PAYG withholding explained

Step 01

What PAYG withholding is

Pay as you go (PAYG) withholding is how your employer deducts income tax from salary or wages and sends it to the ATO during the year. ATO tax tables and calculators help employers work out the amount; employees can use the ATO Tax withheld calculator to sanity-check a payslip. When you start a job, complete a **tax file number (TFN) declaration**. Your employer uses that form to decide how much to withhold. Also apply for a TFN if you do not have one — without a TFN you generally pay more tax on your income.

This page explains the system for employees. It is not an ATO withholding-table reprint or a third-party “PAYG withholding calculator.”

Step 02

Tax-free threshold and second jobs

If you are an Australian resident, the first **$18,200** you earn is usually tax-free. You can claim the tax-free threshold on your TFN declaration for your main job. If you have more than one income source (second job or taxable pension), ATO guidance is to tell the second payer **not** to claim the tax-free threshold so more tax is withheld. Otherwise you may owe a bill when you lodge your return.

Step 03

On your payslip and income statement

Most employers report income, tax, and super at the same time they pay you through **Single Touch Payroll (STP)**. Your **income statement** in ATO online services (via myGov) shows what was reported. Most employers have until **14 July** to finalise year-end data. Year-to-date tax withheld on payslips should broadly track toward those totals. Medicare levy (generally **2%** of taxable income for many residents) and study/training support loan repayments can also affect how much is withheld when declared on the TFN declaration.

Step 04

No TFN / higher withholding

ATO weekly tax tables (payments from 1 July 2026) require employers to withhold **47%** from resident payees and **45%** from foreign resident payees (ignoring cents) when the payee has not quoted a TFN and has not claimed an exemption — see the current weekly tax table for the full conditions. A formal **PAYG withholding variation** is a separate ATO process when standard withholding does not fit your facts. Use ATO forms and channels — Counttaxes does not file variations.

Educational estimates of annual take-home (after modelled tax and Medicare) are on our Australia calculator — confirm withholding with ATO tables and your income statement.