• Withholding from annual and long service leave for continuing employees

    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.

    If a continuing employee receives a payment for unused leave, with or without leave loading, refer to Tax table for back payments, commissions, bonuses and similar payments.

    If an employee ceases working for you, refer to Tax table for unused leave payments on termination of employment.

    Annual leave payments

    If you are paying an employee 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 pay as you go (PAYG) withholding amount.

    The amount to withhold from an advanced leave payment is based on the amount of leave taken.

    Example 1: leave in advance

    Your employee, who is paid weekly, earns $1,055 a week and is taking four weeks annual leave. They will receive a total gross payment of $4,220.

    Step 1: As your employee has claimed the tax-free threshold, you refer to column 2 in the Weekly tax table

    Step 2: You find that the withholding amount for weekly earnings of $1,055 is $202.00

    Step 3: Multiply the withholding amount by the number of weeks leave: $202 x 4 = $808.00

    Answer: The total amount to withhold from the annual leave payment of $4,220 is $808.00

    End of example

    This example uses the Weekly tax table for payments made on or after 1 October 2016. Ensure that you use the tax table that applies to that employee's normal earnings when calculating the amount to withhold.

    Leave loading

    Any leave loading attracted by annual leave in an advance leave payment is to be added to the total leave payment when calculating the withholding.

    Example 2: leave in advance with leave loading

    Your employee, who is paid weekly, earns $1,410 a week and is taking eight weeks leave: four weeks annual leave and four weeks long service leave. They will receive a leave payment of $11,280 for the eight weeks leave. The annual leave attracts leave loading at the rate of 17.5% per day, which increases the total leave payment by $987 to $12,267.

    Step 1: As your employee has claimed the tax-free threshold, you refer to column 2 in the Weekly tax table

    Step 2: Divide the total leave payment by the number of weeks leave to give the average weekly earnings: $12,267 / 8 = $1,533

    The withholding amount for the average weekly earnings of $1,533 is $367.00

    Step 3: Multiply the withholding amount by the number of weeks leave: $367 x 8 = $2,936.00

    Answer: The total amount to withhold from the full leave payment of $12,267 is $2,936.00

    End of example

    This example uses the Weekly tax table for payments made on or after 1 October 2016. Ensure that you use the tax table that applies to that employee's normal earnings when calculating the amount to withhold.

    See also

    Tax tables

    Tax withheld calculator

      Last modified: 29 Sep 2016QC 16601