Annual Leave Loading in Australia: How 17.5% Works
Learn how annual leave loading works in Australia, when 17.5% may apply, and how awards, agreements and employment conditions affect leave pay.
- ✓ Full-time employees in Australia accrue 4 weeks (20 days / 152 hours) of paid annual leave per year under the National Employment Standards (NES).
- ✓ Shiftworkers under qualifying awards accrue 5 weeks (25 days / 190 hours) of paid annual leave.
- ✓ Annual leave loading (commonly 17.5%) is an additional payment added to ordinary base pay under applicable modern awards, enterprise agreements, or employment contracts.
- ✓ Unused annual leave MUST be paid out upon employment resignation or termination.
- ✓ Superannuation Guarantee (12.0%) is payable when leave is taken during employment, but is NOT payable on unused leave cash-outs at termination.
In Australia, workplace entitlements are governed by the National Employment Standards (NES) administered by the Fair Work Ombudsman. Under the NES, paid annual leave provides employees with financial security while taking time off work for rest and recreation.
This guide explains annual leave accrual mathematics, how 17.5% Annual Leave Loading operates under modern awards, payout tax withholding rules, and superannuation obligations.
1. Statutory Annual Leave Accrual Rates
Annual leave accumulates progressively from an employee's first day of work based on ordinary hours worked:
2. What is Annual Leave Loading (e.g. 17.5%)?
Annual Leave Loading is an additional payment (most commonly 17.5%) paid on top of an employee's base rate when taking recreation leave.
Historical Origin & Purpose:
Leave loading was introduced into Australian awards in the 1970s. Its primary purpose was to compensate workers for the loss of overtime pay, penalty rates, and allowances they would have earned had they been working rather than on leave.
3. Leave Loading Calculation Formulas
If your Modern Award or Enterprise Bargaining Agreement (EBA) provides for 17.5% leave loading, it is calculated as:
$\text{Total Gross Leave Pay} = \text{Base Weekly Salary} \times 1.175$
Example Calculation:
If an employee earns $1,600 gross per week ($42.10/hr) and takes 2 weeks (76 hours) of annual leave:
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Base Annual Leave Pay: $1,600 × 2 weeks = $3,200
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17.5% Leave Loading Bonus: $3,200 × 17.5% = $560
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Total Gross Pay for 2 Weeks Leave: $3,760 Gross
4. Termination Payout Rules & Tax Withholding
When an employee resigns or their employment is terminated, all accrued, unused annual leave must be paid out in full under Section 90(2) of the Fair Work Act.
Tax & Super Rules on Termination Payouts:
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PAYG Income Tax Withholding: Unused leave payouts are subject to PAYG tax withholding based on ATO Schedule 7 Marginal Method B(i).
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Super Guarantee (12.0%): Under ATO Ruling SGR 2009/2, employer superannuation is NOT payable on unused annual leave paid out upon termination. Super is only payable when leave is taken as time off during active employment.
5. Calculate Your Accrued Leave & Loading Payout
Determine your total accrued leave hours, dollar value, 17.5% loading entitlement, and estimated tax withholding using Calcivo’s Annual Leave Calculator.
Frequently Asked Questions
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