What Is Leave Loading? How It Works and When It’s Paid in Australia
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Leave loading is an extra payment (usually 17.5%) added to an employee’s annual leave pay. It was originally designed to compensate for the loss of overtime and penalties during paid…
Leave loading is an extra payment (usually 17.5%) added to an employee’s annual leave pay. It was originally designed to compensate for the loss of overtime and penalties during paid leave — and is still common in many awards and enterprise agreements.
Not all employees are entitled to leave loading, but where it applies, it must be included in payroll and taxed correctly.
Who Is Entitled to Leave Loading?
Leave loading is generally:
- Set out in modern awards, enterprise agreements, or employment contracts
- Common in retail, education, hospitality, and public sector roles
- Not universal — some private-sector agreements don’t include it
Check the relevant award or agreement before assuming it’s required.
How Leave Loading Works
| Component | Calculation Example |
|---|---|
| Base annual leave pay | $1,000 (for a period of leave) |
| Leave loading (17.5%) | $175 |
| Total paid | $1,175 |
- Leave loading is calculated on the employee’s base rate of pay
- Not usually paid on termination, unless specified in the agreement
Tax Treatment of Leave Loading
- Leave loading is taxable income
- It must be included in PAYG withholding
- Reported through Single Touch Payroll (STP)
- May affect superannuation depending on agreement (default: not included)
If the loading is deemed to compensate for lost overtime, it may not attract super, but this must be clearly documented.
How to Check If You Need to Pay IT
- Review the Fair Work award or EBA
- Check the employment contract
- Consult your accounting or HR system setup
- Contact Fair Work Ombudsman for official guidance
How Ozobooks Helps
- Audits your payroll system to ensure compliance
- Applies leave loading automatically (if applicable)
- Reports correctly via STP
- Advises on award or contract obligations
- Prevents overpayment or underpayment risks
FAQ
Q1: Is leave loading mandatory?
Only if it’s required under the relevant award, agreement, or contract.
Q2: Do casuals receive leave loading?
No — casuals don’t accrue annual leave, so they don’t receive leave loading.
Q3: Does leave loading attract super?
Generally no — unless your award or agreement specifically includes it for super purposes.
Q4: Is leave loading paid on termination?
Only if specified in the contract or award — otherwise, only accrued leave pay is owed.