What is the tax rate on a bonus in Australia?

Bonuses are taxed at your marginal income tax rate — not a special bonus rate. For 2025–26, the marginal rates are: 0% ($0–$18,200), 19% ($18,201–$45,000), 32.5% ($45,001–$135,000), 37% ($135,001–$190,000), and 45% (over $190,000). Add 2% Medicare levy to each rate.

Why does my bonus look so heavily taxed?

Your employer must withhold PAYG tax from your bonus using ATO schedules, which may over-withhold by treating the bonus as if it were a regular salary payment. The extra withheld comes back to you when you lodge your tax return. Your actual tax rate on the bonus is your marginal rate — typically 32.5% to 37% for most earners.

Can I reduce the tax on my bonus?

Yes. You can: (1) salary sacrifice the bonus into super (taxed at 15%), (2) make a personal deductible super contribution, (3) claim any valid work-related deductions that reduce your taxable income for the year, or (4) defer the bonus to the next financial year if your employer agrees.

Is overtime taxed differently to a bonus?

No — overtime and bonuses are both taxed as ordinary income at your marginal rate. There is no separate tax rate for overtime pay in Australia.

Does my bonus push me into a higher tax bracket?

It might — but only the amount above the bracket threshold is taxed at the higher rate. For example, if you earn $130,000 and receive a $10,000 bonus, the first $5,000 of the bonus falls in the 32.5% bracket and the remaining $5,000 falls in the 37% bracket. This calculator shows the exact bracket split.

Bonus & Overtime Tax Calculator Australia

Find out exactly how much of your bonus or overtime you take home. Bonuses are taxed at your marginal rate — not a special higher rate. 2025–26 ATO rates.

Myth: “Bonuses are taxed at 50%”

Bonuses and overtime are taxed at your marginal rate — the same rate as your regular salary. Your employer may withhold a higher amount upfront, but you reconcile this when you lodge your tax return and get any over-withheld amount back.

Your Income Details

Annual base salary

Your salary before the bonus, excluding super

Bonus / overtime amount

Gross amount before tax

Tax year

From your $10,000 bonus

Bonus take-home

$6,800

After $3,200 in tax (32.0%)

Marginal rate

32.5%

+Medicare levy

$200

Bonus Breakdown

Gross bonus$10,000

Income tax on bonus-$3,000

Medicare levy on bonus-$200

Total deducted-$3,200

Bonus take-home$6,800

Bracket breakdown

33% — $45,001 – $135,000$10,000 → $3,250 tax

Full Year Comparison

Without bonus

With bonus

Gross income$90,000$100,000

Income tax$17,788$20,788

Medicare levy$1,800$2,000

Net income$70,412$77,212

Effective tax rate21.8%22.8%

How to Use This Calculator

1Enter your annual base salary (excluding super, before bonus)
2Enter the gross bonus or overtime amount
3Select the tax year
4See your bonus take-home, the marginal rate that applies, and the full-year tax comparison

How Are Bonuses Taxed in Australia?

Bonuses and overtime payments are taxed as ordinary income — they are added to your annual salary and taxed at your marginal rate. There is no special 'bonus tax rate' in Australia.

What confuses many people is that employers often over-withhold tax from bonuses at the time of payment. This is because the ATO's PAYG withholding schedules may require employers to annualise the bonus and withhold based on a higher assumed income. However, when you lodge your tax return, any over-withheld tax is refunded.

The key number to know is your marginal rate — the rate that applies to your last dollar of income. If a bonus pushes you into a higher bracket, only the portion above that bracket threshold is taxed at the higher rate.

Key Things to Understand

Marginal rate vs effective rate: Your marginal rate is the rate on the next dollar earned — this is what applies to your bonus. Your effective rate is the average across all your income. If your salary is $90,000, the marginal rate is 32.5% but the effective rate might be only 22%. Your bonus is taxed at 32.5%, not 22%.
Bracket creep from a bonus: If your bonus pushes your income into a higher bracket, only the part above the bracket threshold is taxed at the higher rate. The calculator shows you exactly how much of your bonus falls in each bracket.
PAYG over-withholding: Your employer may withhold more tax from your bonus than the final amount due. This is not extra tax — it is a timing difference that is reconciled when you lodge your tax return, and you receive the excess back as a refund.
Medicare levy: The 2% Medicare levy applies to your total income including bonuses. This is included in the effective rate shown for your bonus.
Super salary sacrifice: If you receive a large bonus, consider salary sacrificing some or all of it into super. Super contributions are taxed at 15% rather than your marginal rate — potentially saving 17–32% depending on your bracket.

Tax Tips for Bonus Earners

•If you receive your bonus near the end of the financial year (April–June), consider asking if it can be deferred to 1 July — this delays the tax by 12 months
•Salary sacrifice your bonus into super: taxed at 15% instead of your marginal rate. At the 32.5% bracket, this saves you 17.5% on every dollar sacrificed
•Make deductible super contributions from your bonus: claim a personal super deduction and reduce your taxable income
•If you have a partner on a lower income, a super splitting strategy can further boost household super while minimising tax
•Keep records of work-related expenses (WFH, car) to offset some of the extra tax from your bonus with legitimate deductions

Frequently Asked Questions

Official Sources

Estimates only. Not financial or tax advice. Full disclaimer for your rights and our limitations of liability.

Rates and thresholds last updated for the 2024–25 financial year.

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