Xero Payroll runs your pay runs, Single Touch Payroll and super, but it does not prepare three state-based obligations that many Australian employers carry: payroll tax, portable long service leave returns and workers compensation wage declarations. Xero's own support has said Xero Payroll doesn't calculate payroll tax automatically and there are currently no plans to add it. So the figures get worked out from Xero's reports, usually in a spreadsheet. Below: what each obligation needs, what people do today, and the options, simplest first. It is general information, not tax or legal advice; check the rules for your state with your accountant or the relevant authority.
The problem in plain English
Payroll in Xero is built around the national rules: tax withheld, STP reporting to the ATO and super. Payroll tax, portable long service leave and workers comp are run by the states and territories, and each one has its own definition of wages, its own exclusions and its own portal or return.
So after the pay run, someone still has to export reports, split wages by state, entity or worker type, decide which pay items count for each obligation, key the results into a portal and keep the workings for audit. Once a year for one state, that's a chore. Monthly payroll tax in several states, quarterly LSL returns and an annual workers comp declaration make it a standing job that depends on one person's spreadsheet.
What Xero users are asking for
Xero's Product Ideas site shows how widespread this is. As of 29 October 2026:
- [AU Payroll - Monthly payroll tax report](https://productideas.xero.com/forums/967118-payroll-expenses/suggestions/46225696): 139 votes, created January 2023, status "Accepted". Xero's reply on 9 December 2025 says the idea has been "added to the wider pool of ideas" and is "not on our immediate roadmap". One payroll officer with staff in three states writes: "I export the employee summary to excel and manually calculate."
- [AU Payroll - Add portable long service leave report](https://productideas.xero.com/forums/967118-payroll-expenses/suggestions/47693666): 119 votes, created January 2024, status "Gaining Support". Xero's reply on 26 November 2025: "now it's up to the community to get behind and support it." Commenters report around 45 minutes to over an hour per scheme each quarter for smaller teams, and one reports "8-10 hours for 80 employees" plus another two hours entering portal data.
- [AU Payroll - Report for Workers Compensation](https://productideas.xero.com/forums/967118-payroll-expenses/suggestions/48938981): 49 votes, created October 2024, status "Gaining Support" (Xero reply, 4 February 2026). Users describe "having to marry several reports together".
"Accepted" and "Gaining Support" are not delivery dates, so plan as if the gap will still be there next year.
What each obligation needs
State payroll tax
Payroll tax is a state and territory tax on wages, run by each state's revenue office (for example the Queensland Revenue Office), not the ATO. Each state sets its own threshold and rate. Businesses that are related can be grouped, which means the group is treated as one employer for the threshold, so several small entities can be liable together. If you pay wages in more than one state, the threshold is shared across states in proportion to the wages paid in each.
In Queensland, for example, registered employers generally lodge monthly returns and an annual reconciliation after 30 June. Taxable wages usually include more than gross pay (super and some contractor payments, for example), so you need to know which Xero pay items are taxable in each state.
Portable long service leave
In some industries, long service leave follows the worker across employers, funded by a levy and tracked by a state scheme. The scheme names and coverage differ by state:
- Queensland (QLeave): three schemes. Community services and contract cleaning employers lodge a return every quarter, due 14 days after the quarter ends, with each worker's service and wages; QLeave then invoices the levy. In building and construction the levy is paid on the project cost by the project owner, and employers lodge an annual worker service return, due 31 July.
- Victoria: construction is run by LeavePlus (formerly CoINVEST); returns are due within 14 days of each quarter end and include each worker's days worked and ordinary pay. Community services, contract cleaning and security are run by the Portable Long Service Authority, with quarterly returns covering hours worked and ordinary pay.
- Other states and territories: NSW (Long Service Corporation), WA (MyLeave), SA, Tasmania (TasBuild), the NT and the ACT (ACT Leave) all run portable schemes, at least for construction, and the ACT covers several other industries. Check your scheme's site for what you must lodge and when.
The hard part: each scheme defines "ordinary pay" and service its own way, so a generic Xero report rarely matches the return line for line.
Workers compensation declarations
Workers comp premiums are set by your state's scheme or agent, and you declare wages to them, usually each year. For example, WorkCover Queensland asks employers to declare wages between 1 July and 31 August, including gross wages, super, fringe benefits and payments to contractors who count as workers. icare in NSW requires actual wages at the end of each policy period, and WorkSafe Victoria asks for a declaration of rateable remuneration. Wages often need splitting by industry classification or state.
What Xero gives you, and what people do today
Reports such as the Payroll Activity Summary and Details can be filtered by date and employee group, and Xero's payroll tax guide suggests using them alongside state revenue office calculators. What Xero doesn't do is apply each state's or scheme's rules and produce the return.
So the usual routine, as Xero users describe it in those threads, is: run the Payroll Activity Summary or Employee Summary, export it into an Excel template someone built years ago, add or remove pay items by hand, split by state or entity, then re-key the totals or each worker's line into the portal. It works until the template's author leaves, a new pay item is added and nobody updates the spreadsheet, or an auditor asks how a figure was reached. This is the same pattern we describe on our manual data entry page: the system holds the data, but people carry it the last mile by hand.
Your options, simplest first
1. Set up pay items and employee groups properly
Most of the pain comes from pay items that don't line up with the rules. Before buying anything:
- Give each pay item a clear name, and keep a list of which items count for payroll tax, for each portable LSL scheme and for workers comp.
- Use employee groups (or tracking) for state, entity and scheme membership, and tidy out old or misspelt groups.
- Save the report settings you use each period so the export is the same every time.
For a single state, a single entity and one scheme, this may be all you need.
2. Ask your accountant or payroll bureau
Many accountants prepare payroll tax returns and workers comp declarations, and some bureaus lodge portable LSL returns. At modest volumes this is often cheaper and safer than building anything.
3. Move payroll to a product that covers it
Some payroll platforms include this reporting. For example, Employment Hero's help centre describes a Portable Long Service Leave Report on its Standard and Premium payroll plans, filterable by pay category, period and location. Moving payroll is a bigger change, so check the product covers your states and schemes first. If payroll changes are already on the cards, see our posts on Payday Super errors four months in and labour hire payroll under Payday Super first.
4. A small tool that reads Xero payroll and prepares the returns
Where you want to stay on Xero Payroll and no app fills the gap (we didn't find one on the Xero App Store), a small custom tool is an option. It reads pay runs and payslip lines from Xero through its payroll API, applies a mapping you agree once (which pay items count for which obligation, in which state or scheme), and produces the monthly payroll tax figures, the quarterly LSL file in the format the portal accepts, and the annual workers comp wage split, with a worker-level working that an auditor can follow.
We build this kind of thing. It's a Xero API integration job, and it usually runs on the client's own Xero connection rather than as a subscription app. The rules still need a yearly review as states and schemes change them.
When it's worth getting help
Doing it yourself is fine while the spreadsheet is understood, checked and kept up to date. Consider outside help when:
- you pay wages in more than one state, or across grouped entities
- you report to more than one portable LSL scheme
- the process relies on one person and isn't written down
- returns have been late or have needed amending
If the payroll piece is one of several hand-offs between systems, our $5,000 Process & Systems Audit maps the whole chain and gives you a written report on what to fix first. For background on how Xero connects to your other systems, see our Xero and MYOB integration and migration guide.
Frequently asked questions
Does Xero calculate payroll tax in Australia?
No. Xero support has said Xero Payroll doesn't calculate payroll tax automatically and there are no current plans to add it. You can run payroll reports by date and employee group and export them, but the state-by-state calculation and the return are done outside Xero.
Can Xero produce a portable long service leave report for QLeave or LeavePlus?
Not as a ready-made scheme report. The Xero idea asking for one had 119 votes as of October 2026 and is marked "Gaining Support". Most users export the Payroll Activity Summary or Details report and adjust it in a spreadsheet to match their scheme's definition of ordinary pay and service.
How do I get workers comp wages out of Xero?
Run the payroll reports for the policy period, then split wages, super and other declarable payments by state and classification as your insurer asks. Employee groups that match your classifications make this quicker.
Do we have to leave Xero Payroll to fix this?
No. Better pay-item set-up, accountant support or a small tool that reads Xero payroll data can all close the gap while you stay on Xero. Switching payroll products is an option if it covers your states and schemes, but it isn't the only one.
If your payroll team spends each month-end and quarter-end rebuilding the same spreadsheets, book a free initial chat and we'll talk through which option fits.