How is a bonus taxed in Australia?
There is no special "bonus tax rate" — a bonus is taxed at your marginal rate because it sits on top of your income. Here is why so much gets withheld, and how to keep more of it.
Getting a bonus is great — until you see how much tax comes out. The common belief is that bonuses are taxed at a special, punishing rate. They are not. Here is what actually happens.
There is no special bonus rate
A bonus is taxed at your marginal rate, the same as the top slice of your salary. It feels heavily taxed because it sits on top of your existing income, so every dollar is taxed at your highest bracket, plus the 2% Medicare levy.
Why your employer withholds so much
Employers calculate tax on a bonus using PAYG lump-sum withholding rules, which can withhold more than your actual marginal rate. That is not the final tax — it is just what is held back. If too much is withheld, you get the difference back as a refund when you lodge your return.
Worked example
James earns $90,000 and receives a $10,000 bonus. The bonus is taxed at his 32% marginal rate (30% plus Medicare), so about $3,200 comes out and he keeps roughly $6,800. His payslip might show even more withheld, in which case the excess comes back at tax time.
The HECS effect
If you have a study debt, a bonus is included in your repayment income, so it can lift your compulsory HECS repayment for the year — or push you across a repayment threshold. That is another reason the net figure can be smaller than expected.
See what you keep from a bonus
Enter your salary and bonus to see the tax, Medicare and HECS taken, and your real take-home.
This is general information, not personal advice. See also our guide to what you keep from a pay rise.
Frequently asked questions
Are bonuses taxed at a higher rate in Australia?
No. There is no special bonus tax rate. A bonus is taxed at your marginal rate because it adds to your total income — the same rate as the top of your salary.
Why was so much tax taken from my bonus?
Employers use PAYG lump-sum withholding, which can hold back more than your actual marginal rate. Any excess is refunded when you lodge your tax return, so many people get a larger-than-usual refund after a bonus.
Does a bonus increase my HECS repayment?
Yes. A bonus is part of your repayment income, so it can raise your compulsory HECS repayment for the year or push you over a repayment threshold.
How can I pay less tax on my bonus?
If your employer allows it, salary sacrificing some of the bonus into super has it taxed at 15% instead of your marginal rate, within the concessional cap. Timing it in a lower-income year can also help.