PAYG Withholding Calculator

About PAYG Withholding in Australia

Pay As You Go (PAYG) withholding is the system by which employers deduct tax from employees' wages each pay period and remit it to the ATO on their behalf. The withheld amounts are credited against the employee's annual tax liability when they lodge their income tax return — so withholding too little creates a tax debt for the employee, and withholding too much means they wait for a refund. Employers must register for PAYG withholding before making any payments to employees or contractors, and report amounts via Single Touch Payroll (STP) each payday.

The correct withholding amount depends on: gross wages and pay frequency, whether the employee has claimed the tax-free threshold ($18,200 for FY2025-26), any HELP/HECS or student loan debt, Medicare levy status, and whether a Tax File Number (TFN) has been provided. Contractors who do not quote an ABN must also have 47% withheld from any payment — this is reported separately. The ATO's withholding tables use an annualisation method: the period's wages are grossed up to an annual equivalent, annual tax is calculated, then divided back to the pay period and rounded to the nearest dollar.

On the BAS, total gross wages paid are reported at label W1, and the total PAYG withheld is reported at W4 (for small withholder businesses remitting quarterly). These amounts must reconcile to your payroll records and STP year-to-date totals. A common mistake is failing to update withholding when an employee's circumstances change mid-year — for example, if they submit a new TFN Declaration claiming the tax-free threshold or disclosing a HELP debt.

How to use this PAYG withholding calculator

1. Select whether you are calculating for a regular employee wage, a bonus payment, or a contractor without an ABN.
2. Enter the gross payment amount and the pay frequency (weekly, fortnightly, or monthly).
3. Select whether the employee has claimed the tax-free threshold and whether they have a HELP/HECS debt — these materially affect the withholding amount.
4. Use the withholding amount shown at label W4 on your BAS and record it in your payroll records for STP reporting.

What is the tax-free threshold and should my employee claim it?

The tax-free threshold ($18,200 for FY2025-26) means the first $18,200 of a resident individual's income is not taxed. An employee can only claim it from one employer — generally their primary employer. Claiming it from a second employer leads to under-withholding and a tax bill at year end. If an employee has multiple jobs, they should only tick the threshold on the TFN Declaration for their main job.

How does HELP/HECS debt affect withholding?

Employees with a HELP, VSL, SSL, or other compulsory repayment debt must have additional withholding applied. The compulsory repayment threshold for FY2025-26 is $54,435. If the employee's income will exceed this threshold and their employer is not withholding the additional amount, they may face a significant tax bill — or underpayment penalties if the ATO determines the correct amount was not withheld. The employee should tick the HELP box on their TFN Declaration.

What happens if I withhold the wrong amount?

Employers are liable for the correct withholding amount regardless of what the employee tells them. If you under-withhold, the ATO may hold the employer responsible for the shortfall. If you fail to remit withheld amounts on time, the ATO can impose penalty and interest. Under-reporting at W1 or W4 on the BAS compared to STP data is a common trigger for ATO data-matching reviews.