Income Tax Calculator

Income Tax Calculator

How much income tax should you pay in Australia? Use our income tax calculator to find out! Simply enter your annual gross income and choose whether to add a 2% medical levy.

Your results will show the amount of tax paid across the year, along with any yearly changes. You can also see your annual and weekly net income, helping you to plan your home loan repayments threshold.

A wise threshold to use when planning your home loan finances is to ensure repayments do not surpass 30% of your net income. 

So, if you earn $100,000 per year, your monthly net income is around $6253. Using the 30% home loan repayment threshold, you should aim to keep your instalments below $1876 per month. This reduces mortgage stress and ensures that you can afford your home loan repayments!

Here are some other key points to note:

  • Employers usually deduct tax from wages and pay it to the Australian Taxation Office (ATO).
  • Individuals generally need to lodge a tax return with the ATO by 31 October each year.
  • Various deductions and offsets can reduce your taxable income.
  • Important changes are coming to the tax system in July 2024, with the removal of the 32.5% and 37% tax brackets.

Tighten your budgeting skills today and use our income tax calculator!

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Australian Income Tax Brackets

The Australian tax system uses a progressive income tax structure, meaning the tax rate you pay increases as your income rises. It’s organised into tax brackets, which group together income ranges and apply specific tax rates to each. Here’s a breakdown of the current tax brackets for Australian residents.

Taxable Income Tax Rate
$0 - $18,200
Nil (tax-free threshold)
$18,201 - $45,000
19%
$45,001 - $120,000
32.50%
$120,001 - $180,000
37%
$180,001 and above
45%

These brackets apply for the financial year ending June 30, 2024. From July 1, 2024, some changes are planned.

Please note that only the portion of your income within each bracket is taxed at the respective rate. For example, if you earn $50,000, you wouldn’t pay 30% on your entire income. Only the income exceeding $45,001 would be taxed at 30%, while the remaining amount stays untouched by that bracket’s rate.

The Australian Taxation Office (ATO) provides various resources and tools to help you understand your tax obligations. You can find more information on their website.

How Is Income Tax Calculated in Australia?

Calculating your income tax in Australia involves a few steps based on your taxable income and various factors.

  • Determine Your Taxable Income: This is your gross income (wages, salary, investments, etc.) minus any eligible deductions and offsets. Common deductions include work-related expenses, rental property expenses, and personal superannuation contributions.
  • Apply the Tax Brackets: As I mentioned earlier, Australia uses a progressive tax system with five brackets and varying tax rates for each. You only pay the specific rate for the portion of your income that falls within that bracket. For example, if you earn $55,000, you wouldn’t pay the 30% rate on your entire income, only on the amount exceeding $45,000.
  • Add the Medicare Levy: This is a 2% levy on most taxable income to help fund Medicare, Australia’s public healthcare system.
  • Consider the Medicare Levy Surcharge (if applicable): This additional 1% to 1.5% levy applies to individuals and families with higher incomes who don’t have private health insurance.
  • Factor in Tax Offsets and Rebates: The government offers various tax offsets and rebates for specific situations like low-income earners, seniors, or certain medical expenses. These can further reduce your tax liability.

Remember, these are general steps, and your individual circumstances might involve additional considerations. If you’re unsure about your tax situation, it’s always best to consult a registered tax agent or the ATO directly for personalised advice.

Key Benefits of Using the Income Tax Calculator Australia

  • Simplicity and Convenience: The biggest draw is its ease of use. You input your details, and the calculator does the heavy lifting, saving you from the complex calculations and potential errors of manual computation.
  • Time-Saving: Calculating taxes manually can be time-consuming. An income tax calculator streamlines the process, giving you quick results.
  • Educational Value: It helps in understanding how different factors, like income level and deductions, impact your tax liability, offering a learning curve about tax laws and financial planning.
  • Accuracy: These calculators are generally updated with the latest tax rates and rules, ensuring that the calculations are as accurate as possible.
  • Planning Tool: Beyond just calculating your current taxes, it can be a valuable tool for future financial planning, allowing you to estimate how changes in your income or deductions might affect your future tax bills.

An income tax calculator is a powerful tool that simplifies the process of calculating your taxes. It’s efficient, accurate, and educational, making it an essential asset for anyone looking to get a clear picture of their tax obligations in Australia. Whether you’re a seasoned taxpayer or new to the game, leveraging the power of a good income tax calculator can make your tax season a breeze.

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