Back pay

Back pay is a payment made retrospectively, that is relating to a prior pay period. For example, to account for a salary or wage increase, or to address an incorrect rate of pay.

 

 
Definition
 
Back pay is a payment made retrospectively, that is relating to a prior pay period. For example, to account for a salary or wage increase, or to address an incorrect rate of pay.
 
 
Tax issues

 

An employer that provides back pay to an employee must withhold tax from the back pay in the same way as tax would have to be withheld from salary or wages. Tax must be withheld at the rate set out in the PAYG Withholding Schedules.
 
As the back pay has the character of salary or wages paid late, it is taxed at marginal rates. 
 

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