Payslip and withholding guide
PAYG Withholding vs Your Final Tax Return: Why the Numbers Differ
PAYG withholding is a prepayment toward tax, not the final assessment. Payroll estimates withholding one pay period at a time, while your tax return considers the whole income year and your wider circumstances.
What PAYG withholding does
An employer generally withholds amounts from salary and wages and reports them to the ATO. The amount is based on payroll tables and declarations, including whether you claimed the tax-free threshold and disclosed a study and training support loan.
Because withholding is calculated during the year, it cannot always anticipate bank interest, investment income, a second job, deductible expenses or changes in eligibility for offsets.
- ✓ PAYG is credited to you at tax time
- ✓ It is not a separate tax
- ✓ It may be too high or too low for your final circumstances
- ✓ Your income statement should show the annual withheld total
Related guide: Estimate your tax refund →
Common reasons for a refund
A refund can occur when payroll withheld more than the final liability. This may happen after allowable deductions, an available tax offset, irregular employment, or because withholding across pay periods did not perfectly match annual income.
- ✓ Eligible deductions reduce taxable income
- ✓ Some tax offsets reduce calculated income tax
- ✓ Work stopped part-way through the year
- ✓ Bonuses or irregular pay produced higher withholding in a pay period
Related guide: HELP repayment and tax →
Common reasons for an amount owing
An amount owing can appear when not enough tax was withheld for the full-year result. Typical causes include multiple jobs where the tax-free threshold was claimed more than once, untaxed interest or business income, investment income, or a compulsory study-loan repayment not fully covered by withholding.
Example: Suppose two jobs each withheld as though they were your only job. Combined annual income may reach a higher bracket even though each payroll system saw only its own payments. The final return reconciles the combined amount.
Related guide: Tax residency and rates →
Check the right figures
Use gross income and the separate PAYG withholding figure from the income statement. Do not enter net pay as income or include super guarantee contributions as tax withheld. If pre-fill information is incomplete, compare it with final payslips and wait for the employer’s statement to become tax ready before lodging.
Frequently asked questions
Is PAYG withholding my final tax?+
No. It is a credit toward the final assessment calculated from your full return.
Why did my employer withhold tax but I still owe?+
Other income, multiple jobs, study-loan repayments or declarations that produced insufficient withholding can create a balance owing.
Should I enter net pay in a refund calculator?+
No. Use gross taxable salary or wages and enter PAYG tax withheld separately.
Official sources and important note
This guide provides general educational information, not personal tax advice. Confirm current rules with the ATO or a registered tax agent before lodging.