What Is Leave Loading? The 17.5% Explained
Understand leave loading in Australia — what the 17.5% means, whether it's compulsory, how it's taxed, and how to check your award or EBA.
Leave loading is an extra payment on top of your normal base pay while you're on annual leave, most commonly 17.5%. It isn't in every Australian pay packet. Whether you get it, and at what rate, depends on your award, enterprise agreement or contract rather than a blanket national law.
What the 17.5% actually covers
Take annual leave and your employer normally pays your base rate for each day off. Leave loading adds a percentage on top of that base rate, so a week of leave pays more than a week of ordinary wages.
The figure traces back to a 1970s industrial relations idea. Employees who regularly earned overtime, shift penalties or weekend loadings lost that income while on leave, because leave is paid at the base rate. The loading offsets the gap, which is why 17.5% ended up in many awards even for people who never work a shift penalty.
Is leave loading compulsory?
Not automatically. The National Employment Standards guarantee four weeks of paid annual leave a year, five for some continuous shift workers, and say nothing about a loading on top. It becomes compulsory only when the instrument covering your employment puts it there.
| Source | Guarantees leave loading? | Guarantees annual leave? |
|---|---|---|
| National Employment Standards | No. It isn't mentioned | Yes. 4 weeks, 5 for some shift workers |
| Modern award | Often. Many specify 17.5%, or the higher of 17.5% and the penalties you would have earned | Yes, per the NES |
| Enterprise agreement | Depends. Some pay it, some don't, some set a different rate | Yes, at least matching the NES |
| Award-free contract | No, unless the contract says so | Yes, per the NES |
Two people in different jobs can both be paid correctly while one gets loading and the other doesn't. If no award or enterprise agreement covers you, which is common in salaried professional roles, your employer owes it only where your contract promises it.
How to check your award or agreement
- Find your award with the Fair Work Ombudsman's Find My Award tool, or read the name off your payslip or offer letter.
- Search its clauses for "leave loading" or "annual leave loading", and note both the rate and how it is calculated.
- Read your enterprise agreement if one applies. It can set a different rate, cap the amount, or leave loading out entirely.
- Ask payroll if your payslip shows no separate loading line when you take leave. It's a fair question and you don't need to know the answer first.
Once you know the rate, how to calculate leave loading covers the arithmetic. For timing the leave itself, the Leave Planner maps it against public holidays and weekends, and the best time to take leave picks out the best windows.
Do you pay tax on leave loading?
Yes. Leave loading is assessable income exactly like your ordinary wages, and it counts towards your taxable income for the year.
The confusion comes from a separate withholding rule. Where an employer pays $320 or less in leave loading in a financial year, and the loading genuinely compensates for lost overtime or penalty-rate opportunity, they aren't required to withhold PAYG tax from it at the time of payment.
Frequently asked questions
What is leave loading and what does the 17.5% mean?
An extra payment on top of base pay while you're on annual leave, most often set at 17.5% of that base pay. It began as compensation for the overtime and penalty income employees lose while away from work.
Is leave loading compulsory in Australia?
Only where an instrument says so. The National Employment Standards don't require it, so the entitlement has to come from your modern award, enterprise agreement or employment contract.
Is leave loading taxed?
Yes, as ordinary assessable income. The $320 withholding concession changes when tax is collected, not whether it is owed, so an untaxed payment can still leave you with tax to pay at lodgement.
When is leave loading paid?
In the same pay run as the annual leave it relates to. Where an award provides for loading, an unused-leave payout at the end of employment normally includes it as well.
Who is entitled to leave loading?
Anyone whose award, enterprise agreement or contract provides for it. Award-free salaried roles usually miss out unless the contract says otherwise, and enterprise agreements vary from one employer to the next.
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