Why your bonus looks over-taxed
Bonuses aren't taxed at a special rate, but a big chunk often disappears from the payslip. Here is why, what the bonus really costs you in tax for the year, and when you might get some of it back.
Reason 1: the bonus is taxed at your top rate
Your normal pay is taxed in layers: nothing on the first $18,200, then rising rates on each band above it. Overall, someone on $78,000 pays about 19.44% of their pay in tax and Medicare levy.
A bonus sits on top of all that, so every dollar of it is taxed at your highest rate: 30% plus the 2% Medicare levy for that example. So a $5,000 bonus has about 31.2% taken out, well above the share you are used to seeing on your payslip. Nothing is wrong: it is the same tax you would pay on a pay rise of the same amount.
Reason 2: how your payroll withholds it
For a bonus that covers more than one pay period, such as an annual bonus, the ATO has employers spread it over the year (Schedule 5). They work out the extra tax on one pay with 1/26 of the bonus added, then multiply by 26. On $3,000 a fortnight that withholds $1,560 from a $5,000 bonus.
If the bonus is simply added to one fortnight’s pay and run through the normal tax table, the table treats that fortnight as if you earned it every fortnight, all year. The same bonus then has $1,852 withheld, $292 more. The ATO allows that only for a bonus that relates to a single pay period, but it is why some bonus payslips look much worse than others. Any extra comes back at tax time.
What the bonus really costs you
Withholding is only an estimate. Your actual tax is worked out on your whole year’s income when you lodge. In the example, the bonus adds $1,600 to your tax and Medicare levy for 2026–27, so you keep $3,400. That is $40 more than was withheld, which your tax return will collect, often just by making your refund slightly smaller.
A bonus can cost more than your marginal rate in two situations:
- It takes you over the Medicare levy surcharge threshold. Without private hospital cover, once your income passes $105,000 (singles, 2026–27), a 1% surcharge applies to your whole income, not just the bonus. On $102,000, a $5,000 bonus adds $1,060 of surcharge, so it costs $2,660 in total.
- You have a HECS-HELP debt. Income above the repayment threshold adds compulsory repayments on top of tax. The HECS calculator shows how much.
Keeping more of your bonus
If your employer allows it, you can salary sacrifice a bonus into super. Sacrificed amounts are taxed at 15% in the fund instead of your marginal rate, so the $5,000 bonus becomes $4,250 in super, against $3,400 in cash. The catch: the arrangement must be in place before you become entitled to the bonus, and you can’t touch super until you retire. The salary sacrifice calculator compares the two.
Frequently asked questions
Is there a special tax rate for bonuses?
No. A bonus is ordinary income, taxed at the same rates as the rest of your pay. Only the way tax is withheld from it is different.
Will I get the tax on my bonus back?
Only if more was withheld than the bonus really adds to your tax for the year. With the ATO’s spreading method the two are usually close, so expect little back. If your payroll added the bonus to one pay and used the normal tax table, more was withheld, and the excess comes back when you lodge.
Can I put my bonus into super instead?
Yes, if your employer allows it and you set up the salary sacrifice arrangement before you become entitled to the bonus. Once the bonus has been awarded, it is too late to sacrifice it. Sacrificed amounts count towards your $32,500 concessional contributions cap.
General information based on ATO rules and rates, not tax advice. Figures are worked out by our calculators; see how we calculate.