You get a bonus. You feel great. Then you look at your payslip and see a big chunk of tax taken out. It can feel like the ATO took half of it.
Here is the good news. Australia has no special “bonus tax rate.” Your bonus is added to your other income and taxed at your normal rate. The tax taken on payday is only an estimate. The real tax is worked out when you lodge your tax return.
In this guide, we explain how bonus tax works in 2026-27 in simple words. We use real numbers, checked against ATO and Fair Work sources. We show you worked examples, how super fits in, and smart ways to keep more of your bonus.
Key Takeaways
- A bonus is taxed at your normal tax rate, plus the 2% Medicare levy. There is no higher “bonus rate.”
- Only the part of your income above a tax line is taxed at the higher rate. A bonus never makes all your pay taxed more.
- On payday, your employer holds back tax using an ATO table called Schedule 5. It is capped at 47% of the bonus. Too much? You get it back in your tax return.
- Most bonuses earn 12% super, paid by your employer on top of the bonus.
- You can put a bonus into super to cut tax, but you must agree before you earn it, and you must stay under the $32,500 cap for 2026-27.
- A bonus can push you over the Medicare levy surcharge line if you have no private hospital cover.
2026-27 Bonus Tax at a Glance
| Item | The rule for 2026–27 |
|---|---|
| How a bonus is taxed | Added to your income, taxed at your normal rate |
| Resident tax-free amount | First $18,200 |
| Resident tax rates | 15%, 30%, 37%, 45% |
| Medicare levy | 2% of taxable income |
| Tax held back on payday | ATO Schedule 5, capped at 47% of the bonus |
| Super on bonus | 12%, paid by your employer on top |
| Super paid within | 7 business days of payday (Payday Super, from 1 July 2026) |
| Concessional super cap | $32,500 |
| Medicare levy surcharge starts above | $105,000 (single) or $210,000 (family) |
Is a Bonus Taxed Differently in Australia?
No. The ATO treats a bonus like your wages. It is part of your “assessable income.” That means the ATO adds it to your pay for the whole year and taxes the total.
So why does it feel like you pay more tax on a bonus? There are two reasons.
Reason 1: The tax is taken all at once. When you get a big payment in one go, a big tax amount comes out in one go. It looks scary on the payslip.
Reason 2: The tax is a guess. Your employer has to hold back tax before they know your full-year income. The ATO gives them a formula to use. The formula is not your final tax.
Think of it like a deposit. Your employer pays a deposit to the ATO for you. At tax time, we work out the real bill. If the deposit was too big, you get money back. If it was too small, you pay the rest.
What Are the Tax Rates for 2026-27?
A big change happened on 1 July 2026. The lowest tax rate went down from 16% to 15%. Here are the rates for Australian residents.
| Your taxable income | Tax you pay (2026–27) |
|---|---|
| $0 to $18,200 | Nil |
| $18,201 to $45,000 | 15 cents for each $1 over $18,200 |
| $45,001 to $135,000 | $4,020 plus 30 cents for each $1 over $45,000 |
| $135,001 to $190,000 | $31,020 plus 37 cents for each $1 over $135,000 |
| $190,001 and over | $51,370 plus 45 cents for each $1 over $190,000 |
You also pay the Medicare levy of 2% on top. These rates do not include it.
For comparison, last year’s rates (2025-26) had 16% in the second band. The rates for the other bands were the same, but the dollar amounts in the table were $268 higher. The 15% rate is set to drop to 14% from 2027-28.
Why Is So Much Tax Taken Out of My Bonus?
our employer uses PAYG withholding. PAYG means “Pay As You Go.” It means tax is paid to the ATO bit by bit during the year.
For bonuses, the ATO has a special table called Schedule 5. It is for “back payments, commissions, bonuses and similar payments.”
Here is how it works in simple steps.
If your bonus is for one pay period. Your employer adds it to your normal pay for that period. They use the normal tax table. This is the easy way.
If your bonus is a one-off payment. This is the most common case, such as a performance or Christmas bonus. Your employer uses Method A or Method B. The ATO says Method A can be used for any bonus.
In simple terms, Method A:
- Works out your normal tax for the pay period
- Spreads the bonus across all the pay periods in the year, and adds that share to your normal pay
- Works out the new, higher tax
- Takes the extra tax and multiplies it back up
There is a limit. The ATO says the tax held back on a bonus can be at most 47% of the bonus. That matches the top rate of 45% plus the 2% Medicare levy.
Method A is a guess based on your pay in that one period. So it rarely matches your real tax exactly. If too much was held back, you get a credit when you lodge. If too little was held back, you may owe tax.
Tip: Look at your payslip. Find the bonus line and the tax line. Then do the 3-step estimate later in this guide to see if a refund or a bill is coming.
Does a Bonus Push All My Income Into a Higher Bracket?
No. This is the biggest myth about bonus tax.
Think of tax rates like a staircase. Each step up is taxed at a higher rate. But you only pay the higher rate on the money that sits on that step. The money on the lower steps stays taxed at the lower rates.
So a bonus can only push the top part of your income into a higher step. It never changes how your earlier pay is taxed.
Here are real examples. Each person gets a $10,000 bonus. We include the 2% Medicare levy. We assume they are Australian residents with no other income or deductions. We also assume they earn above about $66,667, so the low income tax offset does not apply.
| Salary before bonus | Tax on the $10,000 bonus | Share of the bonus taxed | Bonus you keep |
|---|---|---|---|
| $80,000 | $3,200 | 32% | $6,800 |
| $100,000 | $3,200 | 32% | $6,800 |
| $130,000 | $3,550 | 35.5% | $6,450 |
| $160,000 | $3,900 | 39% | $6,100 |
| $185,000 | $4,300 | 43% | $5,700 |
| $200,000 | $4,700 | 47% | $5,300 |
The $130,000 and $185,000 rows are special. The bonus crosses a line, so part of it is taxed at one rate and part at the next. We show how this works below.
Worked Example: A Bonus That Crosses a Line
Tom earns $128,000 a year. He gets a $12,000 bonus. His new income is $140,000. The 30% step ends at $135,000.
- The first $7,000 of the bonus fills the rest of the 30% step: $7,000 x 30% = $2,100
- The last $5,000 goes into the 37% step: $5,000 x 37% = $1,850
- Income tax on the bonus: $2,100 + $1,850 = $3,950
- Medicare levy: $12,000 x 2% = $240
- Total tax on the bonus: $4,190 (about 34.9%)
- Tom keeps: $7,810
Tom’s $128,000 salary is taxed just as it was before. Only the bonus is affected.
Can a Bonus Trigger the Medicare Levy Surcharge?
Yes. This catches many people out.
The Medicare levy surcharge (MLS) is an extra tax. It applies if you earn above a set amount and you do not have private hospital cover. If you have the right cover, you do not pay it.
Here are the ATO’s thresholds for 2026-27.
| Tier | Single | Family | Surcharge |
|---|---|---|---|
| Base | $105,000 or less | $210,000 or less | 0% |
| Tier 1 | $105,001 to $123,000 | $210,001 to $246,000 | 1% |
| Tier 2 | $123,001 to $164,000 | $246,001 to $328,000 | 1.25% |
| Tier 3 | $164,001 or more | $328,001 or more | 1.5% |
The family amount goes up by $1,500 for each dependent child after the first.
The surcharge applies to your whole income for MLS purposes, not only the bonus. So crossing the line is costly.
Example: Mia is single. She earns $100,000 and gets a $10,000 bonus. Her income is now $110,000. She has no private hospital cover. She moves into Tier 1. She pays 1% of $110,000, which is $1,100 extra. That is on top of the 2% Medicare levy.
If Mia has the right hospital cover, she pays no surcharge. Cover can cost less than the surcharge, so it is worth checking before your bonus lands.
Two more warnings:
- “Income for MLS purposes” includes more than your taxable income. For example, it includes reportable super contributions. So putting your bonus into super does not lower your MLS income.
- A bonus also raises your HELP (study loan) repayment income. If you have a study debt, your repayment can go up.
Do You Get Super on Your Bonus?
Usually, yes. The super guarantee rate is 12%.
The ATO says most bonuses count as “ordinary time earnings” for super. This includes performance, Christmas, sign-on, referral and return-to-work bonuses. Your employer pays the super on top of your bonus. It does not come out of your bonus.
Example: You get a $10,000 bonus. Your employer pays $1,200 super (12% x $10,000) into your fund.
The Exceptions
- Work done entirely outside your ordinary hours. The ATO says a bonus for work performed entirely outside ordinary hours is not included. A one-off bonus for working a Sunday is an example. It is treated like overtime.
- Ex gratia bonuses. The ATO says a “thank you” bonus counts only if it is for work done in your ordinary hours.
- Overtime. Overtime is not ordinary time earnings, if your ordinary hours are clearly set out in an award or agreement.
You may read online that “one-off bonuses never get super.” That is not the ATO’s test. The test is whether the bonus is for your ordinary hours of work.
What About Commissions?
From 1 July 2026, the ATO says all commissions count as qualifying earnings for super under the Payday Super law. This includes commissions for work done entirely outside ordinary hours. This is a change from the old rules.
When Must Super Be Paid?
Under Payday Super, which started on 1 July 2026, employers must pay super so it reaches your fund within 7 business days of payday. The old rule was every 3 months. If you do not see super on your bonus, ask your employer.
Should You Put Your Bonus Into Super?
This is called salary sacrifice. You ask your employer to pay part of your pay into super instead of into your bank account.
Money paid into super this way is taxed at 15% in the fund. That can be lower than your normal rate. But there are rules.
Rule 1: Agree Before You Earn It
A salary sacrifice deal only works for pay you have not yet earned. You cannot sacrifice a bonus you have already earned. Talk to your employer early.
Rule 2: Stay Under the Cap
The concessional contributions cap for 2026-27 is $32,500. It was $30,000 in 2025-26. Your employer’s 12% super counts toward the cap. So does your salary sacrifice.
If you go over, the extra is added to your income and taxed at your normal rate, with a 15% tax offset. That can cancel your saving.
You may be able to use unused cap from past years. This is called carry-forward. The ATO says you can use unused amounts for up to 5 years, but only if your total super balance was under $500,000 on 30 June of the previous year.
Rule 3: Watch the $250,000 Line
If your income plus these contributions is over $250,000, you pay Division 293 tax. This is an extra 15% on some or all of the contributions.
Rule 4: The Money Is Locked
Super is generally locked away until you meet a condition of release, such as retirement.
Example: A Smart Use of Salary Sacrifice
Ravi earns $120,000. He expects a $15,000 bonus. He agrees to sacrifice all of it into super before he earns it.
| Take as cash | Put into super | |
|---|---|---|
| Tax on the $15,000 (30% + 2% Medicare) | $4,800 | $2,250 (15% in the fund) |
| Amount for Ravi | $10,200 in his bank | $12,750 in super |
Ravi has $2,550 more working for him. But it is locked in super.
Does he stay under the cap? Employers must work out super on your pay before salary sacrifice. So his employer still pays 12% on $135,000, which is $16,200. Add the $15,000 he sacrifices. The total is $31,200, which is under $32,500.
Example: When It Goes Wrong
Sara earns $160,000 and expects a $20,000 bonus. Her employer’s 12% super on $180,000 is $21,600. If she sacrifices the whole $20,000, the total is $41,600. That is $9,100 over the $32,500 cap.
The most she could sacrifice without going over is $10,900 ($32,500 minus $21,600), unless she has carry-forward amounts to use.
Some websites show the savings without checking the cap. Always check it.
Does It Matter Which Tax Year Your Bonus Is Paid In?
Usually, you are taxed on a bonus in the year you receive it. So the date it lands in your account can matter.
The 1 July 2026 rate change is a good example. If your income is under $45,000, a $5,000 bonus paid on 30 June 2026 is taxed at 16% plus 2% Medicare, which is $900. Paid on 1 July 2026, it is 15% plus 2%, which is $850. That is only a $50 difference. This ignores offsets such as the low income tax offset.
If you earn over $45,000, timing makes no difference to the tax on the bonus itself. Both years use the same 30% rate in that band. For you, the better questions are about the Medicare levy surcharge line, the HELP threshold and your super cap.
Special Cases
Working Holiday Makers
If you are on a Working Holiday (subclass 417) or Work and Holiday (subclass 462) visa, you have special tax rates. From 1 July 2026, the ATO’s rates are:
| Income | Rate |
|---|---|
| $0 to $45,000 | 15% |
| $45,001 to $135,000 | 30% |
| $135,001 to $190,000 | 37% |
| $190,001 and over | 45% |
Example: A backpacker earns $38,000 and gets a $5,000 bonus. Income is $43,000, all inside the 15% band. The tax on the bonus is $750 (15% x $5,000).
If you do not give your employer a Tax File Number, the ATO says 45% must be withheld. Your employer must also pay super on your bonus. When you leave Australia, you may be able to claim your super back. See our guide to the Departing Australia Superannuation Payment (DASP).
Non-Residents and Expats
If you are not an Australian resident for tax, different rates apply, and there is no tax-free amount. Your residency status decides how your bonus is taxed. If you are not sure, ask a registered tax agent before you plan around a large bonus.
Sign-On, Retention and Christmas Bonuses
These are all taxed like wages. Most earn super too. A bonus is not the same as a gift. A non-cash gift, such as a voucher, can be treated differently and may involve fringe benefits tax for your employer. If you are unsure, ask us.
What Happens If Too Much Tax Was Held Back?
This is common, and it is good news. Say your employer held back $4,500 from your bonus. Your real tax on it turns out to be $3,200. The extra $1,300 is credited to you when you lodge your tax return. It either reduces what you owe or adds to your refund.
The opposite can also happen. If less was held back than you owe, you pay the difference after you lodge. It will show on your notice of assessment, which is the ATO’s final tax bill or refund notice for the year.
Before you lodge, check your income statement. This is the ATO’s record of your pay and tax for the year. Make sure it shows your full bonus and the tax held back. If a figure looks wrong, talk to your employer before you lodge. A wrong figure can mean the wrong refund.
A Note for Employers
If you pay bonuses, here are the basics.
- Tax deduction: A bonus is usually a tax deduction for your business, like wages. It is generally deductible in the year you become definitely committed to paying it.
- PAYG and reporting: You must withhold tax and report the payment through Single Touch Payroll.
- Super: Most bonuses attract 12% super. Under Payday Super, it must reach the fund within 7 business days.
- Payroll tax: Bonuses are generally part of wages for state payroll tax.
Mistakes here can lead to penalties. We help employers set up bonus payments the right way.
7 Common Bonus Tax Mistakes
- Believing there is a special “bonus tax.” There is not. It is your normal rate.
- Thinking all your income is taxed at the higher rate. Only the top part is.
- Forgetting the Medicare levy surcharge. One bonus can tip you over.
- Not checking for super. If your bonus is for ordinary hours, 12% should be paid.
- Salary sacrificing a bonus you have already earned. It must be agreed first.
- Going over the $32,500 cap. Remember your employer’s super counts.
- Panicking about the tax on payday. It is an estimate. Check your final tax first.
How to Estimate Your Bonus Tax in 3 Steps
- Add your bonus to your expected income for the year. For example, $100,000 plus $10,000 is $110,000.
- Use the 2026-27 table. Find which tax steps the bonus falls on. Add the 2% Medicare levy.
- Compare with what was held back. Look at your payslip. If more tax was taken than you owe, you get a refund when you lodge.
Things to keep: your payslip, your income statement, details of any deductions you plan to claim, and your private health insurance statement.
When Should You Talk to a Tax Agent?
Speak to a registered tax agent before your bonus is paid if:
- Your bonus will push you over a threshold, such as the $135,000, $190,000 or $250,000 lines
- You are thinking about salary sacrifice and want to check your cap
- You have no private hospital cover and are near $105,000
- You are a working holiday maker, non-resident or expat
- You are a business owner paying bonuses to staff
- You have other income, such as rent, shares or a second job
A short talk before the bonus lands can save you much more than a fix after.
Frequently Asked Questions
No. A bonus is added to your income and taxed at your normal rate, plus the 2% Medicare levy. It can look higher because tax is held back as an estimate on payday. The real tax is worked out in your tax return.
It depends on your income. In 2026-27, a resident who earns $80,000 to $100,000 pays about $3,200 on a $10,000 bonus (32%). A person earning $160,000 pays about $3,900 (39%). A person earning $200,000 pays about $4,700 (47%). These figures include the Medicare levy.
Employers use ATO Schedule 5 to estimate the tax on a bonus. The amount held back is capped at 47% of the bonus. If it is more than you really owe, the difference comes back to you when you lodge your tax return.
Usually, yes. Most bonuses for ordinary hours earn 12% super. A bonus for work done entirely outside your ordinary hours does not. From 1 July 2026, all commissions count for super.
Yes, if you agree with your employer before you earn the bonus. It is taxed at 15% in the fund. You must stay under the $32,500 cap for 2026-27, which includes your employer’s super. Division 293 tax may apply if your income is over $250,000.
It can. If you have no private hospital cover and your income goes above $105,000 (single) or $210,000 (family), you may pay 1% to 1.5% of your whole income for MLS purposes.
No. Only the part of your income above each line is taxed at the higher rate. The rest is taxed as before.
For most people over $45,000, no. The tax on the bonus itself is the same in both years. It can matter if the date moves you across a threshold, such as the Medicare levy surcharge line.
Yes. Commissions are taxed like wages and use the same Schedule 5 table for withholding. From 1 July 2026, all commissions count as qualifying earnings for super.
How AMA Accountants Can Help?
AMA Accountants is an ATO-registered tax agent and CPA/IPA firm in Adelaide. We have 25 years of experience and lodge more than 20,000 tax returns a year. Our team works with employees, contractors, business owners, working holiday makers and expats, in person or fully online.
We can help you:
- Estimate the tax on your bonus before you get it
- Check your payslip, super and income statement
- Decide if salary sacrifice suits you, and stay under your cap
- Claim every deduction you are allowed
- Lodge your tax return correctly and on time
- Set up bonus payments and payroll for your business
Call (08) 7111 0100 or send Book an Appointment.
You can also visit 477 Torrens Road, Woodville SA 5011.
Authored By Amit Chugh
Partner, CPA & Registered Tax Agent
Your Trusted Accountant for Adelaide, Melbourne, Sydney, Brisbane & Across Australia
Amit Chugh is a Partner at The AMA Accountant and a highly respected CPA & Registered Tax Agent with a proven track record of delivering exceptional accounting and taxation services to individuals, businesses, and corporations across Australia.
With over 25+ of professional experience, Amit has helped thousands of clients streamline their finances, optimise tax returns, and ensure full compliance with Australian Taxation Office (ATO) requirements. His client base spans Melbourne, Brisbane, Sydney, Tasmania, Perth, Adelaide, Darwin, Canberra, and regional hubs including Prospect, Modbury, Mawson Lakes, Woodville, Mount Gambier, Victor Harbor, Whyalla, Port Lincoln, Murray Bridge, Port Augusta, Gawler, and Port Pirie.
Disclaimer
This article is general information only and is not personal tax or financial advice. It does not take your own circumstances into account. Please speak to a registered tax agent about your situation. Figures are for the 2026-27 income year and were checked against ATO and Fair Work sources on 4 November 2026. Rates and thresholds can change.
