Is a bonus taxed at a higher rate in Australia?

No, there is no special bonus tax rate. A bonus is just additional taxable income for the financial year. It feels heavily taxed because most or all of it falls in your top marginal tax bracket — at $135,001-$190,000 that's 37% plus 2% Medicare levy, and above $190,000 it's 45% + 2%.

Why is so much tax withheld from my bonus?

Your employer uses ATO Method B(i) for back-payments and bonuses. This effectively projects the bonus across the next 12 months on top of your normal salary and calculates withholding at the resulting marginal step. The withholding rate is often close to your marginal tax rate, which is why the take-home portion of a bonus looks small. Any over-withholding is returned as a refund when you lodge.

Does a bonus affect my HECS/HELP repayment?

Yes. HECS repayments are calculated on your total repayment income for the year, which includes bonuses. A bonus can push you into a higher repayment band, increasing your annual HECS payment. Use our HECS/HELP Calculator with your projected total income (including bonus) for the most accurate picture.

Bonus Tax Calculator Australia 2026-27

How tax on a bonus is calculated in Australia

A common myth is that bonuses are taxed at a higher rate than regular salary. They aren't — a bonus is just additional taxable income for the year. The reason it feels heavily taxed is that bonuses usually push the entire amount into your top marginal tax bracket, where every extra dollar is taxed at 30%, 37% or 45% depending on your salary. Withholding at payment time can also be inflated.

The ATO sets out a specific withholding method (Method B(i) for back-payments and bonuses) that effectively annualises the bonus over the next 12 months and calculates withholding at the resulting marginal step. This usually approximates the actual tax owed, but isn't exact — especially if your taxable income for the year ends up different from the projection. Any over-withholding comes back as a refund when you lodge; any under-withholding becomes a tax bill.

This calculator shows you the actual tax payable on your bonus by comparing the income tax payable on (salary + bonus) versus salary alone. The difference is the true marginal tax cost of the bonus. For HELP/HECS interaction, the toggle flags that your repayment band is calculated on total repayment income, so a bonus can push you into a higher band. For the full pay-packet picture, see our Take-Home Pay Calculator.

Methodology & sources

Applies FY 2026-27 individual income tax (Stage 3 brackets) to (salary + bonus) and (salary alone); the difference is the actual tax cost of the bonus. Withholding calculation under ATO Method B(i) is described in the article but not separately computed (the long-run actual tax is what matters at lodgement). Medicare levy and HECS repayment effects are flagged via toggle but not added to the displayed tax — those are layered on top of income tax. General information only and not personal financial advice.

This estimate excludes the Low Income Tax Offset (LITO). If you are eligible, your tax may be lower and your take-home pay higher — LITO is worth up to $700 and phases out at $66,667. See the LITO calculator.

Why your bonus looks so heavily taxed

A bonus is ordinary assessable income — it is not taxed at a special higher rate. What makes it feel that way is the withholding method. Employers use the ATO's Schedule 5 approach for lump sums: they work out the tax on your normal pay, then the tax on your normal pay plus the bonus spread across the period, and withhold the difference. Because that calculation assumes the higher amount is your ongoing rate, the withholding can overshoot.

What actually determines the tax

At lodgment, your bonus simply adds to your taxable income for the year and is taxed at your marginal rate. If your salary is $95,000 and you receive a $10,000 bonus, that bonus sits in the 30% bracket (plus 2% Medicare levy), so about $3,200 is the true tax cost — regardless of what was withheld on the day. If too much was withheld, the excess comes back as a refund; if too little, you'll have a bill.

The bracket-boundary case

A bonus can push part of your income into a higher bracket, but only the portion above the threshold is taxed at the higher rate — the rest of your income is unaffected. Earning one dollar more never leaves you worse off overall. What can bite are income-tested thresholds: a bonus that lifts your income for surcharge purposes past the Medicare levy surcharge threshold, or past a HELP repayment step, can cost more than the marginal rate alone suggests.

Salary sacrificing a bonus

Many employers let you direct a bonus into superannuation before it's paid, where it's taxed at 15% rather than your marginal rate — a large saving for higher earners, provided the arrangement is agreed before you become entitled to the money and you stay within the concessional cap ($32,500 for 2026-27, plus any unused carry-forward cap).

Frequently asked questions

Is super paid on bonuses? Usually yes — performance bonuses generally form part of ordinary time earnings, so the 12% super guarantee applies.

Can I ask my employer to withhold less? Not selectively, but you can vary withholding with the ATO in limited circumstances. Most people simply reconcile it at tax time.