2025 Pay as you go (PAYG) withholding tax tables

Important update – 11 August 2025

Description

On 2 August 2025, the Universities Accord (Cutting Student Debt by 20 Per Cent) Bill 2025 became law. This Bill changes the way study and training support loan compulsory repayments are calculated and increases the threshold at which a compulsory repayment is required for the 2025-26 year. This will have the effect for most individuals with a study and training support loan of reducing their compulsory repayment amount.

Schedule 8 – Statement of formulas for calculating study and training support loans components (NAT 3539) and study and training support loans weekly, fortnightly and monthly tax tables are being updated to reflect the reduced compulsory repayment requirements in PAYG withholding.

The ATO will be undertaking communications activity to make payers aware of this change. However, we would appreciate DSPs utilising their own communication channels with customers to assist in ensuring awareness of the change and supporting them to be compliant.

Key changes

• An updated Schedule 8 – Statement of formulas for calculating study and training support loans components (NAT 3539) and study and training support loans weekly, fortnightly and monthly tax tables will take effect on 24 September 2025.
• To implement the new law, the formulas in the updated Schedule 8 to calculate the withholding amounts for employees who have a study and training support loan will comprise linear equations of the form y = ax – b. This is different to the formula previously used for Schedule 8.
• Payers must apply the updated Schedule 8 prospectively when calculating withholding from payments made on or after 24 September 2025. When the updated Schedule 8 comes into effect there is no requirement to recalculate withholding that has already occurred on payments made before 24 September.

The NAT 3539 output file that will apply from 24 September 2025 is available in the attachment section titled, NAT 3539 – effective from 24 Sept 2025 (XLSX).

The updated schedule 8 and associated tax tables will be published during September at ato.gov.au/tax tables

Originally published 15 May 2025

Description

The Federal Budget on 25 March did not result in any changes to the tax rates or income thresholds for the 2025-26 income year. The tax cuts announced don’t take effect until the 2026-27 income year. Therefore, there are no changes to Schedule 1 – Statement of formulas for calculating amounts to be withheld (NAT 1004) nor to the regular tax tables. The updates that were made on 1 July 2024 to Schedule 1 and the regular tax tables will continue to apply to payments made from 1 July 2025.

However, for the 2025-26 income year we will be updating Schedule 8 – Statement of formulas for calculating study and training support loans components (NAT 3539) and study and training support loans weekly, fortnightly and monthly tax tables due to the annual indexing and changing of the repayment income thresholds. The NAT 3539 output file that will apply from 1 July 2025 is provided under 'Resource Attachments'.

The updated Schedule 8 and associated tax tables will be published from mid-June at ato.gov.au/tax tables

In addition, there is likely to be an out-of-cycle update during the 2025-26 income year to Schedule 8 – Statement of formulas for calculating study and training support loans components (NAT 3539), subject to the passing of legislation impacting study and training support loans. This will also result in consequential changes to the study and training support loans weekly, fortnightly and monthly tax tables. Royal Assent received 2 August 2025 – updated information now available on this page.

Other important information

Schedule 5 – Tax table for back payments, commissions, bonuses and similar payments (NAT 3348) has been updated to remove the $1,200 Lump Sum E threshold. From 1 July 2025, all back payments that accrued more than 12 months before the date of payment should be treated as lump sum E regardless of the amount. This change has been made as the result of legislation that changed the way lump sum payments in arrears are treated for Medicare levy purposes.

We do not update the statement of formulas and regular tax tables to only accommodate changes to the Medicare levy thresholds. We only factor in the Medicare levy changes when we have to make changes to the tax tables due to changes to tax rates and/or income thresholds. We don’t consider making changes to tax tables just for Medicare levy thresholds economical for employers, digital service providers and the ATO, as their effect on withholding is minimal. When individuals lodge their income tax return for the year, the up-to-date Medicare levy thresholds will apply.

Some of the schedules and tax tables have had no material changes but are updated for other reasons including formatting and having up-to-date examples, cap or payment limit amounts.

Whenever using Schedule 11 - Tax table for employment termination payments (NAT 70980), Schedule 12 - Tax table for superannuation lump sums (NAT 70981) or Schedule 13 - Tax table for superannuation income streams (NAT 70982), ensure you’re using the current cap or payment limit amount for the income year. Refer to Key super rates and thresholds for the latest:

• Untaxed plan cap amount (Table 10)
• Life benefit termination payments ETP cap (Table 17)
• Death benefit termination payments ETP cap (Table 18)
• Genuine redundancy and early retirement scheme payment limits (Table 20)
• General transfer balance cap (Table 25)
• Defined benefit income cap (Table 26).

Note: Prior year PAYG withholding tax tables are available in the DSP hub in Online services for DSPs.