p a y c a l c u l a t o r

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. The threshold for this rate is set at $18,200 to compensate for increased in cost of living expenses due to the introduction of the carbon tax. Tax rates increase progressively up to 45% for incomes over $180,000. Refer to the table below for current income brackets:

Taxable income Tax on income (2014 - 2015) Tax rate
$0 – $18,200 Nil 0%
$18,201 – $37,000 19¢ for each $1 over $18,200 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%

Source

It is important to understand that these brackets are progressive, whereby only the value between the bracket is taxed at the corresponding rate. For example: an income of $10,000 is taxed at (10000 - 6000)*15% = $600. For more information on income tax rates for individuals see the ATO website.



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%.



Carbon Tax

On 1 July 2012 a carbon tax was imposed on the top 500 carbon polluting businesses. These businesses range from electricity and gas providers to airlines, manufactures, building and construction companies and food industries. Although the tax does not come out of income tax but it will increase cost of living expenses and in particular household power bills which are expected to rise by at least 10%. To compensate for the increase in cost of living expenses the government has introduced a Household Assistance Package. This includes an increase in the tax free threshold from $6,000 to $18,200. In addition there are cash bonuses and increases in government payments to individuals and families on low-incomes. In 2014 the carbon tax was repealed however the personal tax rate did not change.




Flood Levy

This levy no longer applies. It was introduced in 2011-2012 financial year due to a series of natural disasters that occurred and went to help fund reconstruction in affected areas.



Low Income Tax Offset

The Low Income Tax Offset is a tax rebate for individuals on low incomes. From 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. Note that the amount of the LITO that is deducted from regular pay is 70% of the full benefit. The remaining 30% is paid following lodgment of an income tax return.



Superannuation

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 9.25%) 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 gradually increase year-by-year until it reaches 12%. In addition, there is also a cap on superannuation concessional contributions. Currently the cap is set at $25,000. 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

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 $88,000 a year (for singles) or $176,000 a year (for couples and families, 2014 fiscal year) whom don't have private hospital cover, also have to pay the Medicare Levy Surcharge (MLS). This is an additional 1% tax on top of the 2% Medicare levy. For more information see information on the Medicare levy on the infochoice website.





HECS-HELP debt

HECS-HELP is a government loan for tertiary education that is repaid through the tax system. 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 (2014 - 2015)
Below $53,345 Nil
$53,345–$59,421 4.0%
$59,422-$65,497 4.5%
$65,498-$68,939 5.0%
$68,940-$74,105 5.5%
$74,106-$80,257 6.0%
$80,258-$84,481 6.5%
$84,482-$92,970 7.0%
$92,971-$99,069 7.5%
Over $99,070 8.0%

Source



Fiscal year

The Australian 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 2013 - 30 June 2014 is the 2014 fiscal 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.



Monthly and Weekly Pay differences

It is often assumed that a month is 4 weeks long but this is only valid for those months that have 28 days. Due to the varying length of months, monthly pay is based on 1/12 of a year. The result is that a monthly pay is equivalent to 4.33 weeks.