Bonus Tax in Australia: How Bonuses Are Taxed (With Examples)

When a bonus lands in your bank account and looks surprisingly small, most Australians have the same reaction: “Why is there so much tax on my bonus?” It’s one of the most common pay-related questions in Australia — and it’s built on a widespread myth. There is no special “bonus tax rate” in Australia. A bonus is simply ordinary income, taxed at the same marginal rate as the rest of your salary. So why does it look like it’s taxed so heavily? The answer comes down to how your employer is required to withhold tax from it. This guide explains how bonus tax in Australia actually works, walks through two worked examples with real 2025–26 figures, and covers super, salary sacrifice, and the most common bonus tax questions.

Is There a Bonus Tax Rate in Australia?

Short answer: no. Australia’s tax system has no separate tax rate for bonuses. A bonus — whether it’s an annual performance bonus, a Christmas bonus, a sign-on bonus, or a commission payout — is classified as ordinary assessable income. That means it’s added on top of your salary and taxed at your marginal tax rate, plus the 2% Medicare levy where applicable.

So if your salary puts you in the 30% bracket, the extra income from your bonus is taxed at 30% + 2% Medicare levy = 32% in real terms. If you’re in the 37% bracket, your bonus is effectively taxed at 39%. The bonus doesn’t change your tax rate structure — it just stacks on top of your existing income and gets taxed at whatever marginal rate it falls into.

The confusion comes from the withholding side of things. Your employer doesn’t withhold tax on a bonus at your marginal rate. For lump-sum bonuses covering multiple pay periods (quarterly, annual or EOFY bonuses), employers must use the ATO’s Schedule 5 method — either Method A or Method B — which annualises the payment. Because of this, the withholding rate is frequently much higher than the actual tax you’ll owe, capped at 47%. That gap between what’s withheld and what you actually owe is exactly why your bonus looks overtaxed.

How PAYG Withholding on Bonuses Works

There are two different withholding treatments depending on what the bonus relates to:

Bonuses relating to a single pay period

If your bonus relates to just one pay period — for example, a monthly sales bonus paid alongside your normal monthly pay — your employer simply adds the bonus to that period’s earnings and applies the standard PAYG withholding tables to the combined amount. Nothing special happens.

Lump-sum bonuses covering multiple periods

This is where most of the confusion sits. Annual bonuses, quarterly bonuses and EOFY payouts are treated as lump-sum payments. Under the ATO’s Schedule 5, employers calculate withholding using one of two marginal-rate methods:

• Method A: the withholding is calculated on the lump sum as if it were added to your annualised earnings, using the marginal tax rates for the relevant financial year.
• Method B: used where the employee’s normal earnings over the relevant period can’t be determined or the employer elects to use it — again applying marginal rates to the lump sum.

In both cases, the method annualises the bonus — it treats the lump sum as though you earned that amount every pay period for the whole year. That’s what inflates the withholding: a $15,000 annual bonus, annualised, looks like $390,000 of annual income to the formula, which lands deep in the top brackets. The result is withholding that can be far above your real marginal rate, capped at a maximum of 47%.

Want to see what a bonus is actually worth to you after tax? Try the bonus tax calculator to model different bonus amounts against your salary.

2025–26 Resident Tax Brackets (Reference)

All figures below use the 2025–26 resident income tax brackets (for taxpayers claiming the tax-free threshold). The 2% Medicare levy applies on top where applicable.

Worked Example 1: $120,000 Salary + $15,000 Bonus

Let’s take a resident employee on a $120,000 salary who receives a $15,000 annual bonus. Here’s how the actual tax liability works out for 2025–26:

Without the bonus ($120,000):

• Income tax = $4,288 + 0.30 × $75,000 = $26,788
• Medicare levy (2%) = $2,400
• Total tax = $29,188
• Take-home pay = $90,812

With the $15,000 bonus ($135,000 total):

• Income tax = $4,288 + 0.30 × $90,000 = $31,288
• Medicare levy (2%) = $2,700
• Total tax = $33,988
• Take-home pay = $101,012

What the bonus actually cost in tax: $33,988 − $29,188 = $4,800. That’s an effective 32% on the bonus — exactly the 30% marginal rate plus the 2% Medicare levy. The bonus adds $10,200 to take-home pay. You can compare this against a full breakdown on the $120,000 salary breakdown page.

Worked Example 2: $150,000 Salary + $25,000 Bonus

Now a higher earner: a resident on $150,000 receiving a $25,000 bonus. Notice how the bonus pushes income further into the 37% bracket.

Without the bonus ($150,000):

• Income tax = $31,288 + 0.37 × $15,000 = $36,838
• Medicare levy (2%) = $3,000
• Total tax = $39,838

With the $25,000 bonus ($175,000 total):

• Income tax = $31,288 + 0.37 × $40,000 = $46,088
• Medicare levy (2%) = $3,500
• Total tax = $49,588

What the bonus actually cost in tax: $49,588 − $39,838 = $9,750. That’s an effective 39% — the 37% marginal rate plus the 2% Medicare levy. The bonus adds $15,250 to take-home pay. See the $150,000 salary breakdown for the full pay-period figures.

Both examples make the same point: once you do the maths on your annual tax return, a bonus is taxed at exactly your marginal rate — no more. The “extra” tax you saw in your payslip was withholding, not actual tax.

Why Your Bonus Looks Overtaxed — and How You Get It Back

Because lump-sum bonuses are annualised for withholding purposes, your employer is legally required to withhold as though you earned that bonus amount every single pay period. For most people, this over-withholds significantly — sometimes by thousands of dollars.

The good news: over-withheld tax is not lost. It simply means you’ve paid more tax during the year than you actually owe. When you lodge your tax return, the ATO compares your total withholding against your actual tax liability on your total income, and the difference is refunded to you. A larger-than-usual tax refund after a big bonus year is completely normal.

One thing to note: you can’t easily get the excess back mid-year. The withholding formulas are mandatory for employers, so the correction happens at tax time. If your bonus is particularly large, it’s worth planning around a bigger refund at lodgement rather than expecting the cash in your payslip.

Do Bonuses Attract Superannuation?

It depends on the type of bonus. In 2025–26 the super guarantee rate is 12%, and it applies to bonuses that form part of your Ordinary Time Earnings (OTE):

• Contractual or performance-based bonuses — e.g. an annual KPI bonus written into your employment contract — generally count as OTE, so your employer must pay 12% super on them.
• Purely discretionary one-off bonuses — e.g. a surprise Christmas bonus with no contractual basis — may not count as OTE, and super may not be payable.

If you’re unsure, check your employment contract and ask your payroll team — the distinction turns on whether the bonus is tied to your ordinary hours and contractual entitlements.

Can You Salary Sacrifice a Bonus Into Super?

Yes — many employers allow you to salary sacrifice some or all of a bonus into your super fund. As a general strategy (not personal financial advice), the appeal is straightforward: sacrificed amounts are taxed at 15% inside the fund instead of your marginal rate, which can be a significant saving if your marginal rate is 30%, 37% or 45%.

The key constraint is the concessional contributions cap — your sacrificed bonus plus your employer’s regular super guarantee contributions must stay within the cap for the financial year. Exceeding it triggers extra tax. Also, the sacrifice arrangement must be in place before you’ve earned the right to the bonus — you can’t retrospectively sacrifice a bonus that’s already been paid. If you’re considering this, talk to your employer or a licensed adviser before the bonus is paid out.

Employer Reporting and Timing Rules

Two final points worth knowing:

• Reporting: under Single Touch Payroll Phase 2, employers report bonuses separately as bonuses/commissions, distinct from your ordinary salary. This doesn’t change your tax — it’s just how the ATO sees the payment data.
• Timing: a bonus is assessable income in the financial year it is received/paid, not the year it was earned. A bonus earned in June but paid in July counts toward the new financial year’s income. This matters if you’re close to a bracket threshold or planning a salary sacrifice.

Frequently Asked Questions

Is there a bonus tax rate in Australia?

No. There is no separate bonus tax rate in Australia. Bonuses are ordinary assessable income taxed at your marginal income tax rate plus the 2% Medicare levy. If you earn $120,000, the tax on your bonus works out to 32% (30% marginal + 2% levy); at $150,000 it’s 39% (37% + 2%). The high tax you see in your payslip is PAYG withholding, not a special rate.

Why is so much tax withheld from my bonus?

For lump-sum bonuses covering multiple pay periods (annual, quarterly or EOFY bonuses), employers must use the ATO’s Schedule 5 marginal-rates method, which annualises the bonus — treating it as though you earned that amount every pay period. That inflates the withholding, sometimes dramatically, capped at a maximum of 47%. It’s a withholding formula, not your real tax rate.

Will I get the extra tax back?

Yes. Any amount withheld above your actual tax liability is refunded when you lodge your tax return. The ATO compares your total PAYG withholding for the year against the tax you actually owe on your total income, and refunds the difference. An unusually large refund after a big-bonus year is normal and expected.

Does my bonus attract super?

Bonuses that form part of your Ordinary Time Earnings — typically contractual or performance-based bonuses — attract the 12% super guarantee in 2025–26. Purely discretionary one-off bonuses may not. Check your contract and confirm with your payroll team if you’re unsure.

Can I salary sacrifice my bonus?

Generally yes, if your employer offers salary sacrifice. Sacrificed amounts are taxed at 15% inside the super fund rather than your marginal rate, subject to the concessional contributions cap. The arrangement must be agreed before the bonus is paid. This is general information, not personal financial advice.

Which financial year is my bonus taxed in?

The year it is received/paid — not the year it was earned. A bonus relating to work done in 2024–25 but paid in July 2025 is assessable in 2025–26. This can matter for bracket thresholds and salary sacrifice timing.

Conclusion

Bonus tax in Australia is simpler than it looks: there is no special rate, no penalty and no trick. Your bonus is taxed at your marginal rate plus the Medicare levy, and the scary-looking deduction in your payslip is just over-withholding that the ATO refunds at tax time. The real planning opportunities sit elsewhere — knowing which financial year the bonus lands in, whether it attracts super, and whether salary sacrificing it makes sense for you.

Want a personalised answer? Plug your salary and bonus into the bonus tax calculator to see exactly what your bonus is worth after tax — including the take-home figure and the effective rate on the bonus itself.