PAYG Withholding vs Your Final Tax Return: Why the Numbers Differ

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 repayments in 2025–26 →

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.

The ATO generally advises claiming the tax-free threshold from only one payer at a time unless your combined income for the year will remain below the threshold. If total withholding is still likely to be short, you can ask a payer to withhold an additional amount.

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.

For a planning estimate, add annual gross salary across all jobs. Add PAYG withholding from the matching income statements and any PAYG instalments already paid; do not include a future payment or an expected refund as tax withheld.

Use the ToolsFA calculator step by step

Choose the rate category that applies to the 2025–26 income year. Enter gross salary from every job in Salary and wages, net sole-trader income in Net business income, and supported interest, rent or other taxable amounts in Other taxable income. Enter the annual PAYG withholding and instalments in Tax already withheld, then place eligible work expenses, donations and other deductions in their separate fields.

After selecting any applicable Medicare exemption or HELP option, calculate and read the result from the liability lines upward: taxable income, income tax after LITO, ordinary Medicare levy, HELP repayment and total estimated liability. The headline refund or amount owing is the tax already withheld you entered minus those included liabilities.

• ✓ Use annual figures for one income year
• ✓ Combine multiple jobs by matching category
• ✓ Keep withholding separate from deductions
• ✓ Read each liability line before the headline balance
• ✓ Confirm omitted return items with the ATO or a registered tax agent

Example: If the calculator shows total included liabilities of $13,400 and you entered $12,100 of PAYG withholding and instalments, the planning result is $1,300 owing. Changing only the withholding field changes the filing balance, not the calculated taxable income.

Know what this comparison cannot settle

The ToolsFA refund calculator estimates annual income tax, LITO, the ordinary Medicare levy and an optional HELP repayment from the fields it collects. It does not reproduce an employer’s weekly or fortnightly withholding table, issue a variation, lodge a return or model every offset, private-health adjustment, capital gain, foreign-income item or family threshold.

Use the ATO tax withheld calculator for a payroll withholding check. Use the ToolsFA refund calculator for a transparent annual filing estimate, and do not treat a difference between the two as an error when their inputs and purposes differ.