Bonuses are taxed as part of your regular income at your marginal tax rate. Your employer withholds PAYG tax using ATO Schedule 5 (lump sum) rates, which may differ from your actual marginal rate. You reconcile the difference in your tax return.
Are bonuses taxed differently from regular income in Australia?
No. The ATO does not have a special bonus tax rate. Bonuses are added to your annual taxable income and taxed at your marginal rate, the same as any other income. The confusion arises because the employer's PAYG withholding method can make it look like a higher rate was applied.
Why does my bonus seem taxed at 47%?
Your bonus isn't actually taxed at 47%. Your employer withholds tax by annualising the pay period that includes the bonus, which inflates the apparent tax rate. When you lodge your tax return, the ATO calculates the real tax on your total annual income and you get a refund for any over-withholding.
How does employer withholding work on bonuses?
Employers use the ATO's PAYG withholding schedule. They take the pay period in which the bonus is paid, annualise it (multiply by the number of pay periods per year), calculate tax at that annualised income, then divide back down to get the withholding for that period. Because the bonus inflates that single period, the annualised income is much higher than your actual annual income, leading to higher withholding.
Will I get the over-withheld tax back?
Yes. Any tax over-withheld by your employer throughout the year is reconciled when you lodge your tax return. If more was withheld than you owe, you'll receive a refund from the ATO.
Does the bonus push me into a higher tax bracket?
It can, but only the portion of income in the higher bracket is taxed at that rate. Australia uses a progressive tax system, so moving into a higher bracket doesn't mean all your income is taxed at the higher rate — only the amount above the bracket threshold.
Can I salary sacrifice my bonus to reduce tax?
Yes, if your employer allows it, you can sacrifice some or all of your bonus into super before tax. This is taxed at 15% in super rather than your marginal rate (up to 45%). Check the $30,000 concessional cap for 2025-26.
Does my bonus affect my HELP/HECS repayment?
Yes. Your bonus is included in your HELP repayment income. A bonus can push your total income above the HELP threshold ($67,000 for 2025-26) or into a higher repayment bracket, resulting in additional compulsory repayments.
Leaving your job?
Leaving your job? Calculate every payment
Bonuses are often paid alongside redundancy or termination. Calculate the tax on each component separately.
The ATO does not have a separate tax rate for bonuses. Your bonus is simply added to your annual income and taxed at your marginal rate. The confusion comes from employer withholding.
Why withholding looks so high
Employers calculate PAYG withholding using the ATO's pay-period annualisation method:
Step 1Take the pay period — e.g. monthly pay $7,500 + $10,000 bonus = $17,500 total
Step 2Annualise it — $17,500 × 12 = $210,000 annualised income
Step 3Calculate tax at that rate — $210,000 puts you in the 45% bracket
Step 4Withhold accordingly — based on $210,000, not your actual $100,000
Worked example — $90k salary + $10k bonus, monthly
Actual tax on bonus: $3,200 (32% marginal rate incl. Medicare)
Employer withholding: ~$3,930 (annualised method overshoots) Over-withheld: ~$730 — refunded when you lodge your return
How marginal rates apply to your bonus
Only the portion of income in a higher bracket is taxed at that rate — not all your income.
Income Range
Tax Rate
Including Medicare
$0 – $18,200
0%
2%
$18,201 – $45,000
16%
18%
$45,001 – $135,000
30%
32%
$135,001 – $190,000
37%
39%
$190,001+
45%
47%
Ways to reduce tax on your bonus
Salary sacrifice to superAsk your employer to redirect part of the bonus into super before tax — taxed at 15% instead of your marginal rate, subject to the $30,000 concessional cap.
Claim deductionsIncreasing deductions reduces taxable income and may offset the bonus tax. See the WFH Deductions Calculator.
TimingIf you have flexibility on when the bonus is paid, receiving it in a lower-income year means a lower marginal rate applies.
Tax tip: If you receive a large bonus, your tax refund at the end of the year may be larger than usual because of over-withholding. Use the calculator above to estimate how much you'll get back. To model salary sacrifice savings, use the Salary Sacrifice Calculator.
Estimates actual marginal tax on a bonus and compares it with employer PAYG withholding using 2025-26 ATO rates. It does not cover salary sacrifice arrangements, multiple income sources, or individual offsets.