Use this guide when you make advance payments of annual and long service leave to employees who are continuing in your employment.
These payments include:
- annual leave
- leave loading
- long service leave.
Where your employee is being paid annual leave or long service leave for a period greater than one pay period, you can use the appropriate tax table (weekly, fortnightly or monthly) to calculate the PAYG withholding amount.
The amount to withhold from the leave pay is based on the number of weeks involved.
Your employee, who is paid weekly, earns $1,055 a week and is taking four weeks annual leave. They will receive a total payment of $4,220. As your employee has claimed the tax-free threshold, you refer to column 2 in the Weekly tax table (NAT 1005).
- The withholding amount for weekly earnings of $1,055 is $196.00
- Multiply the withholding amount by the number of weeks leave: $196 x 4 = $784.00
- The total amount to be withheld from the annual leave payment of $4,220 is $784.00
This example is based on the figures in the Weekly tax table (NAT 1005) for payments made on or after 1 July 2012. Ensure that you use the applicable tax table when calculating the amount to be withheld.
From 1 July 2012, there is no longer a separate withholding scale in the tax tables for employees who are entitled to leave loading and they will no longer have higher withholding from every pay. These employees will now be taxed more accurately when the leave loading is paid.
Previously, the leave loading scale provided for extra withholding throughout the year to allow for the first $320 of leave loading to be tax-free when paid.
Any payment of leave loading can be added to annual leave payments and treated as in the example above.
More information
Last Modified: Wednesday, 25 July 2012