This article explains how overtime is taxed in Australia in general terms. Tax thresholds and rates change over time, so always check the current ATO tax rates and PAYG withholding tables, or speak to a registered tax agent, before making decisions.
Are You Declining Extra Shifts and Overtime Work because of Higher Taxes?
Is overtime taxed more? Should you decline overtime or extra nursing shifts to save money? Find out all about this in our Tax Time Series last and final part.
Does working overtime mean more tax for me?
No. There is no special “overtime tax” in Australia. Overtime is simply part of your employment income, grouped together with your normal salary and wages, and taxed using the same progressive tax rates.
Australia uses a marginal tax system, which means your income is taxed in slices. The first slice is tax‑free, the next slice is taxed at a low rate, the next slice at a higher rate, and so on. Only the top slice of your income is taxed at your marginal tax rate – the earlier slices stay at the lower rates.
When you pick up extra shifts, you increase the top slice of your income, so that part can be taxed at a higher rate. But the overtime itself doesn’t have a special extra tax; it’s just that you may move into a higher slice of the tax table.
Should you say no to overtime to “save tax”?
For most nurses, saying no to overtime purely to “avoid a higher tax bracket” will mean leaving real after‑tax money on the table. Extra shifts increase your taxable income and the tax you pay, but the amount you keep in your pocket still goes up.
The better way to think about it is: “How many dollars do I keep from each extra shift once tax and my own energy, wellbeing and life commitments are taken into account?” Tax is only one part of that decision – but it is not a penalty that makes overtime a loss.
For most nurses, saying no to overtime purely to “avoid a higher tax bracket” will mean leaving real after‑tax money on the table. Extra shifts increase your taxable income and the tax you pay, but the amount you keep in your pocket still goes up.
The better way to think about it is: “How many dollars do I keep from each extra shift once tax and my own energy, wellbeing and life commitments are taken into account?” Tax is only one part of that decision – but it is not a penalty that makes overtime a loss.
Overtime allowances and overtime meal allowances
Many nurses receive allowances in connection with overtime, such as an overtime meal allowance or other shift‑related allowances. These are generally treated as employment income when they are reported on your income statement, and you may need to include them in your tax return.
In some cases, overtime meal allowances may only appear on your payslip and not on your income statement. Different rules can apply to these amounts, including when you do or don’t need to include them as income and when you can claim a deduction for related expenses.
The rules around allowances are nuanced, so if you are not sure whether to include an overtime allowance or overtime meal allowance in your return, it’s worth checking the ATO’s guidance on employment allowances or speaking with a tax professional.
The Benefits of Progressive Tax Rate
The progressive tax rate in Australia ensures that your average tax rate remains much lower than the marginal rate. In this system, your average tax rate is calculated by dividing the amount of tax you pay by your income. On the other hand, the marginal tax rate represents the tax paid for every additional dollar earned as income. Therefore, if another source of income pushes you into the next tax bracket, it doesn’t imply that all your income is now taxed at the higher rate.
An illustrative example (numbers only, not current ATO rates):
Imagine your base nursing income for the year is 70,000. Let’s say, purely for illustration, that income between 45,000 and 90,000 is taxed at a 30% marginal rate, and income below that is taxed at lower rates.
If you then pick up enough overtime to earn an extra 10,000, your total income becomes 80,000. The extra 10,000 doesn’t make all of your income jump to a higher rate. Instead, only that extra 10,000 is taxed at the marginal rate that applies to income in that slice.
Your overall (average) tax rate will go up a bit, because more of your income is in a higher slice, but you are still better off in dollar terms by doing the overtime. The extra shifts never make you “lose money” in tax; they just mean you keep a smaller percentage of the last dollars you earn.
To see what this looks like with real, current figures for your situation, use the ATO’s latest income tax information and tools rather than relying on example numbers.
Where to find the current tax rates
Because tax rates and thresholds are updated over time (and have been adjusted again around 2025–26), it’s risky to rely on any static table in a blog post.
For the most up‑to‑date personal income tax rates and thresholds for Australian residents, always refer directly to the ATO’s tax rates page and tax tables.
If you want to estimate your current take‑home pay from nursing, including overtime and penalties, use the ATO’s income tax estimator (for yearly figures) or a PAYG tax withheld calculator based on the latest ATO rates.
Content last reviewed in 2026. The concepts in this article are intended to be general and evergreen, but tax rules and thresholds change over time. Always check the latest information on the ATO website or speak to a registered tax agent for advice about your own situation
Reference
The Australian Taxation Office
