How is my tax calculated
Australian income tax is levied at progressive tax rates. The lowest bracket is 0%, known as the tax-free rate for individuals on low incomes. Tax rates increase progressively up to 45% for incomes over $180,000. In addition to tax there are additional levies for Medicare and the Temporary Budget Repair Levy. Individuals on incomes below $18200 are also entitled to a Low Income Tax Offset (LITO). Refer to the table below for current income brackets:
|Taxable income||Tax on income (2016 - 2017) Provisional||Tax rate|
|$0 – $18,200||Nil||0%|
|$18,201 – $37,000||19¢ for each $1 over $19,400||19%|
|$37,001 – $80,000||$3,572 plus 32.5¢ for each $1 over $37,000||32.5%|
|$80,001 – $180,000||$17,547 plus 37¢ for each $1 over $80,000||37%|
|Over $180,000||$54,547 plus 45¢ for each $1 over $180,000||45%|
The 2016 Budget proposed a change to the 37% tax bracket to help mitigate bracket creep. The changes have the effect of moving the 37% bracket from $80,000 to $87,000. However, due to the early election being called, this legislation has not yet been passed. If the Liberal government remains in power then these changes will pass, however if Labor are in power then this legislation could be revoked.
This is the tax table for the proposed changes:
|Taxable income||Tax on income (2016 - 2017) Proposed||Tax rate|
|$0 – $18,200||Nil||0%|
|$18,201 – $37,000||19¢ for each $1 over $18,200||19%|
|$37,001 – $87,000||$3,572 plus 32.5¢ for each $1 over $37,000||32.5%|
|$87,001 – $180,000||$19,822 plus 37¢ for each $1 over $87,000||37%|
|Over $180,000||$54,232 plus 45¢ for each $1 over $180,000||45%|
It is important to understand that these brackets are progressive, whereby only the value between the bracket is taxed at the corresponding rate. For more information on income tax rates for individuals see the ATO website.
Foreign Residents and the 'Backpacker-Tax'
Foreign residents are not entitled to claim the tax free threshold where no tax is paid below $18,200. The classification of a foreign resident is not necessarily determined by your passport or visa entitlement. Generally the ATO classifies a worker to be a non-resident if they have lived in Australia for less than 6 months.
The exception however is for participants in the ‘Working Holiday Maker Program’. This program allows young adults (aged 18 to 30) from eligible partner countries to work in Australia while having an extended holiday. This benefits Australian agriculture as a significant number of farm laborers and fruit pickers are on this program. It was proposed that these workers would become non-resident tax purposes however this has been revoked. Backpacker's on this program now continue to be entitled to the tax-free threshold.
The Tax Office has put together an online interactive tool that will help you determine your status.
Temporary Budget Repair levy
Introduced on 1 July 2014 the "Temporary Budget Repair levy" is a cost imposed on high income earners who have incomes in excess of $180,000. The rate is set at 2% and will continue until 30 June 2017. In effect, the levy increases the top tax margin from 45% to 47%. Find out more
Low Income Tax Offset
The Low Income Tax Offset is a tax rebate for individuals on low incomes. Since 1 July 2013 the full offset is $445, with a withdrawal rate of 1.5 cents per dollar of income over $37,000, such that it cuts out at $66,667. You will need to complete 'Withholding declaration (NAT 3093)' to withhold your tax offsets from your pay. Otherwise Tax Offsets are paid back as a lump sum in you tax return.
Superannuation is a pension scheme. It has a compulsory element where employers are required by law to pay a proportion of an employee's salary and wages (currently 9.5%) into a superannuation fund which can be accessed when the employee retires. Superannuation applies to all working Australians, except those earning less than $450 per month, or aged under 18 or over 70. Individuals can choose to make extra voluntary contributions to their superannuation and receive tax benefits for doing so.
The superannuation rate will remain at 9.5% until 2021. It will then gradually increase year-by-year until it reaches 12% in 2025. In addition, there is also a cap on superannuation concessional contributions. Currently the cap is set at $30,000. To learn more about these caps and their thresholds see Superannuation Guarantee increases on the SuperGuide website.
Your salary is often quoted as a 'package' where the figure includes the superannuation contribution. In this case the superannuation contribution must be deducted from you salary as tax is not charged on superannuation. For more information about superannuation and superannuation funds see Simplified Superannuation on the Australian Government website.
Medicare is an Australian health care scheme funded by an income tax levy to provide all Australians with access to free or low cost medical care. From 1 July 2014 the Medicare levy increased by 0.5% from 1.5% to 2% to fund the National Disability Insurance Scheme (NDIS). Taxpayers earning more than $90,000 a year (for singles) or $180,000 a year (for couples and families, 2015 fiscal year and beyond) whom don't have private hospital cover, also have to pay the Medicare Levy Surcharge (MLS). This is a 3 tier levy of 1%, 1.25% and 1.5% tax on top of the 2% Medicare levy. For more information see information on the Medicare levy on the infochoice website.
HELP, TSL & SSL repayments
Higher Education Loan Program (HELP), Trade Support Loan (TSL) and Student Start-up Loans (SSL) are all government loans for tertiary education that is repaid through the tax system. They are all subject to the same repayment regimes as HELP. You must start repaying your debt when your income is above the minimum repayment threshold for compulsory repayment. The repayment thresholds are adjusted each year to reflect any changes in average weekly earnings. Compulsory repayments are made through your income tax assessments.
|Taxable income||Repayment rate (2016 - 2017)|
Student Financial Supplement Scheme (SFSS)
The Student Financial Supplement Scheme (SFSS and also known as Austudy Supplement) was a loan scheme available to students. It has now been abolished and there have been no new loans since 1 January 2004. It remains as an option in the Withholding declaration (NAT 3093) form.
The Australian financial (or fiscal) year is between 1 July and 30 June of the following year, i.e. the year that it finishes in (e.g. 1 July 2016 - 30 June 2017 is the 2017 financial year). This departure from the natural calendar is in response to higher financial activity during the December-January period that would make book keeping during this festive season an additional burden.
How many weeks in a year?
This calculator adopts the approximation of 52 weeks per year to convert annual to weekly pay. However, there aren't exactly 52 weeks in a year and if you are being paid weekly or fortnightly there will be some years where there maybe 53 or 27 pay days in a year. The actual year depends on which day of the week you are paid.
The Gregorian calendar is defined as having exactly 20871 weeks in a 400 year cycle, therefore an average year is exactly 52.1775 weeks long and months average 4.348125 weeks. This is defined in the ISO week-numbering year. These "leap-weeks" occur every 5-6 years and "leap-fortnights" occur approximately every 11 years. The ATO's tax tables, and most accounting software use a standard 52 weeks per year calculations. In some years a weekly or fortnightly salary earner may need to pay additional income tax for the additional pay they received. The onus is on the employee to make this request, otherwise the 52 weeks per year calculation is made. Because of this anomaly, most employers who define pay on an annual basis adopt the monthly pay cycle.