Key takeaways
- Leave loading is an award entitlement, not an NES entitlement. The legal floor is annual leave paid at your base rate, with no loading on top.
- 17.5% is the common figure, but many awards pay the higher of 17.5% or your weekend and shift penalty rates, and some calculate it on the award minimum rather than your actual rate.
- On $75,000, 4 weeks of leave carries $1,009.62 of loading, about $323 of tax and $687 in hand.
- There is no $320 tax-free amount in 2026-27. That was a withholding scale the ATO removed, not an exemption.
- Super is payable on loading unless the employer holds written evidence it compensates for lost overtime. Still 12%, now inside qualifying earnings under Payday Super.
- Your state does not change the answer. The award or registered agreement does.
What annual leave loading means
Annual leave loading is an extra percentage paid on top of your normal pay for the annual leave you take, usually 17.5%. It exists because an award or a registered agreement says it does. The National Employment Standards give you the leave; they do not give you the loading.
Fair Work sets the baseline plainly: "Annual leave is paid at the employee's current base pay rate for all hours of leave taken. This doesn't include extra payments such as overtime rates, penalties, allowances and bonuses." So a worker who normally picks up Saturday penalties or a few hours of overtime drops back to bare base rate the moment they go on holiday. Loading is the mechanism awards use to close part of that gap, and the ATO recognises the same rationale in its super rules, where loading paid to compensate for a lost opportunity to work overtime is treated differently from every other kind of loading.
The entitlement itself comes from one place. Fair Work again: "Awards, enterprise agreements and other registered agreements can set out: a different method of payment for annual leave; that annual leave loading is paid for annual leave." That single sentence explains most of the confusion on this topic. Loading is a term of an industrial instrument, so it varies by instrument.
Two things follow. Loading is not a bonus and not a separate class of income: it is taxable pay, withheld under the ordinary rules set out across our tax and PAYG guides and listed among the payments covered in the PAYG withholding guide. And because it is award-driven, two people on identical salaries at different employers can receive very different loading, or none at all.
Who is entitled to annual leave loading
You are entitled to annual leave loading only if an award, enterprise agreement, other registered agreement or your employment contract provides for it. There is no universal right to it and no minimum loading in the National Employment Standards. Check the instrument that covers your job before assuming 17.5% applies to you.
The leave itself is a different matter. Under the NES, full-time and part-time employees get 4 weeks of paid annual leave based on their ordinary hours of work, accruing pro rata. Shiftworkers can get more than 4 weeks where the award or agreement contains shiftwork provisions and defines them as shiftworkers for NES purposes. Casual employees do not get paid annual leave at all, which is why the loading question does not arise for them: there is no annual leave for a loading to attach to.
The NES list of minimum entitlements includes annual leave. It does not include annual leave loading. That is the whole answer to "am I entitled to it", and everything else is a question about your particular instrument.
To check yours, use Fair Work's Find my award tool, open the award, and read the annual leave clause. If you are award-free and employed on a common law contract, the contract is the only place loading can come from, and many salaried contracts are silent on it. Even where an award does carry a loading clause, it can be absorbed into your salary. That is covered further down.
How to calculate annual leave loading: the 17.5% formula
Multiply the pay for the leave you are taking by 0.175. 2 weeks of leave on $1,216.00 a week is $2,432.00 of leave pay, so the loading is $425.60 and the gross for those 2 weeks is $2,857.60. Loading applies to the hours you actually take, so three days of leave attracts 17.5% of three days of pay.
Annual leave loading on 2 weeks of leave at $32.00 an hour
That is the arithmetic. Two clauses in real awards change the answer.
1. Many awards pay the higher of 17.5% or your penalty rates
If you normally earn weekend or shift penalties, a flat 17.5% can leave you worse off than simply being paid what you would have earned. Plenty of awards deal with that by making the loading a comparison rather than a fixed add-on. Fair Work's own examples:
| Award | How the loading clause works |
|---|---|
| General Retail Industry Award, employee who is not a shiftworker | The higher of a 17.5% loading calculated on the employee's minimum hourly rate, or the weekend or shift penalty rates the employee normally gets |
| Security Services Industry Award | The higher of what the employee would have earned for those ordinary hours had they not been on leave, or the minimum hourly rate plus any applicable first aid, supervision or relieving officer allowance plus a loading of 17.5% |
| Road Transport and Distribution Award, shiftworkers | The higher of 17.5%, or the shift loading including relevant weekend penalty rates |
Fair Work attaches its own caveat to those examples: "Annual leave loading clauses in awards can vary from award to award. The examples below show common ways that annual leave loading is calculated, but it's not a full list of every way annual leave loading is calculated in awards." Read your clause rather than assuming.
2. The rate the 17.5% attaches to varies
Some awards calculate loading on the amount payable under the NES, or on what the employee would have received for their ordinary hours, which lands on the rate you are actually paid. Others say the loading is calculated on the relevant minimum rate of pay under the award. Fair Work's wording: "In those cases, the employee's annual leave loading is calculated on the award rate rather than their above award rate of pay."
That difference is why an employee paid $10 an hour above the award minimum can look at a payslip and find the loading is nowhere near 17.5% of their leave pay. Nothing is wrong. The clause is attaching the 17.5% to a smaller base.
Annual leave loading calculator: what 17.5% is worth after tax
On a $75,000 salary, 4 weeks of annual leave carries $5,769.23 of leave pay and $1,009.62 of loading. About $323 of the loading goes to tax, leaving roughly $687 in hand, and where the loading counts as qualifying earnings it also adds $121.15 of super. The table runs the same calculation across five salaries on the 2026-27 resident scale.
| Annual salary | 4 weeks leave pay | 17.5% loading | Extra tax | Loading in hand | Super on loading |
|---|---|---|---|---|---|
| $55,000 | $4,230.77 | $740.38 | $248.03 | $492.36 | $88.85 |
| $65,000 | $5,000.00 | $875.00 | $293.13 | $581.88 | $105.00 |
| $75,000 | $5,769.23 | $1,009.62 | $323.08 | $686.54 | $121.15 |
| $95,000 | $7,307.69 | $1,278.85 | $409.23 | $869.62 | $153.46 |
| $120,000 | $9,230.77 | $1,615.38 | $516.92 | $1,098.46 | $193.85 |
At $75,000 the extra tax on the loading is exactly 32 cents in the dollar, which is the 30% bracket plus the 2% Medicare levy. That is the entire mechanism: loading is added to your income for the year and taxed at whatever your top rate happens to be. The 2026-27 tax brackets set that rate, and the take-home pay calculator runs the numbers for salaries not in the table.
With a HECS or HELP debt the loading costs more than the headline marginal rate suggests. At $75,000 with a HELP debt, the $1,009.62 of loading adds $474.52 to what comes out: $323.08 of tax and $151.44 of extra compulsory repayment, because loading lifts your repayment income as well as your taxable income. Test your own position in the HECS repayment calculator.
These are annual positions on the 2026-27 resident scale with the tax-free threshold claimed, not payslip-exact withholding. What your employer actually holds back in the pay period the loading lands in is set by the ATO schedules described in the next section, and any difference between the two settles at assessment.
How annual leave loading is taxed
Leave loading is ordinary assessable income taxed at your marginal rate. There is no special rate for it and no concession attached to it. What does change is the withholding method, and that depends only on how your employer pays it: added to the pay period if it is paid pro rata, or run through Schedule 5 like a bonus if it is paid as a lump sum.
The ATO puts it in one sentence in the current weekly tax table (NAT 1005), published 17 June 2026 for payments made from 1 July 2026: "If you pay leave loading as a lump sum, use Schedule 5 - Tax table for back payments, commissions, bonuses and similar payments to calculate withholding. If you pay leave loading on a pro-rata basis, add the leave loading payment to earnings for that period to calculate withholding." The same document confirms the general position for anyone still employed: "You must include holiday pay (including any leave loading) and long service leave payments as part of normal earnings, except when they are paid on termination of employment."
Paid pro rata: nothing special happens
If the loading rides along with the leave as you take it, it is added to that period's earnings and withheld through the ordinary schedule for your pay cycle. Your tax for the period goes up because your pay for the period went up. That is all. The step-by-step is in how PAYG is calculated, and the PAYG withholding calculator shows the effect on a single pay.
Paid as a lump sum: Schedule 5, the bonus schedule
The ATO says loading "can also be regarded as a payment like a bonus if it is made as a lump sum and not on a pro-rata basis as leave is taken". Schedule 5, published 17 June 2026 for payments made from 1 July 2026, gives employers two ways to work out the withholding. Method A apportions the additional payment over the number of pay periods in the financial year and applies the average to the current period's gross earnings. Method B is longer and, in the ATO's words, "produces a withholding amount that is more likely to approximate the payee's actual tax payable", and it adds that "calculations made using either method are acceptable". Withholding on the additional payment is capped at 47% under Method A and under the Method B(ii) variant. The full schedule is set out on our Schedule 5 bonus tax table page.
Leave paid in advance: why payroll averages the payment
Get paid the whole block before you go and the ATO method is to average it. Take the total payment, divide it by the number of pay periods the leave covers, work out the withholding on that average, then multiply back up.
Run it on the $75,000 example. 4 weeks of leave pay is $5,769.23, the loading is $1,009.62, so the advance payment is $6,778.85. Averaged over 4 weeks that is $1,694.71 a week, which annualises to about $88,125 and sits in the 30% bracket. Skip the averaging and payroll treats $6,778.85 as one week's pay, annualises it to about $352,500, and withholds at the top rate. The annual tax is identical either way. The cash you have for the holiday is not.
Is the first $320 of leave loading tax free?
No. There is no $320 tax-free amount for annual leave loading in 2026-27. The ATO's current withholding schedules, all published 17 June 2026 and applying to payments made from 1 July 2026, set out the lump sum and pro rata routes and nothing else. None of them exempts the first $320 of loading, or any other amount of it.
The figure is still repeated widely, including in payroll guides and software help pages, so the history matters. The $320 was a feature of a separate PAYG withholding scale that used to apply to employees entitled to leave loading, and the ATO describes it in exactly those terms. Here is the ATO's own wording from the tax table (NAT 1006) that announced the change, in an edition the ATO no longer publishes:
There is no longer a separate withholding scale for payees who are entitled to leave loading and they will no longer have higher withholding from every pay. These payees 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 $320 of leave loading to be tax-free when paid.
Read the last sentence twice. The scale took extra tax out of every single pay across the year so that $320 could land untaxed when the loading was paid. It was never free money. It was your own over-withheld tax handed back in a lump, and it cost you the use of that cash for up to twelve months. The ATO removed that scale more than a decade ago. Since then there has been a single scale for employees who claim the tax-free threshold, whether or not they get leave loading.
A guide, a payroll blog or a well-meaning colleague quoting a $320 tax-free leave loading amount is quoting a rule the ATO withdrew. If your loading looks like it was taxed harder than the rest of your pay, the explanation is almost always the Schedule 5 lump sum route described above, not a missing exemption. Over-withholding under Schedule 5 comes back at assessment.
Is super paid on annual leave loading?
Yes, in most cases. Annual leave loading counts towards the super guarantee unless your employer can show in writing that the loading is paid to compensate you for being unable to work overtime while on leave. Without that written evidence, the loading goes into the super calculation.
The framing changed this financial year. Payday Super started on 1 July 2026, so employers now pay the super guarantee each payday rather than quarterly, and they calculate it on "qualifying earnings", which the ATO describes as a new term that brings together ordinary time earnings and other payments. The rate is unchanged at 12%, and contributions have to reach the fund within 7 business days after payday. If you are looking at a period before 1 July 2026, the same leave loading test applied, framed as ordinary time earnings.
The test itself, in the ATO's words: "Generally, you include annual leave loading in qualifying earnings because it's related to annual leave. However, you don't include annual leave loading in qualifying earnings if you can show that it's paid to compensate employees for being unable to work overtime while on leave."
| Payment | Qualifying earnings? |
|---|---|
| Annual leave loading clearly linked to a lost opportunity to work overtime | No |
| Annual leave loading, all other | Yes |
| Cashed out annual leave and leave loading during employment | Yes |
| Unused leave on termination, including annual leave, annual leave loading and long service leave | No |
The evidence standard is specific. To leave loading out of qualifying earnings, an employer needs written evidence linking it to a lost opportunity to work overtime, and the ATO accepts two forms: the relevant award or agreement, or a documented policy understood by employer and employees that states the reason for the entitlement. No written evidence means the employer either obtains it as soon as possible or starts including the loading.
The ATO has said it will not review how an employer treated leave loading in earlier periods where the employer self-assessed the overtime link and there is no evidence pointing the other way. Where there is evidence the loading was paid for something else, it should have been in qualifying earnings all along, and leaving it out creates a super guarantee shortfall with the super guarantee charge on top. There is a reporting consequence too: under Single Touch Payroll Phase 2, loading that is demonstrably referable to a loss of overtime is reported as overtime rather than as paid leave, so the distinction shows up on your income statement.
In dollars, 12% of the $1,009.62 of loading on a $75,000 salary is $121.15. Small on one holiday, not small across a career. The super guarantee calculator works it out on any earnings figure.
Annual leave loading in NSW, Queensland, Victoria, WA and SA
Leave loading does not change from state to state. It is set by your award or registered agreement under the national workplace relations system, so the same 17.5% clause applies to a retail worker in Sydney and a retail worker in Brisbane. There is no NSW leave loading rate and no Queensland leave loading rate to look up.
The state only matters if you sit outside the national system, and Fair Work is precise about who that is:
- NSW, Queensland and South Australia: state public sector and local government employees are not covered by the national system and remain under the state system.
- Tasmania: state public sector employees remain under the state system.
- Victoria: most employees are covered by the national system, including state government employees with some exceptions such as senior public servants. Local government employees are covered by the national system.
- Western Australia: all state public sector employers are in the state system, and so are sole traders, partnerships, other unincorporated entities and non-trading corporations. From 1 January 2023 all WA local government entities are covered by the state system.
- ACT and Northern Territory: generally all employees and employers are covered by the national system.
Western Australia is the one worth pausing on, because its state system catches ordinary private-sector employers that are not incorporated. Work for a WA sole trader or partnership and your leave loading comes from a WA state instrument rather than a federal award. Everyone else is asking an award question, not a state question, and the answer is in the clause.
When leave loading stops showing on your payslip
A missing loading line has one of five explanations, and three of them are absorption mechanisms Fair Work recognises. Its wording: "Employees may not receive the annual leave loading payment in their award or enterprise agreement if it's included in: an annualised wage arrangement permitted under their award or enterprise agreement, or a contractual offsetting arrangement." An individual flexibility arrangement can also vary the effect of a loading clause.
- An annualised wage arrangement
Your award permits a single annual salary that covers a defined set of award entitlements, loading among them. The loading is still being paid, just not as a separate line.
- A contractual offsetting arrangement
Your contract sets a salary expressly stated to absorb specified award entitlements. The same mechanism, done through the contract rather than the award.
- An individual flexibility arrangement
An IFA between you and your employer can vary how the loading clause applies to you specifically.
- Loading calculated on the award minimum
The loading is there, but the clause attaches it to the award rate rather than your above-award rate, so it looks far smaller than 17.5% of the leave pay on your payslip.
- No loading clause at all
Award-free salaried employees on a common law contract that says nothing about loading never see it. Nothing has gone wrong; there was never an entitlement.
The check takes a minute. Find the leave pay line on the payslip, find the loading line, divide one by the other, and compare the result with the annual leave clause in your award. If the number is 17.5% of an award minimum rather than of your actual pay, the clause is doing exactly what it says. If the line is missing entirely, read the salary clause in your contract for offsetting or annualised wage wording before raising it with payroll.
Leave loading when your job ends
Unused annual leave is paid out with its loading, and Fair Work leaves no room on the point: "Annual leave loading is paid out on termination even when an award, enterprise agreement or employment contract says that it's not."
The withholding is different from loading paid during employment. It runs under ATO Schedule 7, published 17 June 2026 for payments made from 1 July 2026, rather than Schedule 5: marginal rates on a normal termination such as a resignation or retirement for leave accrued after 17 August 1993, and a flat 32% where the termination is a genuine redundancy, invalidity or approved early retirement scheme. Super is not payable on unused annual leave or leave loading paid on termination, regardless of the reason for the termination. The full treatment, with a worked example, is in annual leave payout tax, and redundancy figures come out of the redundancy tax calculator.
Frequently asked questions
What does annual leave loading mean?
Who is entitled to annual leave loading?
How do you calculate 17.5% annual leave loading?
Is annual leave loading taxed at a higher rate?
Is the first $320 of annual leave loading tax free?
Is super paid on annual leave loading?
Do casuals get annual leave loading?
Does annual leave loading count towards my HECS repayment?
Is annual leave loading different in NSW?
Sources
- Fair Work Ombudsman: Payment for annual leave (annual leave paid at base rate; awards and registered agreements can provide loading; loading is paid out on termination)
- Fair Work Ombudsman: Annual leave loading in awards and agreements (the Retail, Security and Road Transport clause examples, the above-award versus award-minimum base, and annualised wage, IFA and offsetting arrangements)
- Fair Work Ombudsman: Final pay (the quoted line that annual leave loading is paid out on termination even when an award, enterprise agreement or employment contract says it is not)
- Fair Work Ombudsman: Annual leave (4 weeks of paid annual leave for full-time and part-time employees, pro rata on ordinary hours; casual employees do not get paid annual leave; the shiftworker exception)
- Fair Work Ombudsman: National Employment Standards (the NES list, which includes annual leave and does not include leave loading)
- Fair Work Ombudsman: The Fair Work system (which employees in each state and territory sit outside the national system)
- ATO: Weekly tax table (NAT 1005) (published 17 June 2026, applies from 1 July 2026; the lump sum and pro rata leave loading rule, and loading as part of normal earnings)
- ATO: Schedule 5, back payments, commissions, bonuses and similar payments (published 17 June 2026; lump sum loading treated like a bonus, Method A and Method B, 47% cap)
- ATO: Super on annual leave loading (published 27 June 2026; the overtime test, the written evidence standard and the shortfall consequence)
- ATO: What payments are qualifying earnings (last updated 21 June 2026; the qualifying earnings table rows for leave loading, cashed out leave and unused leave on termination)
- ATO: Single Touch Payroll Phase 2, disaggregation of gross (leave loading demonstrably referable to a loss of overtime is reported as overtime, not as paid leave)
- ATO: About Payday Super (from 1 July 2026: super each payday, qualifying earnings, 12%, 7 business days)
- ATO: Schedule 7, unused leave payments on termination of employment (published 17 June 2026; marginal rates and the flat 32% rows for annual leave loading)
- The $320 quotation comes from a superseded edition of the ATO fortnightly tax table (NAT 1006) that announced the removal of the separate leave loading withholding scale. That edition is no longer published on ato.gov.au, and none of the current 2026-27 documents above mentions a $320 amount.
- Tax, Medicare levy and HELP figures in the tables: 2026-27 resident scale, computed on this site.
Related resources
Annual Leave Payout Tax
Unused leave and its loading on resignation and redundancy
Open →Take-Home Pay Calculator
Net pay with super, HELP and packaging options
Open →Schedule 5 Bonus Tax Table
The schedule that applies when loading is paid as a lump sum
Open →
Narelle Hartigan is a CPA-qualified tax accountant with over a decade of experience in Australian personal taxation and payroll. She founded PAYG Calculator Australia to make tax withholding easy for every Australian worker to understand.