Compare the estimated annual tax effect of your bonus with ATO Schedule 5 Method A withholding. The result includes LITO and the individual Medicare low-income reduction.
What this shows: your estimated annual tax increase, after-tax bonus and Schedule 5 Method A withholding. It does not promise a refund because your final return includes the rest of your tax position. Also see: Pay Calculator, how withholding is reconciled, salary sacrifice a bonus?
01 —INPUTS
Sets both the annual tax rules and ATO PAYG coefficients.
$
Your base annual salary excluding the bonus
$
The gross bonus you received (or expect)
How often you're paid (affects withholding estimate)
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%?
47% is the Schedule 5 maximum withholding limit for an additional payment under Method A or Method B(ii), not a separate final bonus tax rate. Your final liability is based on your complete annual tax position, and the withholding may be above or below the bonus's eventual annual tax effect.
How does employer withholding work on bonuses?
Employers use ATO Schedule 5. For a whole-year or undefined-period bonus, Method A divides the bonus across the standard 52, 26 or 12 annual pay periods, compares ordinary withholding before and after that averaged amount, then multiplies the difference back up. Method B(ii) can use average year-to-date earnings and prior additional payments for a closer estimate.
Will I get the over-withheld tax back?
Only if your total withholding and credits exceed your final liability after all income, deductions, offsets, levies and study-loan repayments are included. A positive bonus-withholding difference by itself does not guarantee a refund.
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 $32,500 concessional cap for 2026-27.
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 ($69,528 for 2026-27) 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.
Bonus tax and withholding are different calculations
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.
How Schedule 5 Method A works
For a bonus relating to the whole year or an undefined period, Method A uses these steps:
Step 1Work out ordinary withholding on the normal pay-period earnings
Step 2Divide the bonus by 52, 26 or 12 and add that average to normal earnings
Step 3Compare ordinary withholding before and after adding the averaged bonus
Step 4Multiply the difference back across the year, capped at 47% of the bonus
Worked example — $90k salary + $10k bonus, monthly (2026-27)
Actual tax on bonus: $3,200 (32% marginal rate incl. Medicare)
Schedule 5 Method A withholding: $3,228 Difference: $28 above this simplified annual estimate
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%
Medicare may be nil or shaded in separately
$18,201 – $45,000
15%
Plus 0–2% Medicare where applicable
$45,001 – $135,000
30%
Plus up to 2% Medicare
$135,001 – $190,000
37%
Plus up to 2% Medicare
$190,001+
45%
Plus up to 2% Medicare
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 $32,500 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: A withholding comparison is not a refund forecast. Use your year-to-date withholding and complete tax position when estimating a refund or bill. To model salary sacrifice savings, use the Salary Sacrifice Calculator.
Estimates the annual tax effect of a bonus for 2025-26 or 2026-27, including LITO and the individual Medicare low-income reduction, then compares it with Schedule 5 Method A withholding for a whole-year or undefined-period bonus. Assumes the tax-free threshold is claimed and excludes HELP, MLS, family Medicare adjustments, other offsets, deductions and other income.