How penalty rates and overtime are taxed
Weekend, night and overtime pay often seems to lose more to tax than your normal pay. It isn't taxed at a special rate. Here is why it looks that way, what you really pay, and which of that pay earns super.
Penalty rates and overtime in a nutshell
Most awards and agreements pay more for working unsocial hours or extra hours. Rates depend on your award. In the General Retail Industry Award 2020, for example, full-time and part-time employees get:
- 125% of the base rate on Saturdays, 150% on Sundays and 225% on public holidays (penalty rates);
- 150% for the first 3 hours of overtime in a day and 200% after that (overtime rates).
Check your own award with the Fair Work Pay and Conditions Tool, or use the overtime calculator, where every rate can be changed.
Why a big week loses more to tax
On the $26.44 minimum hourly rate, a plain 38-hour week from Monday to Friday pays $1,004.72, with $139 of tax withheld, about 13.8% of the pay. Swap the Monday shift for a Saturday and add 3 hours of overtime on Friday, and the week pays $1,173.94, with $194 withheld.
So the extra $169.22 had $55 taken out, 32.5% of it, far more than the share of your normal pay. Two things cause that:
- The extra is taxed at your top rate. Your normal pay is taxed in layers, starting with a tax-free slice, so the share taken from it is low. Every extra dollar sits on top, at your marginal rate plus the Medicare levy.
- The tax tables assume every week is the same. A bigger week is taxed as if it were a bigger salary. When a big week pushes you into a higher bracket that you won’t reach over the year, too much is withheld.
What you really pay
Your actual tax is worked out on your total income for the year. If that week happened only once, the extra $169.22 would add $56.61 to your tax and Medicare levy for 2026–27, at your marginal rate of 32%. So here the withholding was about right: the extra pay really is taxed at that rate.
Any over-withholding is settled when you lodge your tax return, as a bigger refund.
Which extra pay earns super
Your employer pays 12% super on your ordinary pay. That includes penalty rates, shift loadings and casual loading for your ordinary hours, but not overtime.
In the busy week above, super is $126.60: 12% of $1,054.96, which is the pay excluding the $118.98 of overtime (ATO).
Casual employees also get a 25% casual loading on their base rate, and in many awards their penalty rates are calculated on top of it. The weekly figures assume the tax-free threshold is claimed and there is no HECS-HELP debt. A full year at the plain week is $52,245.
Frequently asked questions
Is overtime taxed at a higher rate?
No. Overtime and penalty rates are ordinary income, taxed at the same rates as the rest of your pay. A big week only looks heavily taxed because the tax tables assume you earn that much every week.
Should I ask for less tax to be taken out of overtime?
Usually there’s no need. If your overtime is irregular, any extra withheld in big weeks comes back when you lodge your tax return. If you work overtime most weeks, the withholding is close to right already.
Do casual workers get super on penalty rates?
Yes. Casual loading and penalty rates for ordinary hours count towards super, the same as for permanent employees. Overtime doesn’t, as long as your ordinary hours are clearly set out in your award or agreement.
General information based on ATO rules and rates, not tax advice. Figures are worked out by our calculators; see how we calculate.