Tax and your first job

Your first payslip is a small document that answers big questions: what you earned, what went to the ATO, what went to your super fund, and what actually landed in your account. Employers must give you one within a day of paying you. Most people never read theirs. You will.

Before you start: two forms

When you begin a job you will complete a TFN declaration, which tells your employer your tax file number and whether to apply the tax free threshold to this job. If it is your only job, tick yes: that is what keeps withholding low or zero on a small wage. You will also get a super choice form, where you name the fund your super should be paid into. If you skip the TFN declaration, your employer must withhold at the top rate until you fix it.

The four lines that matter

• Gross pay: hours worked multiplied by your hourly rate, plus any penalty rates. The biggest number on the page.
• Tax withheld: the amount your employer sends to the ATO on your behalf. On a small casual wage with the threshold claimed, this is often zero.
• Superannuation: 12% of your ordinary earnings, paid by your employer into your super fund on top of your wage. It is not taken out of your pay.
• Net pay: gross minus tax withheld. The amount that actually reaches your bank account.

Pay as you go: why tax leaves each payday

Australia collects income tax gradually through the year rather than as one giant bill in July. The system is called pay as you go, or PAYG, withholding. Each payday your employer estimates the tax on that pay, withholds it, and sends it to the ATO, where it sits as a credit against your name. At tax time your return adds up the real total and settles the difference. This is exactly why over withheld tax comes back: the ATO was holding your credits the whole time.

Checks worth making every payslip

Check the hourly rate matches what you were offered and meets the award minimum for your age and role, which you can look up free on the Fair Work Ombudsman website. Check the hours match what you worked. And every few months, log in to your super fund and confirm the contributions on your payslips actually arrived, because unpaid super is one of the most common ways young workers are underpaid.

Penalty rates and casual loading

If your gross pay looks higher than hours times your base rate, penalty rates are usually the reason. Most jobs are covered by an award, a legal document that sets minimum pay and conditions for that kind of work, and awards lift the rate for hours that are less convenient: weekends, public holidays and late evenings. A Sunday shift can pay noticeably more per hour than the same shift on a Tuesday. On top of that, casual workers are paid a loading, often around 25%, on their base rate. The loading exists because casuals do not get paid holidays or sick leave, so the extra hourly pay is meant to make up for the leave a permanent worker would accrue. Knowing this lets you read your own payslip properly, because a single week can contain several different hourly rates stacked together.

The running totals: year to date

Most payslips carry a second set of numbers labelled year to date, or YTD, beside the figures for the current pay. These are the running totals for the income year so far: total gross, total tax withheld and total super since 1 July. They are useful for two reasons. First, they let you see at a glance whether you are creeping towards the $18,200 tax free threshold, which changes whether any tax should be coming out. Second, they are the figures that eventually feed your tax return, so if the YTD totals on your final payslip of the year do not match your prefilled return, that is exactly the kind of mismatch worth querying before you lodge.