employment
Consider timing of bonus payments across financial years
Caution Areas:
Artificial fragmentation to stay below thresholds (ATO actively audits)
Misclassifying employees as contractors (heavy penalties)
Interstate allocation games without substance
GST: The Complexity Layers
GST appears simple-10% on most goods and services. The complexity emerges in:
Registration Thresholds
You are required to register for GST once your business turnover reaches $75,000 per year. Below this threshold, registration is optional.
When to Register Below Threshold:
Your business makes purchases with GST that exceeds GST you'd collect
You want credibility with business customers (who prefer dealing with registered suppliers)
You plan to exceed threshold soon (register early, establish systems)
GST on Exports
Sales to overseas customers are generally GST-free. This creates input tax credit advantages-you claim GST on Australian purchases but don't charge GST on export sales.
Proper export documentation is essential:
Evidence goods left Australia
Customer address outside Australia
Payment from overseas
GST Groups
Related companies can form GST groups, eliminating GST on intra-group transactions. Benefits:
Simplified reporting
Cash flow improvement (no GST on intercompany transactions)
Reduced administration
Requirements: All members must have same tax period and lodge through one group representative.
BAS Timing Optimization
Monthly vs. quarterly BAS lodgement affects cash flow:
Monthly: Earlier refunds if net creditor position (exporter)
Quarterly: Cash flow advantage if net debtor position (domestic seller)
Choose based on your GST position, not convenience.
Company Tax: The Small Business Concession
Base rate entities (aggregated turnover under $50M, passive income under 80%) pay 25% company tax instead of 30%.
Aggregated Turnover Rules
Your turnover includes connected and affiliated entities. Structuring to stay under $50M through artificial separation doesn't work-the ATO aggregates.
The Franking Credit Consideration
Company tax paid generates franking credits. Shareholders receiving franked dividends get credit for company tax already paid.
At 25% company rate:
Company earns $100, pays $25 tax
Distributes $75 dividend with $25 franking credit
Shareholder receives $100 assessable income, $25 tax offset
Franking credits make company structures attractive for Australian shareholders despite the dual taxation layer.
Division 7A: The Trap That Catches Everyone
Division 7A treats certain payments from companies to shareholders (or associates) as deemed dividends-taxed at full marginal rates without franking credits.
Common Triggers:
Loans from company to shareholder without compliant loan agreement
Company paying personal expenses for shareholders
Company assets used privately by shareholders
Compliant Loan Agreement Requirements:
Written agreement
Interest at benchmark rate (published annually)
Maximum term (25 years secured, 7 years unsecured)
Minimum yearly repayments
Taking money from your company without proper documentation creates deemed dividends with punitive tax treatment.
The Pre-30 June Scramble
Loans outstanding on 30 June trigger Division 7A unless:
Repaid before lodgement of company tax return
Covered by compliant loan agreement
Paid as dividend or salary/wages
Plan distributions quarterly, not in June panic.
Instant Asset Write-Off
SMEs can also claim a deduction for expenditure under the small business instant asset write-off measure, which has been extended until 30 June 2025 for businesses with aggregated turnover under $10M.
Current limit: $20,000 per asset
Planning Considerations:
Timing purchases to maximize deductions
Asset vs. expense classification
Bundling vs. separating asset purchases
International Expansion Tax Implications
Selling to Australian customers creates Australian tax obligations regardless of where you're located. From July 2024, reporting requirements include the hiring of assets and services made through platforms, including storage, food delivery, and professional services.
Selling FROM Australia Internationally:
Export sales generally GST-free
Foreign income included in Australian company tax
Transfer pricing rules apply to related party transactions
Selling TO Australia from Overseas:
GST registration required at $75K threshold
Marketplace facilitators (Amazon, eBay) may collect GST on your behalf
Income tax nexus depends on permanent establishment
The Tax Calendar for eCommerce
Monthly:
BAS lodgement (if monthly reporter)
Payroll tax remittance (if liable)
PAYG withholding remittance (medium+ employers)
Quarterly:
BAS lodgement (if quarterly reporter)
PAYG instalment activity statement
Superannuation guarantee contributions
Annually:
Company tax return (typically due 15 May for 30 June year-end)
FBT return (if applicable)
Transfer pricing documentation (if international transactions)
Critical Dates:
30 June: Financial year-end, Division 7A deadline
28 July: Superannuation Q4 due
21st of month following quarter: BAS due
15 May: Company tax return due (with agent extension)
The Multi-State Compliance Checklist
Requirement | NSW | VIC | QLD | WA | SA |
|---|---|---|---|---|---|
Payroll Tax Registration | ✓ if over threshold | ✓ if over threshold | ✓ if over threshold | ✓ if over threshold | ✓ if over threshold |
Workers Comp Policy | ✓ if employees | ✓ if employees | ✓ if employees | ✓ if employees | ✓ if employees |
Land Tax | ✓ if property owner | ✓ if property owner | ✓ if property owner | ✓ if property owner | ✓ if property owner |
Business Name Registration | Federal - ASIC | Federal - ASIC | Federal - ASIC | Federal - ASIC | Federal - ASIC |
The Professional Advisor Network
Multi-state tax compliance requires specialists:
Tax Accountant: Structure planning, return preparation, ATO negotiations
Tax Lawyer: Complex restructuring, dispute resolution, private rulings
Payroll Specialist: Multi-state payroll tax compliance, calculations
BAS Agent: Regular lodgements, GST compliance
Don't try to manage multi-state tax internally unless you have dedicated finance staff with relevant expertise. The complexity exceeds most founders' capabilities, and the penalty exposure is severe.
Tax planning strategy isn't just about what you do at the end of the financial year-it's about how you plan throughout it. A skilled tax planner helps you forecast profits, structure payments, and take advantage of changing tax laws.
Get advice before you cross state lines. The cost of proactive planning is a fraction of reactive penalty management.
