Usually when we sign on for our first full-time job, the only figure we’re concerned with is the yearly salary. That big number. More than we’ve ever earned before.
What usually happens next is we get our first monthly or fortnightly payslip and the reality doesn’t quite match our expectations. What does it all mean, and where has your money gone? Don’t stress. Here’s how to decode your pay and avoid the let-down.
Understanding your payslip
A payslip is a summary of a payment made to you by your employer. Your employer is required by law to provide you with one each time you are paid. This may come in paper or electronic form depending on your employer. Your payslip is important because it not only helps you keep track of the amount of money you actually take home – it also lets you track the income tax you pay and any superannuation contributions you/your employer make.
- Gross pay (before tax): the total amount of money you earned before any deductions were made
- Net pay (after tax): this is your take-home pay. The amount paid into your bank account after all deductions are made (including HELP)
- Pay period: The dates during which you worked to which your payslip refers
- Pay cycle: The frequency with which you get paid. This is different from employer to employer
- HELP (previously HECS): Your debt owed to the government for the completion of any higher education studies
- PAYG Tax: this is money withheld by the tax office each pay period, based on your estimated earnings for the current financial year
Understanding taxes and levies on your payslip
Each payslip will feature your PAYG tax, but fear not - depending on how much you earn, you may see all of this money back at tax time.
In Australia we have a tax-free threshold which dictates that you don’t have to start paying tax until you earn a certain amount. The tax-free threshold only applies to your primary job, and for each dollar you earn above the tax-free threshold, you’ll pay a portion to the government in tax.
A Medicare levy is also applied to your income unless it’s below a certain amount, and if you earn above a certain amount and haven’t secured private health insurance you’ll be forced to pay the Medicare Levy Surcharge.
Understanding superannuation on your payslip
Superannuation (or Super) is really just forced saving for retirement, and your employer is required to pay it. If you’re ready to really start adulting, choose a Super fund carefully and let your employer know where you would like them to allocate your super contributions. If you don’t nominate a fund your employer will choose one on your behalf (but this may not necessarily be the best option for you as an individual).
Your pay summary should feature the name of your fund and the amount of money allocated in the given pay cycle.
Understanding debts on your payslip
If you’re a University graduate, you may notice information on your pay summary about your HELP Debt (previously HECS). Basically, this is the debt you owe to the Government for completing your studies, and once you begin to earn above a certain amount per annum, you’re required to start paying some of this back. Your pay summary will note the amount of money you pay back towards your HELP Debt in a given pay cycle.
Hot tip – to pay down your HELP Debt sooner, you can begin making voluntary contributions above and beyond your required minimum at any time after deductions begin. Speak to your HR department about this. What’s more, you can also allocate a certain portion of your annual Tax refund towards your HELP Debt, to really knock a chunk of debt away.