Coaching Centre
PAYG, net pay and tax returns
Reading a payslip, PAYG tax withheld, other deductions from pay, superannuation, net pay, and working out a refund or a tax debt at the end of the financial year.
Your first payslip is usually a shock: the amount in your bank account is less than your hours times your rate. The gap is mostly tax, taken out before you ever see it. This section shows where every dollar goes, and why many workers get some of it back in July.
Reading a payslip
By law, your employer must give you a payslip within one working day of paying you. It shows:
- Gross pay: everything you earned before anything is taken out.
- PAYG tax withheld: income tax your employer sends to the ATO on your behalf.
- Other deductions you've agreed to, such as union fees, private health insurance or salary sacrifice into super.
- Net pay: what actually goes into your bank account.
- Superannuation: what your employer pays into your super fund. This is not taken from your pay.
PAYG withholding
Pay As You Go (PAYG) means tax is collected bit by bit through the year instead of in one big bill. Your employer uses the ATO's withholding tables, which spread the expected yearly tax and Medicare levy across your pay periods. Two things change how much is withheld:
- You can claim the tax-free threshold with only one employer. With two jobs, the second withholds more.
- If you don't give your employer your tax file number (TFN), they must withhold $47\%$.
Isla earns $\$31.20$ an hour. This week she worked $38$ ordinary hours and $3$ hours of overtime at time-and-a-half. Her PAYG tax withheld is $\$242$ and she pays $\$12$ in union fees. Find her net pay, and the super her employer pays at $12\%$ of her ordinary earnings.
The tax return
After 30 June, you lodge a tax return. The ATO works out the tax you actually owe on your taxable income for the year and compares it with the PAYG already withheld.
- Withheld more than you owe: you get a refund.
- Withheld less than you owe: you have a tax debt to pay.
Most employees get a small refund, because withholding assumes you have no deductions.
Isla earns the same every week for $52$ weeks. She claims union fees ($\$12$ a week) and $\$1200$ of other deductions. Use the 2026–27 tax table from 3E and a $2\%$ Medicare levy to decide whether she gets a refund.
Leave the settings as they are and check Example 1. Switch to "End of financial year" to check Example 2.
Increase the deductions claimed at tax time by $\$1000$. By how much does the refund grow? Explain why it isn't $\$1000$.
When you owe tax
Mei has two part-time jobs and wrongly claimed the tax-free threshold at both. Her employers withheld $\$2150$ and $\$1050$. Her taxable income for the year is $\$46{,}000$. How much does she owe?
Each employer treated her first $\$18{,}200$ as tax free, so far too little was withheld. That's why the ATO says to claim the threshold from your main job only.
Your turn
Ava's taxable income is $\$38{,}500$ and her employer withheld $\$3400$. Does she get a refund or owe tax, and how much?
Show the working
Tax: $0.15 \times (38\,500 - 18\,200) = 0.15 \times 20\,300 = \$3045$. Medicare: $0.02 \times 38\,500 = \$770$. Total: $\$3815$. Only $\$3400$ was withheld, so she owes $3815 - 3400 = \$415$.
Gross pay is $\$1150,$ PAYG tax is $\$168$ and union fees are $\$15$. Find the net pay.
$1150 - 168 - 15 = \$967$.
Find the employer's super contribution at $12\%$ on ordinary earnings of $\$1150$.
$0.12 \times 1150 = \$138$.
How is the superannuation guarantee paid?
The super guarantee is an employer contribution. It doesn't reduce your gross or net pay.
A worker owes $\$9800$ in tax and Medicare, and $\$10{,}450$ was withheld during the year. Find the refund.
$10\,450 - 9800 = \$650$ refund.
A worker owes $\$6240$ in tax and Medicare, and $\$5980$ was withheld. How much do they still owe?
$6240 - 5980 = \$260$ still owing.
$\$185$ of PAYG tax is withheld every week. Find the total withheld over a year.
$185 \times 52 = \$9620$.
What happens if a new worker doesn't give their employer a tax file number?
Without a TFN, the employer must withhold $47\%$. The worker can get the extra back after giving a TFN and lodging a return.
A fortnightly payslip shows gross pay $\$2640,$ PAYG tax $\$412$ and private health insurance $\$68$. Find the net pay.
$2640 - 412 - 68 = \$2160$.
Exam style: Theo's taxable income is $\$52{,}000$ and $\$7500$ was withheld. Using the 2026–27 table and a $2\%$ Medicare levy, find his refund.
Tax: $4020 + 0.30 \times 7000 = 6120$. Medicare: $1040$. Total $\$7160$. Refund: $7500 - 7160 = \$340$.
Exam style: Kim's gross income was $\$61{,}880$ and her deductions were $\$1380$. Her employer withheld $\$10{,}140$. Using the 2026–27 table and a $2\%$ Medicare levy, find her refund.
Taxable: $61\,880 - 1380 = 60\,500$. Tax: $4020 + 0.30 \times 15\,500 = 8670$. Medicare: $0.02 \times 60\,500 = 1210$. Total $\$9880$. Refund: $10\,140 - 9880 = \$260$.