Overtime pay can look heavily taxed on your payslip, but Australia has no special overtime tax rate.
Your overtime is added to your normal earnings and taxed under the same income tax system. The reason more tax may come out in an overtime week is that payroll withholds tax based on your higher pay for that period.
Here is how overtime tax works, how much may be withheld, and what happens at tax time.
How to Calculate Tax on Overtime Pay
To work out tax on a pay period that includes overtime, start by adding all your earnings together.
Use:
Normal pay + overtime pay = total gross pay
Your employer then calculates PAYG withholding on the total amount.
You do not normally calculate a separate tax amount for your overtime hours.
For a more accurate figure, you can use the ATO withholding tables or a pay calculator.
A Quick Overtime Tax Example
Suppose you normally earn $1,200 per week.
You then earn an extra $300 in overtime.
Your total gross pay for that week becomes:
$1,200 + $300 = $1,500
Your employer calculates withholding based on the $1,500 total.
The tax taken out may therefore be noticeably higher than in a normal week.
However, your final tax position is based on your total income for the full financial year, not just that one payment.
Is Overtime Taxed at a Special Rate?
No. Australia does not tax overtime separately.
It is treated as part of your regular taxable income. Your normal wages and overtime pay are added together, and tax is calculated using Australia’s marginal tax rates.
This means working extra hours does not automatically place all your income into a higher tax bracket.
Only the part of your income that falls into a higher bracket is taxed at that higher rate.
How the ATO Taxes Your Overtime Pay
Australia uses a progressive tax system.
For the 2025 to 2026 financial year, the resident tax rates are:
- $0 to $18,200: no tax
- $18,201 to $45,000: 16 cents for each dollar over $18,200
- $45,001 to $135,000: 30 cents for each dollar over $45,000
- $135,001 to $190,000: 37 cents for each dollar over $135,000
- $190,001 and above: 45 cents for each dollar over $190,000
The Medicare levy may also apply.
Your overtime is simply added to your other income. The total amount you earn during the financial year determines your final tax bill.
Why More Tax Is Withheld in an Overtime Week
You may notice a bigger tax deduction on a payslip after working extra hours.
This doesn’t mean overtime is taxed at a special rate.
Payroll systems use ATO withholding tables to estimate how much tax to take from each pay.
If you earn much more than usual in one week or fortnight, the payroll system may calculate withholding based on that higher amount.
For example, a large overtime week can make it look as though you earn that higher amount every pay period.
As a result, more tax may be withheld from that particular payment.
Do You Get Extra Overtime Tax Back at Tax Time?
You may get some of the extra amount back if too much tax was withheld during the year.
When you lodge your tax return, the ATO looks at:
- Your total taxable income
- The tax already withheld
- Any deductions you can claim
- Other tax obligations that apply to you
If your employer withheld more tax than you actually owe, you may receive a refund.
If not enough tax was withheld, you may need to pay the difference.
This is why a heavily taxed overtime week does not always mean you will permanently lose that extra amount.
Does Overtime Affect Your Tax Bracket?
Yes, overtime can increase your total yearly income and push some of it into a higher tax bracket.
But this does not mean your full salary is suddenly taxed at the higher rate.
For example, if overtime pushes part of your annual income above $45,000, only the amount above that threshold is taxed at the next rate.
The income below the threshold remains taxed at the lower rates.
Conclusion
Overtime pay in Australia is not taxed at a separate or special rate. It is added to your normal income and taxed using the same marginal tax system.
More tax may be withheld in a week or fortnight where you earn a lot of overtime, but your final tax bill is based on your total income for the financial year.
If too much tax is withheld, the difference may be refunded when you lodge your tax return.
Want to estimate your take-home pay after overtime? Use the Australia Pay Calculator to check your pay after tax.
FAQs
Does Overtime Pay Affect HECS-HELP Repayments?
Yes. Overtime increases your total repayment income. If it pushes your yearly income higher, it may increase your compulsory HECS-HELP repayment for that financial year.
Are Casual Employees Taxed Differently on Overtime?
No. Casual employees use the same income tax rates. They may receive higher overtime pay rates, but the tax system applied to that income is the same.
Is a Bonus Taxed the Same Way as Overtime?
Yes. Bonuses and overtime are both taxable income. Employers may use different withholding methods, but your final tax depends on your total taxable income for the year.
Can Overtime Move Me Into a Higher Tax Bracket?
Yes, but only the portion of your income above the relevant threshold is taxed at the higher rate. Your entire income does not move to that higher tax rate.