Tax
How PAYG Withholding Works
Short answer
PAYG withholding is the income tax your employer deducts from each pay and sends to the ATO. The amount follows ATO schedules and depends on your gross pay, pay cycle, residency, whether you claim the $18,200 tax-free threshold, and whether you have a study loan. No TFN means 47% withholding.
How the amount is set
Your employer uses ATO withholding schedules based on your gross pay and pay cycle, assuming that pay continues all year. Claiming the tax-free threshold lowers withholding; not providing a TFN raises it to 47%.
Why PAYG is not your final tax
PAYG is an estimate collected during the year. Your actual tax is worked out when you lodge your return. If too much was withheld you get a refund; if too little, you may owe. Bonuses and irregular pay often cause differences.
Frequently asked questions
What is the no-TFN withholding rate?+
47% for residents who have not provided a TFN. Lodge a TFN declaration to be taxed at normal rates.
Why is my PAYG higher some pays?+
A bonus or extra hours is withheld as if it repeated all year, which can over-withhold for that pay.
Can I reduce my withholding?+
Claiming the tax-free threshold (for your main job) and lodging a TFN declaration ensures you are not over-withheld.
Sources & methodology
- ATO - Personal income tax: new tax cuts (15% rate from 1 July 2026)
- Income Tax Rates Act 1986 (legislation.gov.au)
- ATO - Study and training loan repayment thresholds and rates
- ATO - Super guarantee
- ATO - Contribution caps
- ATO - Payday Super and the annual maximum contribution base
- ATO - Medicare levy
- ATO - Medicare levy surcharge income thresholds and rates
- Fair Work Ombudsman - Pay slips
- How we calculate these estimates
Last updated 13 August 2026. Figures use the 2026-27 financial year.
Related calculators & guides
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