Bonus and commission tax: why the deduction may look unusually high

Published by SESAY · 2026-10-07 · General Australian payroll guidance

What to understand first

The ATO provides specific methods for additional payments such as bonuses and commissions. The appropriate calculation depends on the payment and circumstances. A higher withholding amount on a bonus does not, by itself, mean that bonuses have a separate permanent personal tax rate.

Practical checks

• Payroll: identify the period and nature of the payment.
• Use the applicable current ATO method and retain the workpaper.
• Check loan-related withholding and any valid variation.
• Employee: compare the calculation basis, not just a percentage of the bonus.

Fictional example

Fictional employee Oliver receives a quarterly commission alongside ordinary wages. His net deposit is lower than he expected after multiplying the commission by his usual take-home percentage. Payroll explains which additional-payment method was used and provides a breakdown. His final annual position still depends on his complete tax return.

Your next step

When reviewing a bonus, distinguish the gross award, ordinary pay, withholding and any other deductions. Payroll should not promise a refund at tax time or choose a method solely to maximise immediate net pay. If there is a calculation error, assess the correction using the ATO guidance rather than treating the entire bonus as tax-free.

How SESAY can help

SESAY can help document additional-payment calculations and train payroll teams to explain them clearly and consistently.

Official sources

• ATO — Schedule 5: working out withholding

Sources researched 2026-10-07. Examples are fictional and use stated assumptions. Confirm current rules and your circumstances before acting. This is general information, not individual tax or legal advice. SESAY is independent of the regulators linked here.