How can I avoid an unexpected tax bill?

The Australian Tax Office (ATO) calculates the appropriate amount to withdraw from you every pay period on the basis of 26 fortnightly pay cycles per year. It’s 52 cycles for those paid weekly. 

If in a financial year, you received 27 fortnightly payments, you’ll likely be whacked with a large tax bill or receive less of a tax refund after you submit your tax return.

See also: 8 apps to simplify tax season

Why do 27 fortnightly pays create a tax bill?

You see, receiving a 27th pay doesn’t trigger a special tax or penalty. It simply means you’ve received additional taxable income during the financial year, and, as noted above, PAYG withholding calculations were designed around 26 fortnightly pay periods. 

You are getting a tax bill because withholding may not fully match your final tax liability. 

Dr Adrian Raftery, aka Mr Taxman, told Savings.com.au the 27th pay period is in effect a tax ‘leap year’.

"It will only happen if your first fortnightly pay next year is on 1 July, so not all businesses are going to have 27 pay periods next (financial) year," he said.

"Essentially there will be some businesses every year which have 27 pay periods," Dr Raftery added. 

For many employees, it may only occur every decade or so (when you factor in 29 February).

According to ATO assistant commissioner Rob Thomson:

"In simple terms, if you don’t receive a refund or bill, it means you’ve paid the correct amount of tax throughout the year.

"If you receive a bill, it may mean you didn’t pay enough – this can be for a number of reasons."

Other reasons you may receive a tax bill

The ATO has a neat list of events that may result in additional taxable income, as well as other reasons that can increase your tax payable.

• Not enough tax withheld from your income (e.g. extra pay pushed you into higher bracket)
• Some tax offsets have ended or you are no longer eligible for them
• Higher income increased your compulsory HELP or student loan repayments
• Your employer didn’t withhold HELP repayments because they weren’t notified 
• Receiving an income from a business, partnership or trust
• PAYG instalments didn’t cover enough tax on your business income
• Selling property, shares or crypto may trigger capital gains tax (CGT)
• Receiving income from assets or investments (e.g. dividends, rent) 
• Receiving additional income through the sale of a capital asset
• Gig economy earnings (e.g. ride-sourcing, renting out assets)
• Income or family changes may affect Medicare levy obligations
• Super contributions exceeded annual concessional contribution caps
• ATO data matching identified discrepancies in your tax return details

So, if you have 27 payments next financial year, and your employer hasn’t cottoned onto that fact yet, what can you do?

How to avoid a PAYG tax shortfall

While the difference may not be large, it does get more pronounced as you earn more, and thus fall into the higher tax brackets.

Ideally, your employer should make adjustments, but this may not be the case according to Dr Raftery.

Adrian Raftery

Chartered accountant (aka Mr Taxman)

Who is responsible for a tax shortfall?

As people usually get a refund each year, they probably won’t notice [their tax shortfall] other than they will get a slightly smaller refund than usual.

And funnily enough [they will] probably blame their tax agent, even though it's beyond their control.

Note that it's not the duty of the employer to pay any shortfall out of their own pocket.

The ATO generally allows employees to enter an arrangement with their employers to have additional tax withheld to reduce the risk of an end-of-year shortfall. 

However, the onus for their final tax liability remains on the employee even if withholding throughout the year proves insufficient. 

Get an estimate of your tax payable using Savings.com.au's Income Tax Calculator

How much extra tax could you owe

Below is a rough idea of how much you could owe if you received a 27th fortnightly pay period in a financial year, based on the 2025-26 Australian resident tax rate. 

*Indicative estimates only. Dr Adrian Raftery’s previous estimates have been adjusted to reflect 2025-26 tax rates. Data doesn’t take into account HELP repayments or extra Medicare loading

Personal income tax cuts

Starting 1 July 2026, the lowest marginal tax rate has dropped from 16% to 15%, and will drop further to 14% from 1 July 2027. 

See also: Money changes from 1 July

Additional amount to withhold per fortnight

Of course, not everyone has a nice even fortnightly payment amount. To spread out the extra tax paid during a tax leap year, you can ask your employer to withhold extra tax every fortnight.

The ATO recommends the following additional withholding amounts for employees concerned about a tax shortfall.

Dr Raftery says most individuals can get away with their employer withholding an extra $10 to $20 a fortnight if they think they will be faced with a tax bill at the end of the financial year.

"I would rather be getting a bit more back at year end, so I recommend that as a good forced form of saving," he said.

So for the price of a fast food meal or two per fortnight, you could avoid a potentially large tax bill at the end of the financial year and maybe even still get a large refund.

See also: How to get more tax back in Australia

While those extra dollars you’re sacrificing each fortnight could alternatively be gaining interest in a high-interest savings account, you might prefer avoiding a tax bill by arranging additional withholding instead. 

Need somewhere to store cash and earn interest? The table below features savings accounts with some of the highest interest rates on the market.

Time period

1 year

Deposit amount

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Bank	Savings Account	Base Interest Rate	Max Interest Rate	Total Interest Earned	Introductory Term	Minimum Amount	Maximum Amount	Linked Account Required	Minimum Monthly Deposit	Minimum Opening Deposit	Account Keeping Fee	ATM Access	Joint Application	Tags	Features	Link	Compare	Promoted Product	Disclosure
Revolut	Revolut Instant Access Savings Account ($0 - $100,000)	5.05% p.a.	5.50% p.a. Intro rate for 3 months then 5.05% p.a.	$1,047	3 months	$0	$99,999		$0	$0	$0				Intro rate for 3 months up to $100k, then 5.05% p.a. on paid Ultra plan up to $250k No deposit or withdrawal conditions. New to Revolut customers for a limited time. Open savings account within 1 month of joining. Total Interest Earned shown is for illustrative purposes and is based on monthly compounding. Actual Interest Earned will be higher from interest compounding daily instead of monthly.	Go to site	Compare	Promoted	Disclosure
ING	ING Savings Booster (balance up to $500k)	2.25% p.a. Bonus rate of 3.15% Rate varies on savings amount.	6.00% p.a. Intro rate for 4 months then 5.40% p.a.	$1,134	4 months	$0	$499,999		$0	$0	$0				Sign Up And Get Up To $100 T&Cs* - This Offer Is Available Until 30/09/2026. T&Cs and Eligibility Criteria Apply	Go to site	Compare		Disclosure
Rabobank	Rabobank High Interest Savings Account (<$250k)	4.00% p.a.	5.90% p.a. Intro rate for 4 months then 4.00% p.a.	$936	4 months	$0	$249,999		$0	$1	$0					Go to site	Compare		Disclosure

1. Savings.com.au’s two cents

It sounds like a pretty niche topic, tax leap years. After all, if you stick with one employer and are paid per fortnight, it may only occur every decade or so.

However, this makes it all the more important as tax leap years are easy to forget about. Similarly, if you change employers in that time you could face a tax leap year more often.

While the extra tax paid because you have 27 pay cycles is hardly earth shattering, you could end up owing a few hundred at tax time next year.

If your next pay falls on 1 July, you or your employer may want to make adjustments so that you’re not potentially stung with a tax bill a year from now.

But if you are issued with a large tax bill after you submit your tax return, the ATO may allow you to set up a payment plan so that you can pay it in instalments, which may be easier for you.