If a bonus landed in your pay and a big chunk vanished to tax, you are not alone in thinking bonuses are taxed at some special penalty rate. They are not. A bonus is taxed at exactly the same marginal rates as the rest of your income. The reason so much comes out on payday is how your employer withholds tax on a one-off payment, not the actual tax you owe.
Here is what is really going on and how much of your bonus you keep.
The short answer
A bonus is ordinary income. It gets added to your salary for the year and taxed at your marginal tax rate, plus the 2% Medicare levy. There is no separate "bonus tax rate".
On most middle incomes that means you keep about 68 cents of every bonus dollar (taxed at 30% plus 2% Medicare in 2025-26). Higher earners keep less, lower earners keep more, because the marginal rate follows the normal tax brackets.
You can see the exact figure for your income with the Bonus and Overtime Tax Calculator.
Why your bonus looks like it is taxed more
When your employer pays a bonus, they have to withhold PAYG tax on it. The ATO's method for bonuses and similar lump-sum payments often withholds at a flat rate based on annualising the payment, which frequently pulls out more than your true marginal rate, especially if the bonus is large or paid in a single pay run.
That extra withholding is not lost. It is just tax paid in advance. When you lodge your return, your total income and total tax are reconciled, and any over-withholding comes back as part of your refund. So the scary number on your payslip is a cash-flow timing issue, not a higher tax rate.
How bonus tax actually works
Your bonus stacks on top of your salary and is taxed at whatever bracket that top slice of income falls into.
Take someone earning $90,000 who receives a $10,000 bonus in 2025-26:
- Their salary already sits in the $45,001 to $135,000 bracket, taxed at 30%.
- The $10,000 bonus also falls in that bracket, so it is taxed at 30% plus the 2% Medicare levy — 32% in total.
- Tax on the bonus: $3,200. Take-home from the bonus: $6,800.
If the bonus pushes part of your income into a higher bracket, only the portion above the threshold is taxed at the higher rate — the same progressive system that applies to your salary. Work out your own salary and marginal rate first with the Salary Tax Calculator.
How much of your bonus will you keep?
As a rough guide for 2025-26, here is what you keep from each bonus dollar at different income levels (resident, including the 2% Medicare levy):
| Your salary | Marginal rate + Medicare | You keep per $1 |
|---|---|---|
| $30,000 | 16% + 2% | about 82c |
| $70,000 | 30% + 2% | about 68c |
| $140,000 | 37% + 2% | about 61c |
| $200,000+ | 45% + 2% | about 53c |
These ignore any HELP/HECS repayment, which can take a little more (see below). For a precise figure on your salary and bonus, use the Bonus and Overtime Tax Calculator.
Bonuses, super and HECS
Two things often catch people out.
Super. Most performance bonuses count as ordinary time earnings, so your employer usually pays the 12% super guarantee on the bonus on top, the same as your salary. A few narrow bonus types are not classed as ordinary time earnings, so check your payslip.
HELP/HECS. A bonus lifts your income for the year, which lifts your compulsory student loan repayment. Because repayments are worked out on your whole year's income, a bonus can nudge you into a higher repayment rate. The HECS/HELP Calculator shows the effect.
Can you avoid the tax by sacrificing your bonus into super?
Yes, and it is one of the few genuinely tax-effective moves with a bonus. If you arrange it with your employer before you become entitled to the bonus, you can salary sacrifice some or all of it into super. It is then taxed at 15% inside super instead of your marginal rate, which can be a big saving for higher earners.
The catch: it counts towards your $30,000 concessional contributions cap for 2025-26, and you cannot access it until preservation age. The Salary Sacrifice Super Calculator compares the tax saved against taking the cash.