Schedule 5 Tax Table 2026-27: Back Payments, Commissions and Bonuses
Schedule 5 is the ATO withholding table employers use when a pay includes a lump sum that covers more than one pay period: a bonus, a commission run, or back pay. It spreads the lump sum across the year so withholding runs at your real marginal rate, capped at 47% of the extra payment.
Schedule 5 decides what is withheld on pay day, not your final tax. The bonus tax calculator shows both: the likely withholding and what the bonus actually costs you in tax for the year.
What Schedule 5 covers
The schedule (NAT 3348, applying to payments from 1 July 2026) covers what the ATO calls additional payments: back payments including lump sum payments in arrears, commissions, bonuses and similar payments, plus back-paid compensation and sickness or accident payments that are not tax exempt. The common thread is a payment that relates to more than one pay period, or to no defined period at all, landing in a single pay.
One carve-out matters. A bonus or commission earned entirely within a single pay period does not use Schedule 5: it is simply added to that period's other earnings and withheld through the regular weekly tax table or its fortnightly and monthly equivalents. Schedule 5 exists for the payments those tables would over-tax.
Why a special table exists at all
Withholding tables assume this pay is what you earn every pay. Drop a $5,000 annual bonus into one week and the regular table treats you as someone earning that much all year, withholding near the top marginal rate. Schedule 5 corrects the distortion by averaging: the lump sum is notionally spread over the year's pay periods, withholding is worked out at the rate that annualised picture produces, and the result is scaled back to the actual payment. Your bonus is withheld close to your true marginal rate under the 2026-27 tax brackets instead of the top one.
Method A vs Method B: how employers work it out
The schedule offers two methods. Both average the additional payment over the year; they differ in what they average against.
| Method | How it works | Used for |
|---|---|---|
| Method A | Divides the additional payment by the number of pay periods in the year, adds that slice to the current period's gross, and multiplies the extra withholding back out | Any additional payment; the simpler default |
| Method B(i) | Recalculates withholding for the specific earlier pay periods the back payment belongs to, and withholds the shortfall now | Back payments for identifiable periods in the current financial year |
| Method B(ii) | Averages year-to-date earnings, adds the additional payment spread across the year's pay periods, and withholds the annualised difference | Back pay for a prior financial year, and bonuses or commissions spanning multiple or undefined periods |
Method B(ii) tends to track the year's true position best because it uses actual average earnings to date rather than one period's gross. If any method produces a negative result, the withholding on the additional payment is nil.
The 47% withholding cap
Under Method A and Method B(ii), tax withheld from an additional payment is limited to a maximum of 47% of that payment. If the calculation lands higher, including any study loan component, it is cut back to 47%. The cap protects the additional payment only; normal earnings in the same pay are withheld as usual. The ATO notes the flip side: for high earners the cap can leave withholding short of the final tax bill, with the difference payable at assessment.
A computed illustration: $5,000 bonus on a $80,000 salary
The averaging methods all aim at the same target: withholding that matches the extra annual tax the payment creates. That target is easy to compute directly. Take a resident on $80,000 who receives a $5,000 bonus covering the full year's performance, on 2026-27 rates with Medicare levy. This annual-difference figure is an approximation of the schedule method: payroll runs the same logic per pay period with per-period rounding, so the pay-day amount can differ modestly.
Annual-difference approximation
Frequently asked questions
What is PAYG on Schedule 5?
Is a bonus taxed at 47% in Australia?
Why was so much tax taken from my back pay?
Does Schedule 5 apply to a commission earned in one pay period?
Do HELP debts change the Schedule 5 amount?
Is the Schedule 5 withholding my final tax on the bonus?
Sources
- ATO: Schedule 5: Tax table for back payments, commissions, bonuses and similar payments (NAT 3348, published 17 June 2026)
- ATO: Schedule 5: Working out the withholding amount (Method A, Method B and the 47% withholding limit)
Related resources
Bonus Tax Calculator
Withholding and true annual tax on your bonus or back pay
Calculate →Redundancy Tax Calculator
Final pays with ETPs, unused leave and bonuses together
Calculate →All Tax Tables
Weekly, fortnightly, monthly and the special schedules
Open →Tax Brackets 2026-27
The annual rates Schedule 5 averaging is built on
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.