1. What is Bonus Tax in Australia?

In Australia, bonuses are treated as part of your taxable income and are subject to Pay As You Go (PAYG) withholding tax. The tax on your bonus is calculated based on your marginal tax rate, which depends on your total annual income including the bonus.

2. How Bonus Tax is Calculated

The calculator uses the following method:

Where:

• \( \text{Tax}(x) \) — Australian income tax on amount x
• \( \text{Salary} \) — Your annual salary before bonus
• \( \text{Bonus} \) — The bonus amount received

Explanation: This method accurately calculates the additional tax you'll pay due to the bonus by comparing your tax liability with and without the bonus.

3. Why Calculate Bonus Tax Separately

Details: Understanding how much tax you'll pay on a bonus helps with financial planning. Bonuses can push you into a higher tax bracket, resulting in a higher marginal tax rate on the bonus amount.

4. Using the Calculator

Tips: Enter your annual salary (excluding bonus) and the bonus amount in AUD. The calculator will show the additional tax you'll pay due to the bonus and the effective tax rate on the bonus.

5. Frequently Asked Questions (FAQ)

Q1: Are bonuses taxed differently from regular income?
A: No, bonuses are taxed as ordinary income, but they may be withheld at a different rate when paid.

Q2: Why does my bonus seem to be taxed so highly?
A: When your employer calculates PAYG withholding on your bonus, they may use a higher withholding rate. However, when you file your tax return, it will be reconciled with your actual tax liability.

Q3: Can I reduce tax on my bonus?
A: You may consider salary sacrificing into superannuation or making deductible contributions, but normal bonus payments are fully taxable.

Q4: Does this include Medicare Levy?
A: This calculator shows income tax only. Medicare Levy (2%) would be additional.

Q5: What if I receive multiple bonuses?
A: Add all bonuses together and enter as a single amount for accurate calculation.