PAYG Tax Calculator Australia

PAYG (Pay As You Go) withholding tax is Australia's system for collecting income tax from salary and wages throughout the year. Instead of paying your entire tax bill when lodging your tax return, your employer withholds a portion of your pay each payday and sends it to the ATO on your behalf. The amount withheld is calculated based on your income level, tax residency status, whether you claim the tax-free threshold, and other factors such as HELP debt repayments.

PAYG withholding is calculated using tax tables provided by the ATO. Employers use these tables based on your pay frequency (weekly, fortnightly, or monthly). The calculation takes into account your projected annual income, whether you claim the tax-free threshold, your tax residency status, and if you have a HELP debt or Medicare levy exemption. The ATO updates these tables each financial year to reflect changes in tax rates and thresholds.

If you have only one job or income source, you should typically claim the tax-free threshold to reduce the amount of tax withheld from each payment. The tax-free threshold means the first $18,200 of your annual income is not taxed. If you have multiple jobs or income sources, it's generally best to claim the threshold for your highest-paying job and not claim it for your other jobs. This helps prevent under-withholding of tax, which could result in you owing money when you lodge your tax return.

Your PAYG withholding might seem too high or too low for several reasons. It could be because you haven't correctly claimed the tax-free threshold, your employer is using outdated tax tables, your tax residency status is incorrect, or you have multiple jobs but haven't adjusted your withholding accordingly. Other factors include whether your HELP debt status is correctly recorded or if you receive payments that vary significantly throughout the year. If you believe your withholding is incorrect, speak with your employer's payroll department or consider lodging a PAYG withholding variation form with the ATO.

Yes, you can adjust your PAYG withholding amount by applying for a PAYG withholding variation through the ATO. This might be appropriate if your circumstances mean the standard withholding amounts won't closely match your expected tax liability—for example, if you have significant deductible expenses, additional income sources not subject to withholding, or if you want extra tax withheld to cover potential tax liabilities. To apply, you need to complete a PAYG withholding variation application form (NAT 2036) and submit it to the ATO for approval.