PAYG Withholding Calculator

What is PAYG Withholding?

PAYG (Pay As You Go) withholding is the system where employers deduct tax from employee wages each pay period and send it to the ATO on their behalf. The amount withheld depends on the employee's income and tax file number declaration.

How this calculator works

This calculator applies ATO tax tables to determine the correct withholding amount for each pay period. Employers use these tables to calculate how much tax to deduct from salary, wages, commissions, bonuses, and allowances. If an employee has claimed the tax-free threshold on their TFN declaration, the first $18,200 equivalent per period has no tax withheld. The withholding amount is an estimate — the actual tax liability is reconciled when the employee lodges their annual tax return.

ATO Schedule Tables

ATO publishes various withholding schedules: Schedule 1 (regular wages, claim TFT), Schedule 2 (no TFT claimed), Schedule 5 (back pay, bonuses, commissions — Method B), Schedule 8 (return to work payments), Schedule 14 (resident foreign workers). Schedule 1 is most common. Employers use ATO's withholding calculator or payroll software with embedded tables.

Claiming the Tax-Free Threshold

On your TFN declaration, claim the tax-free threshold ONLY at your highest-paying job. Why: the $18,200 threshold means no tax is withheld on the first $700/fn (approx). If you claim it at multiple jobs, withholding is too low and you get a bill at tax time. Most single-job earners claim; second-job casuals usually don't.

PAYG Variation (Reducing Withholding)

If you know you'll have large deductions (negative gearing on investment property, work-related expenses), apply for a PAYG withholding variation. ATO assesses your application and instructs your employer to withhold less. Avoids waiting until tax time for refund. Application via myGov takes ~28 days. Don't over-claim — you'll owe tax + interest at year-end.

Bonuses, Commissions, and Back Pay

Schedule 5 (Method B): higher withholding rate to avoid tax-time shocks. Method B(ii): employer calculates (YTD income + bonus) annualised, takes effective tax rate, applies to bonus. Result: bonus is taxed at your marginal rate from $1. Many people think the bonus is 'over-taxed' — it usually nets out at tax time, but feels worse than expected.

Voluntary Increased Withholding

Some employees deliberately ask their employer to withhold MORE to ensure a refund at year-end (forced savings). Easy via TFN declaration or directly with payroll. Better alternatives: voluntary super contributions (15% tax saved), paying down debt. The 'refund' from over-withholding is just your own money returned with zero interest.

Single Touch Payroll (STP)

Mandatory since 1 July 2019: employers must report each pay run to the ATO in real time. Your YTD income, withholding, super, and allowances are visible in myGov at any time. At year-end, your employer 'finalises' STP and your income statement becomes available in myTax pre-fill. Replaced the old PAYG payment summary (group certificate) system.

All calculations are performed in your browser — your data never leaves your device. Results are for general guidance only and should not be considered professional financial advice.

Built and maintained by Konstantin Iakovlev. Data sourced from the ATO and official Australian government sources.