What Is Leave Loading? The 17.5% Explained

Leave loading is an extra payment — usually 17.5% on top of your normal base pay — paid while you're on annual leave. It's not part of every Australian pay packet: whether you get it, and how much, depends on your award, enterprise agreement (EBA), or employment contract rather than a blanket national law.

What is leave loading and what does the 17.5% mean?

When you take annual leave, your employer normally pays your base rate for each day off. Leave loading adds a percentage on top of that base rate — most commonly 17.5% — so a week of annual leave pays more than a week of ordinary base wages.

The figure traces back to a 1970s industrial relations idea: employees who regularly earned overtime, shift penalties, or weekend loadings lost that extra income while on leave, since annual leave is paid at the base rate. Leave loading was designed to offset that loss, which is why 17.5% became the standard rate written into many modern awards, even for employees who don't personally work overtime or shifts.

Is it compulsory for employers to pay leave loading?

No — not automatically. The National Employment Standards (NES), the baseline entitlements under the Fair Work Act, guarantee four weeks of paid annual leave a year (five for some continuous shift workers) but say nothing about a loading on top of it. Leave loading only becomes compulsory when it's written into the instrument that actually covers your employment.

Source of entitlement	Guarantees annual leave?	Guarantees leave loading?
National Employment Standards (NES)	Yes — 4 weeks (5 for some shift workers)	No — not mentioned
Modern award	Yes, per NES	Often — many awards specify 17.5%, or the higher of 17.5% or the penalty/overtime rates you'd have earned
Enterprise agreement (EBA)	Yes, at least matching NES	Depends on the agreement — some pay it, some don't, some pay a different rate
Award-free contract	Yes, per NES	No, unless the contract specifically includes it

In practice, that means two employees in different jobs can both be legally paid correctly while one gets leave loading and the other doesn't. If you're not covered by a modern award or EBA — for example, many salaried professional roles — your employer is under no obligation to pay it unless your contract promises it.

Who is entitled to leave loading, and how do you check your award or EBA?

Entitlement is always award- or agreement-conditional, so check the actual document that covers your job rather than assuming the 17.5% figure applies:

• Find your award. Use the Fair Work Ombudsman's Find My Award tool, or check your pay slip or offer letter for the award name (e.g. General Retail Industry Award, Clerks — Private Sector Award).
• Search the award clauses for "leave loading" or "annual leave loading". Most awards that include it state the rate and how it's calculated — commonly 17.5% of the base rate, though some hospitality and retail awards specify the higher of 17.5% or the actual penalty rates the employee would have earned.
• Check your EBA if one applies. Enterprise agreements can set a different rate, cap the amount, or exclude leave loading altogether, as long as the agreement passes the Better Off Overall Test against the relevant award.
• Read your contract if you're award-free. If no award or EBA covers your role, leave loading exists only if your employment contract says so.
• Ask HR or payroll directly. If your pay slip doesn't clearly show a separate loading line when you take leave, ask what applies to your position — it's a reasonable question and doesn't require you to already know the answer.

For help working out how much annual leave you have to spend and when to take it, the Leave Planner maps your leave against public holidays and weekends to find the best-value windows — see the best time to take leave for a state-by-state breakdown. Once you know your award or EBA rate, see how to calculate leave loading for the payment maths.

Do you pay tax on leave loading?

Yes — leave loading is assessable income, exactly like your ordinary wages, and it's included in your total taxable income for the year. Where people get confused is a separate withholding rule: if your employer pays $320 or less in leave loading in a financial year, and the loading genuinely compensates for lost overtime or penalty-rate opportunity (rather than being structured to reduce tax), the employer isn't required to withhold PAYG tax from that amount at the time of payment.

That's a withholding concession, not a tax exemption. The loading still counts as income and still needs to be declared; if the $320 threshold means no tax was withheld upfront, you may owe tax on it at your marginal rate when you lodge your return. Amounts over $320 have tax withheld as normal through payroll. Because thresholds and eligibility rules can change, always check the current ATO guidance or ask your accountant rather than relying on a fixed figure from memory.

Frequently Asked Questions

What is leave loading and what does the 17.5% mean?

Leave loading is an extra payment on top of your base pay while you're on annual leave, most commonly set at 17.5%. It originated as compensation for the overtime and penalty-rate income employees would otherwise lose while away from work.

Is it compulsory for employers to pay leave loading?

Not universally. The National Employment Standards don't require it — leave loading is only compulsory if your modern award, enterprise agreement, or employment contract specifically includes it.

Do you pay tax on leave loading?

Yes, it's assessable income like any other wages. There's a separate ATO withholding concession for leave loading of $320 or less in a year, but that only affects when tax is withheld — not whether it's taxable.

Who is entitled to leave loading and how do you check your award or EBA?

Entitlement depends entirely on the award, EBA, or contract covering your job. Check your award's leave clauses via the Fair Work Ombudsman, review your EBA if one applies, or ask payroll directly if you're award-free.