PAYG and Net Pay
Net pay is what is left of gross pay after tax and other deductions are taken out, the amount that actually reaches your bank account. This NSW Year 9 Core maths subtopic reads payslips and PAYG (Pay As You Go) withholding tables, under NESA outcome MA5‑FIN‑C‑01.
You will find net pay from gross pay and several deductions, such as tax, union fees and health insurance, read a PAYG table to find the tax withheld each week or fortnight, and scale it up to a number of weeks or a year. You will also work backwards from net pay to gross pay, find tax as a percentage of gross pay, compare two jobs on net pay rather than gross, and see why an employer's superannuation contribution is not taken out of your pay. It is part of Year 9 Core Earning Money.
Every question with a fully worked solution.
- PAYG and Net Pay - Video - The PAYG Income Tax System Watch
Theory
Gross pay is what you earn. Net pay is what reaches your bank account after every deduction. This Year 9 maths page shows how to read a PAYG withholding table and a payslip, work out net pay, work backwards to gross pay, and compare two jobs.
Gross pay is the total earned before anything is taken out. Net pay (take-home pay) is what is left after the deductions.
Deductions are amounts taken out of the pay, such as tax, union fees, health insurance or extra superannuation the worker chooses to pay.
PAYG (pay as you go) tax is taken out of each pay by the employer and sent to the Australian Taxation Office. The amount is read from a PAYG withholding table.
A payslip shows the gross pay, each deduction and the net pay for one pay period.
Employer superannuation is paid by the employer into a super fund, on top of the wage. It is not a deduction from the worker's pay.
Net pay and gross pay:
Tax as a percentage of gross pay:
How to work out net pay
- Read the tax from the PAYG table for the right pay period, or take it from the payslip.
- Add all the deductions taken from the pay. Leave out employer super.
- Subtract the total from the gross pay to get the net pay.
- Working backwards? Add the deductions back on. To compare jobs, compare net pay.
(i) the tax withheld each week
(ii) the tax withheld over \(12\) weeks
(iii) his weekly net pay.
| Weekly earnings ($) | Tax withheld ($) |
|---|---|
| 420 | 52 |
| 430 | 54 |
| 440 | 57 |
| 450 | 59 |
(i) Find the row for \(430\) and read across: $54.
| \(\text{(ii) 12 weeks}\) | \(=\) | \(54 \times 12 = \mathbf{648}\) |
| \(\text{(iii) net pay}\) | \(=\) | \(430 - 54 = \mathbf{376}\) |
So $54.00 a week, $648.00 over \(12\) weeks, and a net pay of $376.00. Use the table for the right pay period: weekly or fortnightly.
Add the deductions taken from his pay. The employer super is paid on top, so leave it out.
| \(\text{deductions}\) | \(=\) | \(302 + 12 + 48 = 362\) |
| \(\text{net pay}\) | \(=\) | \(1580 - 362\) |
| \(\) | \(=\) | \(\mathbf{1218.00}\) |
Leo's net pay is $1218.00 a fortnight.
(i) After $148 was withheld in tax, Jay's net pay was $874. What was his gross pay?
(ii) Kim pays $9450 tax in a year, which is \(21\%\) of her gross income. Find her gross income.
(i) Add the deductions back on.
| \(\text{gross}\) | \(=\) | \(\text{net} + \text{deductions}\) |
| \(\) | \(=\) | \(874 + 148 = \mathbf{1022.00}\) |
(ii) \(21\%\) of the gross is \(9450\), so divide by \(0.21\).
| \(0.21 \times \text{gross}\) | \(=\) | \(9450\) |
| \(\text{gross}\) | \(=\) | \(9450 \div 0.21\) |
| \(\) | \(=\) | \(\mathbf{45\,000}\) |
Check (ii): \(0.21 \times 45\,000 = 9450\) \(\checkmark\)
(i) Sara's gross weekly pay is $1400 and $252 is withheld in tax. What percentage of her gross pay is that?
(ii) Job A pays $1100 a week gross with $198 tax. Job B pays $1180 gross with $226 tax and $70 health insurance. Which has the higher net pay, and by how much?
(i) The gross pay is the whole, so it goes underneath.
| \(\dfrac{252}{1400} \times 100\%\) | \(=\) | \(\mathbf{18\%}\) |
(ii) Compare net pay, not gross pay.
| \(\text{Job A net}\) | \(=\) | \(1100 - 198 = 902\) |
| \(\text{Job B net}\) | \(=\) | \(1180 - 226 - 70 = 884\) |
| \(\text{difference}\) | \(=\) | \(902 - 884 = \mathbf{18}\) |
Job A gives $18.00 more a week, even though its gross pay is lower.
Common pitfalls
Frequently asked questions
What is the difference between gross pay and net pay?
Gross pay is the total earned before anything is taken out. Net pay is what is left after tax and other deductions, the amount paid into your bank account.
What does PAYG mean?
PAYG stands for pay as you go. Your employer takes tax out of each pay and sends it to the tax office, so the tax is paid during the year.
How do you calculate net pay?
Add up all the deductions, such as tax, union fees and health insurance, then subtract the total from the gross pay.
Is superannuation taken out of your pay?
Employer superannuation is not. It is paid by the employer on top of your wage. Extra super you choose to add, such as salary sacrifice, is taken out of your pay.
How do you find gross pay from net pay?
Add all the deductions back on to the net pay. If $148 of tax left a net pay of $874, the gross pay was $1022.