Are tips taxed in Australia? What a $40 card tip actually leaves a hospitality casual

A table of four adds $40 on the card machine and tells you it's for you. After tax on a working holiday visa, that one tip can leave you $34, $4.25 or nothing at all, and the tax is the smallest part of that gap. Most of what ranks for this question is written for the venue's accountant. This is the version for the person holding the card machine.

Short answer: yes. Every tip is taxable income, cash or card, whether a customer hands it to you or it comes out of the venue's pool. Cash tips go in your tax return at Allowances, earnings, tips, directors fees etc., and card tips paid through payroll are taxed like the rest of your pay. Whether a card tip reaches you at all is set by your venue's tips policy. This is general information, not tax or legal advice.

Yes, every tip is taxable, cash or card

The ATO lists cash tips, gratuities and payments for your services as employment income, and says you must declare cash tips "regardless of whether you receive them from your employer or direct from customers". Your share of the tip jar counts too. A tip is taxed at your marginal rate, like one more hour of pay: 15c in the dollar on a 417 or 462 working holiday visa, up to $45,000. A resident earning around $40,000 pays 15c in that band for 2026-27 plus the 2% Medicare levy, so 17c. On $40, that's $6.00 or $6.80.

Cash, card or pooled: where the $40 actually goes

The setup: a Saturday dinner shift at a 70-seat restaurant in Surry Hills. Eight staff, front and back of house, work 48 hours between them, and you do six of those on the floor. A pool shares out the whole night's tips, but your slice of this one $40 is the same fraction either way.

Read down the tax columns and the rate never moves. The ATO takes the same cut of every tip dollar however it arrives, and the main difference between the top two rows is timing: payroll tips have tax taken out before they land, cash tips get taxed in one hit when you lodge. What drags $34 down to $4.25 is the policy.

The ATO takes 15 cents from every tip dollar. Your venue's tips policy decides whether there's a dollar there to take it from.

Cash tips and card tips reach the ATO differently

• Cash you keep never touches the venue's payroll, so it isn't on your payslip or your income statement. You add it yourself when you lodge, and nobody has set any tax aside for you. Our cash-in-hand breakdown covers what undeclared cash costs when it catches up with you.
• Card tips paid through payroll are part of a pay run. An employer has to withhold tax each time it pays a worker and report it through Single Touch Payroll, so these should already be in the earnings on your income statement. Check before you add them again.
• Card tips handed out as cash from the till at close are the trap. They came from your employer but never went through payroll, and the ATO still expects you to declare them.
• Card tips the venue keeps are its own business income. Nothing for you to declare, and nothing in your pocket.

Super on tips is a grey area

Super guarantee is 12% of your qualifying earnings, the base the ATO uses from 1 July 2026, so on a $40 payroll tip it would be $4.80. The ATO's list of what counts covers ordinary hours pay, commissions, allowances, bonuses and paid leave, and never mentions tips, so venues make their own call. A cash tip straight from a customer was never paid by the venue, so there's nothing for super to attach to. If your payslip has a tips line, check whether the super figure moves with it, and ask how the pool is treated if it doesn't.

Who keeps the tips: your venue's policy, not the law

The ATO's record-keeping guidance asks employers to record tips paid to staff "and what you retain". It also recommends a written policy covering how tips are collected and recorded, how and how often they're shared, and how disputes get settled. That's a recommendation, not a rule. The UK went further: since 1 October 2024, a UK employer must make sure the total of qualifying tips is allocated fairly between workers, counted before anyone takes a deduction. Australia has nothing equivalent, so the policy at your venue is the whole game.

Watch out for guides that say otherwise. At least one tips guide online claims the 2023 Closing Loopholes Act added tip rules to the Fair Work Act as Part 2-7A. Part 2-7A deals with pay for labour hire workers. If anyone quotes you a tips law, ask for the section number.

Six tips questions to ask every venue

1. Ask for the tips policy in writing. The ATO recommends venues with tipped staff have one, so it's a fair request. Work two or three venues and you're under a different policy at every door.
2. Find out who's in the pool and how it's split. Floor only, or kitchen too? Managers? Equal shares, hours or points? On the shift above, the split alone halves your share from $10 to $5.
3. Ask whether anything comes off first. A card fee, breakages or a cut for the house all shrink the pool before it's shared.
4. Ask how and when it's paid. Through payroll means a payslip line you can check. Cash at close means you're the only record.
5. Log your cash tips every week. Date, venue, amount, in your notes app. Set aside 15c of every dollar on a working holiday visa, or about 17c as a resident on a casual income.
6. At tax time, count each tip once. Cash tips go at Allowances, earnings, tips, directors fees etc. Payroll tips should already be in your income statement.

Shifts where you see the pay before anyone tips

Tips are a bonus you can't plan rent around. The rate is the part you can check before you say yes. Shiftly is free workforce management for venues with an on-demand staffing network built in, so the roster fills itself. For you, that means nearby venues post open shifts straight to the network, you see the venue, the hours and the pay before you accept, and you get paid fast once the shift is done. Shiftly facilitates the match and the payment and isn't your employer, so on-demand shifts are contract work on an ABN: you handle your own tax, and the ATO counts tips earned that way as business income. Find shifts on Shiftly.

Frequently asked questions

Do I have to declare cash tips to the ATO?

Yes. The ATO says cash tips must be declared whether they come from your employer or straight from a customer, including your share of a tip jar, at Allowances, earnings, tips, directors fees etc. in your return. Nobody withheld tax on them, so set some aside as you go. While you're lodging, check the deductions a hospitality casual can claim.

Can my employer keep my tips in Australia?

Nothing in Australian law requires a venue to pass card tips on. The ATO's employer guidance expects venues to record the tips they pay to staff and what they retain, and recommends a written policy on collecting, sharing and resolving disputes. Ask for that policy before you count on tips. In the UK, by contrast, employers have had to allocate tips fairly to workers since 1 October 2024.

Are card tips taxed more than cash tips?

No. Both are taxed at your marginal rate, so a $40 tip costs $6.00 in tax on a working holiday visa either way. Card tips paid through payroll have the tax taken out before they reach you and show on your payslip. Cash tips are taxed when you lodge and only appear if you add them.