55 terms

Australian Pay & Tax Glossary

Every term that turns up on a payslip, in an award or on a tax return, defined in plain English. Figures are current for 2026-27, and each entry links to the page that explains it properly.

A

ABN
An Australian Business Number identifies a business or sole trader. A contractor invoices under one and receives the full invoice amount, with no tax withheld and no super paid by the payer, which is why an ABN rate is not comparable to a salary.
Allowance
A payment for a work condition or expense, such as tools, travel, first aid or meals. Some allowances are taxable and form part of gross pay, others are a reimbursement and are not, which is why two payslips with the same gross can be taxed differently.
Annual leave
Four weeks of paid leave for every year of service under the National Employment Standards, five weeks for some shift workers. It accrues progressively through the year and is paid out on termination if untaken.
Annual leave loading
An extra amount, commonly 17.5%, paid on top of ordinary pay while you are on annual leave. It comes from an award or agreement rather than the National Employment Standards, so not every employee receives it.
Award
A legally binding instrument setting minimum pay and conditions for an industry or occupation, made by the Fair Work Commission. An award rate is a floor, not a going rate, and an employer can always pay above it.

B

Back pay
Wages owed for a past period, usually after an underpayment or a pay rise applied late. Withholding on back pay uses a separate ATO method rather than the ordinary tax table, because the lump sum relates to earlier periods.
Base rate of pay
The rate for ordinary hours of work, excluding overtime, penalty rates, loadings, allowances and bonuses. Several entitlements, including redundancy pay and notice, are calculated on the base rate rather than on total earnings.
Bonus
A lump sum paid in addition to salary. It is ordinary taxable income, but withholding on it is worked out under a separate ATO schedule, which is why a bonus often looks over-taxed on the payslip and settles at the tax return.
Bracket creep
The effect where pay rises move income into higher tax brackets, lifting the average tax rate over time without any change to the published rates.

C

Casual employee
An employee engaged without a firm advance commitment to ongoing work. Casuals receive no paid annual or personal leave and generally no notice of termination, and are compensated with casual loading instead.
Casual loading
An extra 25% on the base rate paid to casual employees in place of paid leave, notice and redundancy entitlements. It raises the hourly rate but is not a bonus: it is the price of the entitlements a casual does not get.
Concessional contribution
A before-tax super contribution, including the super guarantee, salary sacrifice and personal deductible contributions. It is taxed at 15% inside the fund rather than at your marginal rate, and is subject to an annual cap.
Contractor
A person providing services under a contract for services rather than a contract of employment. A contractor is generally responsible for their own tax, super, leave and insurance, so a headline contract rate is not equivalent to a salary.

D

Deduction
An expense you can subtract from assessable income to arrive at taxable income. A deduction reduces the income the tax scale applies to, unlike an offset, which reduces the tax itself. Deductions are not modelled by the calculators on this site.
Division 293 tax
An additional 15% tax on concessional super contributions for individuals whose income plus those contributions exceeds $250,000. It reduces the tax advantage of salary sacrifice at higher incomes.

E

Employment termination payment
A lump sum paid because employment ended, such as payment in lieu of notice or a gratuity. An ETP is taxed concessionally up to a cap and is reported separately from ordinary income. Unused annual leave is paid on termination but is not an ETP.
Enterprise agreement
A collective agreement between an employer and its employees, approved by the Fair Work Commission. It replaces the relevant award and must leave employees better off overall than the award would. Many teachers, nurses and public sector employees are paid under one.

F

Fair Work Commission
The national workplace relations tribunal. It sets the national minimum wage in its Annual Wage Review each year, makes and varies modern awards, and approves enterprise agreements.
Financial year
The Australian tax year runs from 1 July to 30 June. The current year is 2026-27, covering payments made from 1 July 2026 to 30 June 2027. Rates and thresholds are set per financial year, which is why a figure is only meaningful with its year attached.
Foreign resident
Someone who is not an Australian resident for tax purposes. Foreign residents pay tax from the first dollar with no tax-free threshold, and do not pay the Medicare levy.
Fortnightly pay
The most common Australian pay cycle. There are 26 fortnights in a normal year, but some years contain 27 pay days, which can leave slightly too little tax withheld across the year.
Fringe benefits tax
A tax employers pay on non-cash benefits provided to employees. FBT is the reason salary packaging is limited and structured the way it is, and the FBT exemption for eligible electric vehicles is what makes a novated lease attractive.

G

Gross pay
Total pay before tax and any deductions. It is the number in a job advertisement and on the top line of a payslip, and it is not the amount that reaches your account.

H

HECS-HELP
A government loan for university tuition, repaid through the tax system once income passes the repayment threshold, which is $69,528 for 2026-27. It carries no interest but is indexed annually.

L

Long service leave
Additional paid leave after a long period of continuous service with one employer. It comes from state and territory legislation rather than the National Employment Standards, so the qualifying period and rate differ across Australia.
Low income tax offset
An offset of up to $700 that reduces tax payable for lower incomes, phasing out completely at $66,667. It is not refundable: it can reduce tax to zero but never produces a payment on its own.

M

Marginal tax rate
The rate of tax on your next dollar of income. It is always higher than your average tax rate, and it is the reason a pay rise is taxed more heavily than your existing pay while still leaving you better off.
Medicare levy
A levy of 2% of taxable income paid by most Australian residents to help fund public health. Low incomes pay a reduced levy or none at all through a shade-in, and foreign residents do not pay it.
Medicare levy surcharge
An additional 1% to 1.5% charged to higher earners who do not hold private hospital cover, starting at $105,000 for singles. It applies to the whole income at the tier rate, not just the amount above the threshold.
Minimum wage
The lowest lawful rate of pay for an adult employee not covered by an award, set annually by the Fair Work Commission. It rose to $26.44 an hour from 1 July 2026. Most employees are covered by an award rate instead, which may be higher.

N

National Employment Standards
The minimum entitlements that apply to every employee in the national system, including leave, maximum weekly hours, notice of termination and redundancy pay. An award or agreement can improve on the NES but cannot undercut it.
Net pay
The amount that actually lands in your bank account after income tax, the Medicare levy, any study loan repayment and any other deduction. Also called take-home pay.
Non-concessional contribution
An after-tax super contribution. It is not taxed again inside the fund because it has already been taxed as income, and it has its own annual cap, separate from the concessional cap.
Notice period
The period of warning required before employment ends, set by the National Employment Standards and often extended by an award or contract. An employer can pay it out instead of having you work it, which is taxed as an employment termination payment.
Novated lease
A three-way car arrangement between employee, employer and financier, where payments come from pre-tax salary. The FBT exemption for eligible electric and plug-in hybrid vehicles is what makes the saving significant.

O

Ordinary time earnings
The earnings base the super guarantee is calculated on. OTE covers ordinary hours including most allowances, loadings and bonuses, but excludes overtime, which is why overtime usually attracts no super.
Overtime
Hours worked beyond ordinary hours, usually paid at a penalty rate such as time and a half or double time. Overtime is generally not part of ordinary time earnings, so it does not attract the super guarantee.

P

Payday super
The requirement, from 1 July 2026, that employers pay super at the same time as salary rather than quarterly. It means contributions land in your fund sooner and compound for longer.
PAYG withholding
Pay As You Go withholding is the tax your employer takes from each pay and sends to the ATO on your behalf. It is an estimate of your final tax, not the final tax itself, which is settled when you lodge a return.
Penalty rates
Higher rates of pay for hours worked at unsociable times, such as evenings, weekends and public holidays. The multipliers are set by the relevant award or agreement and vary considerably between industries.

R

Redundancy pay
A severance payment owed when a role is no longer required, scaled to years of continuous service under the National Employment Standards. A genuine redundancy payment is tax-free up to a limit based on service.
Reportable employer super contributions
Extra super your employer contributes above the compulsory guarantee where you influenced the amount, most often through salary sacrifice. RESC is added back for income tests such as the Medicare levy surcharge and family payments.
Resident for tax purposes
A status determined by the ATO residency tests, based on where you live and your ties to Australia. It is decided independently of your visa or citizenship, and it changes which tax scale applies to you.

S

Salary packaging
An arrangement where part of your pay is taken as benefits before tax rather than as cash. The benefit depends on FBT treatment and on your employer type, with public benevolent institutions and hospitals having the most generous caps.
Salary sacrifice
The most common form of salary packaging: redirecting part of your pre-tax salary into super, where it is taxed at 15% instead of your marginal rate. The saving is the gap between those two rates.
Schedule 1
The ATO statement of formulas, NAT 1004, that produces the weekly, fortnightly and monthly PAYG withholding amounts. Payroll software applies these formulas directly, which is why software and the published tables can differ by a dollar.
Study and training support loans
The umbrella term for HECS-HELP, FEE-HELP, VET Student Loans and similar debts. STSL repayments are withheld on top of income tax under a separate schedule, which is the most common reason a payslip shows more tax than expected.
Superannuation guarantee
The compulsory employer contribution to your super fund, currently 12% of ordinary time earnings. It is paid on top of your salary, not deducted from it, unless your contract is expressed as a total package including super.

T

Tax file number
Your personal identifier in the tax system. If you do not give your employer a TFN, they must withhold at the top rate with no tax-free threshold, so a missing TFN is an expensive oversight.
Tax offset
An amount that reduces tax payable dollar for dollar, unlike a deduction, which reduces the income tax is calculated on. Most offsets are non-refundable, so they cannot take your tax below zero.
Tax-free threshold
The first $18,200 of income, on which an Australian resident pays no income tax. You claim it from one employer only; claiming it from two is the usual reason a second job leads to a tax bill.
Taxable income
Assessable income less allowable deductions. This is the figure the tax scale is applied to, and it is usually lower than gross pay for anyone with work-related deductions.

W

Withholding declaration
The form used to change your withholding after you have started a job, for example to begin or stop claiming the tax-free threshold, or to tell your employer about a study loan.
Working holiday maker
A holder of a 417 or 462 visa. Working holiday makers are taxed on their own scale from the first dollar with no tax-free threshold, at a lower starting rate than other foreign residents.

Z

Zone tax offset
An offset for people whose usual residence is in a remote or isolated part of Australia. Eligibility depends on where you actually live for at least half the year, not on where you work, which excludes most FIFO workers.

Where these definitions come from

Pay terms come from the Fair Work system: the National Employment Standards, modern awards and enterprise agreements. Tax terms come from the ATO. Where the two use the same word differently, the definition here says which sense applies. Rates quoted are for the 2026-27 financial year and are listed with their sources on the official sources page, with the verification process set out in the methodology.

Definitions are general information, not personal tax or financial advice. The disclaimer sets out what the calculators on this site include and, more importantly, what they leave out.