Yes, tips received in Australia are taxable income. It does not matter whether the tip is paid in cash directly by a customer, distributed through a tronc system managed by your employer, or added to a bill and paid out to staff. All tips are income and must be declared in your tax return.
How tips are treated by the ATO
The ATO treats tips received in the course of your employment as assessable income. They are subject to income tax at the same rate as your wages. For working holiday makers, that means tips are taxed at 15% like any other employment income up to $45,000 per year.
When your employer handles tips
If your employer collects tips and distributes them to staff, those amounts may already be included in your income reporting if the employer treats them as part of wages. Check your payslips and income statement to see whether tips are included in the figures reported by your employer. If they are, they are already captured in your return. If they are not, you need to include them separately.
When you receive cash tips directly
If customers tip you directly in cash and that money goes straight into your pocket without passing through your employer's payroll, it is still taxable income. Keep a record of cash tips received so you can include an accurate figure in your return. Many people underestimate or completely forget to declare tips, but the obligation exists regardless of how informal the arrangement feels.
Superannuation and tips
Tips that are paid through your employer's payroll system may be included in the earnings base on which super is calculated, depending on how they are classified. Cash tips paid directly by customers are generally not subject to superannuation obligations on your employer's part, as they fall outside the ordinary pay structure.
Need help?
Need help declaring all your income correctly?
We make sure working holiday makers tax returns include all income sources correctly. Get in touch and we will take care of your return.
Start your tax return →Keep reading →
What does tax withheld mean on your payslip in Australia?
Tax withheld is the income tax your employer deducts from your wages before paying you. Here is how to check it is correct.