TAX ESSENTIALS FOR EMPLOYEES • STEP 1 OF 4
Get Ready: Understanding PAYG Tax
The hardest thing in the world to understand is the income tax.
Albert Einstein
Learn how PAYG (Pay As You Go) tax works and discover the deductions most Australian employees miss.
Your Learning Journey
Your Learning Journey
This Step Takes: 20 minutes
Learn PAYG basics, explore your payslip, discover the 4 tax reducers, and play the deduction matching game.
Why This Matters
The average Australian employee overpays tax by $2,000+ per year by missing eligible deductions. Understanding how PAYG works and what you can claim puts that money back in your pocket.
Average Australians miss $2,000+ in deductions yearly. Learn what you can claim.
How PAYG Tax Works
Your employer withholds tax from each paycheck and sends it to the ATO on your behalf. At tax time, you reconcile what was withheld vs what you actually owe.
Your Payslip Decoded
Hover over each item to learn what it means
Gross Pay
$3,269.231
per fortnight
PAYG Tax Withheld
Reduces taxable income
$785
per fortnight
Superannuation
Reduces taxable income
$392
per fortnight
Net Pay
$2,484.231
per fortnight
💡 Key Insight:
Your employer withholds $785 per fortnight in PAYG tax. If you claim deductions in your tax return, you may get some of this back as a refund!
Example based on $85,000 annual salary • Your actual payslip will vary based on your circumstances
Parameters checked on 22 Oct 2026 · Source: ATO · FY2026-27
Medicare low-income reduction, LITO and Division 293 are not modelled.
The PAYG System
Your Tax Bracket Visualiser
Australia uses a progressive tax system: you only pay the higher rate on dollars above each threshold. Use the sliders below to see exactly how your income is taxed, and how deductions shift your position.
Tax Bracket Visualiser
See how your income sits across Australian tax brackets, and how deductions reduce your bill.
Tax Bracket Fill
Your Marginal Rate: 30%
Every extra dollar you earn (above your reducers) is taxed at this rate. Reducing your taxable income saves you 30% per dollar.
Max $32,500/year concessional cap (FY2026-27)
WFH, car, uniform, self-education
Tax Without Reducers
$22,520
22.5% effective
Tax Saving
$0
annual saving
Tax Payable
$22,520
22.5% effective
Take-Home Pay
$77,480
$2,980/fortnight
Includes 2% Medicare Levy. General education only, not personal financial advice.
Parameters checked on 22 Oct 2026 · Source: ATO · FY2026-27
Medicare low-income reduction, LITO and Division 293 are not modelled.
The 4 Ways to Reduce Your Tax
As a PAYG employee, you have four main strategies to reduce your tax bill.
Work Deductions
Claim work-related expenses like WFH costs, car travel to client meetings, uniforms, and professional development. The most commonly missed tax savings.
Super Contributions
Salary sacrifice into super reduces your taxable income. You pay 15% tax in super instead of your marginal rate (up to 45%). Powerful for high earners.
Tax Offsets
Direct reductions to your tax bill for specific circumstances (LITO, seniors, pensioners). These are automatic if you're eligible.
Timing Strategies
Defer income or bring forward deductions to optimise your tax across financial years. Advanced strategy for variable income earners.
Focus on What You Can Control
Deduction Category Matcher
Drag each deduction to its correct category. Can you get them all right?
💼 Drag these deductions to their categories:
Home internet used for work emails
Driving to client meetings (not commute)
Steel-capped boots for construction site
Online course to improve work skills
Laptop computer for work projects
Parking fees at work-related events
Work From Home
Car & Travel
Uniform & Safety
Self-Education
💡 Tip: You can re-arrange items by dragging them between categories before checking your answers
Tax-101 for PAYG - Get Ready: Complete
- PAYG (Pay As You Go) tax is withheld from each paycheck throughout the year
- You can reduce tax through 4 ways: work deductions, super contributions, tax offsets, and timing strategies
- Most Australian employees miss $2,000+ in legitimate deductions annually
Homework
What work-related expenses do you currently have that might be tax deductible?
Grab your latest payslip and identify the 'PAYG Withheld' amount. This is what gets reconciled when you lodge your tax return.
What's Next?
20 minutes