Insights · Payroll · 29 October 2026

Paying Christmas bonuses: tax, super and payroll tax

A Christmas bonus is a great way to thank a team after a big year. It’s also wages, which means tax to withhold, super to pay and, for bigger employers, payroll tax. Budget for the whole cost up front and the bonus stays a thank-you, not a January headache.

1. A cash bonus is wages

A cash bonus is salary or wages. You withhold PAYG and report it through Single Touch Payroll like any other pay.
That includes a small cash “Christmas gift”. In its super guarantee ruling the ATO treats a cash gift to an employee as wages, even when it’s described as goodwill and not tied to performance.
Gift cards, hampers and other non-cash gifts are a different question: fringe benefits tax and the minor benefit rules. See Christmas party and gifts: FBT.

2. Working out the tax to withhold

If the bonus relates to work in one pay period, add it to that period’s earnings and withhold as normal.
If it relates to more than one pay period (for example, a reward for the whole year), the ATO’s Schedule 5 lets you use Method A, which spreads the bonus over the year’s pay periods to work out the extra tax, or Method B(ii), which averages it over earnings so far this year.
Either way, withholding on the bonus is capped at 47%.
In practice, set it up in your payroll software as a bonus or lump-sum pay item rather than ordinary hours, so it withholds and reports correctly.

3. Super on the bonus

The ATO lists a Christmas bonus as ordinary time earnings, and as qualifying earnings under Payday Super, so super guarantee applies (12% from 1 July 2025).
The only exception is a bonus paid solely for work done entirely outside ordinary hours, and the ATO wants clear evidence of that.
Timing matters under Payday Super. Super on an out-of-cycle bonus is generally due within 7 business days after the employee’s next regular payday. The detail is in Payday Super over Christmas.

4. Queensland payroll tax

The Queensland Revenue Office lists bonuses as taxable wages, and the super you pay on them counts too.
If your wages are near the $1.3 million threshold, a round of December bonuses can tip a month over. See Queensland payroll tax 2026.

5. The cash flow side

The real cost of a $1,000 bonus is the bonus plus super, plus payroll tax if you pay it. Work it out per person before you announce anything, put it into your Christmas cash flow plan, and pay it from cash you’ve already set aside, not from money earmarked for the BAS or the January quiet weeks.

Quick checklist

Decide whether it’s cash (wages) or a non-cash gift (FBT).
Set it up as a bonus pay item and check the withholding method.
Include super, and diarise the Payday Super due date.
Check payroll tax if you’re near the threshold.
Budget the full cost in your December cash flow.

Not sure what your bonus round will really cost? Call us. We fix problems. You call us, we fix it.

Quick answers

Is a Christmas bonus taxed differently?

It isn’t taxed at a special rate, but the ATO’s Schedule 5 sets how much to withhold. If the bonus relates to more than one pay period, you use Method A or Method B(ii), and withholding on the bonus is capped at 47%. If it relates to a single pay period, you simply add it to that period’s pay.

Do I have to pay super on a Christmas bonus?

Generally yes. The ATO lists a Christmas bonus as ordinary time earnings and as qualifying earnings under Payday Super. The only exception is a bonus paid solely for work done entirely outside ordinary hours.

Is a small cash Christmas gift to staff a bonus?

The ATO treats a cash Christmas gift to an employee as salary or wages, even if it’s described as goodwill and not linked to performance. Non-cash gifts are a fringe benefits tax question instead.

Does a bonus count for Queensland payroll tax?

Yes. The Queensland Revenue Office lists bonuses as taxable wages, and super contributions are taxable wages too. It only matters if your wages are over the $1.3 million threshold or close to it.

Download · PDFThe Christmas and January cash flow checklist: 7 sections, one page each side, PRM branded. Print it and tick it off.

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Sources

General information only. This doesn’t take your circumstances into account and isn’t tax, financial or legal advice. Rules are from ATO and Queensland Revenue Office published information as at October 2026. Talk to your accountant or registered tax agent before acting. PRM is not a registered tax agent; tax agent services are provided by Australian Tax & Super Pty Ltd (TPB 25291395).