Annual leave loading is taxed as ordinary income. There is no special rate, no concession and no exemption: the 17.5% extra you receive on top of your pay while on annual leave is added to your taxable income and taxed at your marginal rate, with PAYG withholding taken out by your employer just like your regular wages.
On an $80,000 salary, four weeks of annual leave attracts $1,076.92 of leave loading, and the tax on that loading is about $344.61 — leaving you with roughly $732.31 of the loading in your pocket. This guide explains how leave loading works, how the tax is calculated in each situation, what happens when you resign, and whether super is paid on it.
Assumptions used in this article: The examples use the standard 17.5% loading rate under a modern award, a 38-hour week, and the 2025–26 resident tax rates. Your award, enterprise agreement or contract may set a different rate — or no loading at all.
What is annual leave loading?
Annual leave loading is an extra payment on top of your ordinary pay when you take annual leave. Under most modern awards in Australia, the standard rate is 17.5% of your ordinary base pay for the leave period. It is calculated on your ordinary hours of pay — excluding allowances, penalty rates and overtime — unless your award or agreement says otherwise.
The entitlement does not come from the National Employment Standards in the Fair Work Act. The NES gives most full-time and part-time employees four weeks of paid annual leave a year, but it does not require leave loading. The loading comes from your modern award, enterprise agreement or employment contract. That is why some workers receive 17.5%, some receive a higher rate, and some receive nothing at all.
The formula is simple:
Leave loading = ordinary time earnings for the leave period × 17.5%
For a full-time worker on a $80,000 salary, the weekly base rate is $1,538.46. Four weeks of leave is worth $6,153.85 in ordinary pay, and the loading is 17.5% of that — $1,076.92. Your total leave pay for the four weeks is $7,230.77 before tax.
How leave loading is taxed
The ATO treats leave loading as assessable income, so it is subject to PAYG withholding just like your regular wages. How your employer calculates the withholding depends on the way the loading is paid:
- Paid with your normal leave in your regular pay cycle: the loading is added to your earnings for that period and tax is withheld at your usual marginal rate. This is the most common situation — your pay simply looks a little higher while you are on leave.
- Paid as a lump sum: if the loading is paid as a one-off lump sum, your employer uses the ATO’s separate tax table for back payments, commissions and similar lump-sum amounts. The withholding can be higher than your final tax bill, and any excess comes back when you lodge your tax return.
- Paid on termination: when unused annual leave, including the loading, is paid out in your final pay, it is not treated as part of normal earnings for withholding purposes. Your employer follows the termination payment withholding rules instead, which can produce a different withholding result from a regular pay cycle.
The key point is that the tax outcome is the same in the end: your total tax for the year is worked out on your total income, deductions and offsets when you lodge your return. Withholding is only an estimate collected during the year. If too much was withheld from a lump-sum loading payment, you get it back as a refund.
Worked examples: tax on leave loading at three salaries
| $55,000 salary | $80,000 salary | $100,000 salary | |
|---|---|---|---|
| Weekly base pay | $1,057.69 | $1,538.46 | $1,923.08 |
| 4 weeks ordinary leave pay | $4,230.77 | $6,153.85 | $7,692.31 |
| Leave loading (17.5%) | $740.38 | $1,076.92 | $1,346.15 |
| Total leave pay | $4,971.15 | $7,230.77 | $9,038.46 |
| Marginal tax rate (incl. Medicare) | 32% | 32% | 32% |
| Tax on the loading | $236.92 | $344.61 | $430.77 |
| Loading kept after tax | $503.46 | $732.31 | $915.38 |
All three salaries sit in the 30% tax bracket, so the marginal rate including the 2% Medicare levy is 32% in each case. On a $150,000 salary the marginal rate is 39% (37% plus Medicare), so the tax on four weeks of loading — $2,019.23 — would be about $787.50. On a $200,000 salary the marginal rate is 47%, so the tax on $2,692.31 of loading would be about $1,265.38.
Notice that the loading itself never pushes you into a higher tax bracket in any meaningful sense: Australia’s marginal rates mean only the dollars above a threshold are taxed at the higher rate. A loading payment that takes your income from $134,000 to $135,500, for example, would see just $1,000 taxed at 37% instead of 30% — a difference of $70 plus $20 of Medicare.
Leave loading when you resign
When you leave a job, your final pay typically includes a payout for unused annual leave, and that payout must include leave loading if you would have received it had you taken the leave while employed. The payout is taxed as ordinary income, but the withholding follows the ATO’s termination payment rules rather than your normal pay-cycle withholding.
Take Maya, who resigns from a full-time role on an $80,000 salary with three weeks of unused annual leave. Her weekly base rate is $1,538.46, so three weeks of unused leave is $4,615.38 before tax. With 17.5% leave loading, the loading on that payout is $807.69, making her gross unused leave payout $5,423.07 before PAYG withholding. The withholding on that amount follows the termination rules, and the final tax position is settled at tax time.
Two things are worth knowing about termination payouts. First, unused annual leave paid on termination is not eligible for the concessional treatment that applies to some other termination payments — it is taxed at your marginal rate. Second, the payout is not counted as ordinary time earnings for super in the same way as leave taken during employment, so the super treatment can differ — see below.
Is super paid on leave loading?
Yes, in most cases. Leave loading is generally included in ordinary time earnings for superannuation purposes, so your employer owes the 12% super guarantee on it — unless the loading is paid specifically to compensate you for the loss of opportunity to work overtime. That is the one exception: where an award or agreement pays loading instead of overtime opportunities, the loading is not OTE and no super is due on it.
From 1 July 2026, the payday super reforms make this position clearer: leave loading is included in OTE unless it is compensation for a lost opportunity to work overtime. On the $80,000 example above, the $1,076.92 of loading attracts about $129.23 in super on top of your leave pay. That super is paid into your fund alongside the super on your ordinary leave pay — paid annual leave taken during employment is itself OTE, so super is payable on the whole $7,230.77, or about $867.69 in total.
Who does not get leave loading?
Not everyone receives it. You generally do not get leave loading if:
- You are award-free: if no modern award or enterprise agreement covers your role and your contract does not provide for loading, there is no entitlement.
- Your agreement rolled it in: some enterprise agreements pay a higher base rate of pay instead of a separate loading. The loading is effectively built into your salary, so you do not see it as a separate line on your payslip.
- You are a casual employee: casuals do not accrue paid annual leave, so there is no leave loading. Instead, casual loading of 25% is built into the casual hourly rate to compensate for the lack of leave entitlements.
- Your contract excludes it: some senior or executive contracts expressly exclude leave loading, usually in exchange for a higher salary.
If you are unsure whether you are entitled, check your modern award through the Fair Work Ombudsman’s award finder, or read your enterprise agreement or employment contract. The loading rate and the exact base it is calculated on — ordinary hours only, or including allowances — vary between awards.
Cashing out annual leave
Some awards and agreements allow you to cash out annual leave while you are still employed, usually limited to two weeks a year and only if you keep at least four weeks of accrued leave. Cashed-out leave is taxed as ordinary earnings in the pay cycle in which it is paid, and leave loading applies to the cashed-out amount if your award provides for it. The tax treatment is the same as taking the leave — the loading is assessable income, withheld at your marginal rate — but you do not get the time off, so it is usually a poor trade unless you genuinely cannot take the leave.
Frequently asked questions
Is annual leave loading taxed?
Yes. Leave loading is part of your taxable income and is subject to PAYG withholding at your marginal rate. There is no concessional tax rate for it, whether it is paid during leave, cashed out, or paid out on termination.
How much is leave loading on $80,000?
On four weeks of annual leave, the loading at 17.5% is $1,076.92. After tax at a 32% marginal rate you keep about $732.31 of it. On a single week of leave, the loading is $269.23.
Do you pay super on leave loading?
Generally yes. Leave loading is included in ordinary time earnings and attracts the 12% super guarantee, unless it is paid to compensate for a lost opportunity to work overtime. From 1 July 2026 the payday super rules confirm this position.
Do casual workers get leave loading?
No. Casual employees do not accrue paid annual leave, so there is no leave loading. Instead they receive casual loading of 25% on top of the base hourly rate.
Is leave loading paid when you resign?
Yes, if you would have received it had you taken the leave while employed. Your final pay must include loading on the unused annual leave payout, and it is taxed as ordinary income under the termination withholding rules.
Can leave loading push me into a higher tax bracket?
Only marginally. Australia uses marginal tax rates, so only the dollars above a threshold are taxed at the higher rate. A loading payment that crosses a threshold costs you the higher rate on the small slice above it — not on your whole income.
Conclusion
Annual leave loading is a welcome top-up — 17.5% extra on your ordinary pay while you are on leave — and the tax treatment is straightforward: it is ordinary income, taxed at your marginal rate, with PAYG withholding collected by your employer. On an $80,000 salary, four weeks of leave brings $1,076.92 of loading, of which you keep about $732.31 after tax, plus around $129 in super. The same rules apply when the loading is paid out on resignation, though the withholding method changes.
If you want to see what your leave is worth in dollars, try our annual leave calculator — it works out your leave pay and loading from your salary and weeks of leave. And if you are planning a holiday around your leave, remember that the loading is designed to cover the extra costs of being away — so enjoy it, because you have already paid tax on it.