Your Bonus After Tax: Cash vs Super vs Paying Down HECS

Australia has no separate bonus tax rate. A performance bonus, a retention payment or a commission is ordinary assessable income, added to everything else you earned that year and taxed on the same scale as your salary. That is the accurate but not very useful answer, because it does not explain why a $10,000 bonus so rarely turns into anything close to $10,000.

The useful answer is that four separate things take a share, and only the first is what most people mean by “tax”:

• Income tax at your marginal rate. For 2026–27 the resident rates are nil to $18,200, 15% to $45,000, 30% to $135,000, 37% to $190,000 and 45% above that. The second rate fell from 16% to 15% on 1 July 2026.
• The 2% Medicare levy, which applies to the bonus like any other income.
• Your compulsory HELP repayment, if you have a study loan. Since 2025–26 this is a marginal system: 15c in each dollar of repayment income above $69,528, rising to 17c above $129,717.
• Offsets you quietly lose. The low income tax offset shades out at 1.5c per dollar between $45,000 and $66,667 of taxable income, so a bonus in that band is effectively taxed 1.5 percentage points higher than the bracket suggests.

Stack those and a worker on $90,000 with a HELP debt keeps $5,300 of a $10,000 bonus — an effective rate of 47%, while sitting in the 30% tax bracket. Add the Medicare Levy Surcharge and it reaches 57.9%. Neither figure appears anywhere on a tax table.

Enter your salary and bonus below. The calculator computes the three things people usually do with a bonus on the same basis — measured against the same person, in the same year, with no bonus at all — so the columns are directly comparable.

The most common complaint about bonuses is that roughly half of it vanished. Usually the tax was never that high; the withholding was. Those are different things, and the gap is settled when you lodge your return.

The ATO’s Schedule 5 — the tax table for back payments, commissions, bonuses and similar payments — sets out two different treatments, and which one applies depends on what period the bonus relates to. Both are correct; they just produce very different-looking payslips.

• If the bonus relates to a single pay period — a week, a fortnight or a month — it is simply added to the other earnings for that period and withheld using the ordinary tax table.
• If it relates to more than one pay period, or to no defined period — which covers most annual performance bonuses — the employer must use Method A or Method B. Method A apportions the bonus across the pay periods in the year, works out the extra withholding on one such period, then multiplies it back up, capped at 47% of the additional payment.

The first treatment is where the alarming payslip comes from. PAYG withholding tables work on a weekly-equivalent basis: they take the gross for that period and treat it as though it were your normal earnings all year. A fortnight containing a $10,000 bonus looks like someone earning roughly $350,000 a year, so that period is withheld near the top rate. Nothing has gone wrong — the over-withholding is simply corrected when you lodge.

There is one case where the intuition flips. Withholding tables have no way of knowing whether you hold private hospital cover, so the Medicare Levy Surcharge is never withheld. Someone on $100,000 without cover, receiving a $10,000 bonus, is under-withheld by about $252 even on the lumped-in method, because the $1,090 surcharge only appears on assessment.

Taking the bonus as cash is the default and the most flexible option. The money is available immediately with no restrictions, no preservation rules and no eligibility conditions. What it costs is the full marginal stack described above.

Two features of that stack are worth understanding, because they are where people mis-estimate.

The effective rate is not your tax bracket

A bonus is taxed at the rate that applies to the top of your income, and it can straddle a boundary. On $130,000, a $20,000 bonus is split in two: the first $6,000 of it sits below the $135,000 boundary and is taxed at 30%, while the remaining $14,000 is taxed at 37%. The effective rate on that bonus is 36.9% — neither of the two brackets it touches.

A bonus can create a bill, not a refund

If the bonus takes you across the surcharge threshold, or starts HELP repayments that were not previously due, the extra amount is assessed at lodgement and was never withheld through the year. That is the mechanism behind an unexpected tax bill in a year that felt like a good one.

Salary sacrificing a bonus means agreeing with your employer that the amount is paid as an employer super contribution instead of salary. It is a concessional contribution, taxed at 15% inside the fund rather than at your marginal rate. On a $10,000 bonus that is $1,500 of tax and $8,500 credited, against $6,800 in cash for someone on $90,000 without a HELP debt.

That gap is real, and it is the reason the option exists. But four constraints determine whether it is available at all, and they are where most coverage stops short.

1. The timing rule is strict

For the arrangement to be effective, the ATO requires it to be in place before you become entitled to the payment. An effective salary sacrifice arrangement cannot cover salary, wages, leave, bonuses or commissions accrued before you entered into it. Once the bonus has been declared and you are entitled to it, sacrificing it is generally no longer available — the remaining route is a personal deductible contribution made after the money is paid, which carries its own notice and eligibility requirements.

2. It cannot get you under the HELP or surcharge thresholds

This is the most consequential and least understood point. Salary sacrificed contributions are reported as reportable employer super contributions, and the ATO adds them back when working out both your HELP repayment income and your income for surcharge purposes. Sacrificing removes the income tax and Medicare levy on the bonus, but it cannot move you below either threshold.

The two tests then diverge, and the difference is worth understanding because it is routinely reported wrongly:

• HELP: no benefit at all. Repayment income adds the contribution back in full, and the repayment is a percentage of that income. Sacrificing a $10,000 bonus on a $90,000 salary leaves the extra $1,500 repayment exactly as it was.
• Surcharge: the liability stays, the amount falls. The tier is chosen on income for surcharge purposes, but the rate is applied to your taxable income — which sacrificing does reduce. On $100,000 with a $10,000 bonus and no hospital cover, taking cash costs $1,090 of surcharge; sacrificing the bonus still leaves you liable, but the bill drops to $990.

3. The concessional cap includes your employer’s contributions

The cap rose to $32,500 on 1 July 2026. It is not $32,500 of room for you — it covers Super Guarantee, salary sacrifice and personal deductible contributions combined. On $150,000, SG at 12% already uses about $21,000, leaving roughly $11,500. A $25,000 bonus would exceed the cap by $13,500. Excess concessional contributions are added back to assessable income and taxed at your marginal rate with a 15% offset, plus an excess contributions charge — which removes the advantage that motivated the contribution. Unused cap from the previous five years may be available if your total super balance was under $500,000.

4. Division 293 doubles the rate above $250,000

Where your income plus concessional contributions exceeds $250,000, an extra 15% applies to the contributions caught by the excess, taking the rate to 30%. That is still below a 47% marginal stack, but it halves the apparent advantage.

Two details matter for reading any comparison of this option, including ours. Division 293 is assessed separately by the ATO — it does not come out of the amount your fund credits, and you can either pay it personally or elect to have the fund release it. And it only applies to contributions within the concessional cap: amounts above the cap are dealt with by being added back to your assessable income instead, so they are not hit twice. Above about $270,000 of salary, employer contributions alone reach the cap, so a sacrificed bonus adds no further Division 293 at all — it is simply excess.

Against all of that sits the plainest constraint: the money is preserved. It is generally inaccessible until you turn 60 and meet a condition of release. Cash you can spend tomorrow and $8,500 you cannot touch for decades are not the same asset, and no effective-tax-rate comparison captures that difference.

The third common destination is a voluntary repayment against a HECS-HELP balance. The tax treatment is identical to taking the cash — the payment is made from post-tax money — so the question is only what the payment achieves.

It achieves less than most people expect, for a specific structural reason.

What a voluntary repayment does do is reduce the balance that gets indexed on 1 June, and bring forward the date the debt clears. Indexation was 2.8% on 1 June 2026, and since 2023 it has been capped at the lower of CPI or the Wage Price Index, which keeps it well below typical loan interest. HELP debt does not attract interest.

Concretely: $5,300 of net bonus put against a $30,000 balance avoids about $148 of indexation in the first year, and clears the debt roughly a year sooner. Those are real amounts. They are also smaller than the $1,700 gap between the cash and super options at the same salary, which is why this is better understood as a debt-clearing decision than a tax one.

The timing detail that does matter: indexation is applied on 1 June, so a voluntary payment needs to be processed and credited before that date to reduce the balance being indexed. Payments made in mid-June miss the entire year’s benefit.

Bonuses are unusual in that they arrive as a lump, which makes them far more likely than a gradual pay rise to push you across a threshold in a single step. Three matter.

$105,000 — the Medicare Levy Surcharge

This is the expensive one, because the surcharge is not marginal. Cross the 2026–27 single threshold without private patient hospital cover and 1% is charged on your whole taxable income for the year, not the amount above the line. On $100,000, a $10,000 bonus adds $1,090 of surcharge and takes the effective rate on that bonus from 32% to 42.9%. The tiers rise to 1.25% above $123,000 and 1.5% above $164,000.

If you have a spouse or dependent children the threshold is $210,000 rather than $105,000, plus $1,500 for each child after the first — but it is tested on combined family income, so a partner’s salary counts. The calculator above lets you switch thresholds, but it only models your own income; for a genuine two-income household the MLS calculator handles the combined test.

$69,528 — where HELP repayments start

Below this, no compulsory repayment is due. A bonus that lifts repayment income across it triggers a repayment for the whole year. On $66,000 with an $8,000 bonus, that is $521 that would not otherwise have been payable, lifting the effective rate on the bonus to 38.8%. Because the system became marginal in 2025–26, there is no longer a cliff where crossing the threshold costs a percentage of your whole income — the older flat-rate design did exactly that.

$250,000 — Division 293

Relevant only to the super option, but it is the reason a large bonus can make sacrificing markedly less attractive than the same decision the year before.

The table below is computed on 2026–27 rates. The effective rate column is the share of the bonus consumed by income tax, the Medicare levy, lost offsets and any compulsory HELP repayment — and it exceeds the marginal tax bracket at every income on the table.

Two patterns are worth noticing. The cash column falls as income rises, while the super column stays flat at 85% of the bonus — so the gap between them widens the more you earn. But the super column is also the one that stops being available first: by $200,000, Super Guarantee contributions alone have consumed almost the entire $32,500 cap, so sacrificing the full bonus is no longer possible without triggering excess contributions tax. The option that looks best on paper at high incomes is frequently the one that has already run out of room.

The other pattern is that a HELP debt moves the number further than two tax brackets do. A worker on $70,000 with a study loan keeps less of the same bonus (46.2% consumed) than a worker on $150,000 without one (39.0% consumed).