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How is Income Tax Defined?
Any income-earning Australian can use the income tax calculator on this page. You can a citizen living in the country or overseas. You can also be a backpacker or on a working holiday.
As you may already know, the Australian Tax Office (ATO) is the body of the government that collects income tax. All working Australians should pay their income tax every financial year, which runs from 1 July to 30 June the next year.
Taxable incomes include salary and wages, bank account interest, dividends from investments as well as other types of income, bonuses for employees, and salesperson commissions. Age pensions and youth allowance are also taxable incomes.
Income tax is paid on every form of income, whether you receive work wages, business profits, or returns from your investments. This particular type of tax also involves your assets, including your shares and properties.
Some people have two or more jobs; others have other income sources. If you are one of either case, you should be aware of the tax traps, which may be because of the tax-free threshold. The country has a progressive tax system: those with higher income will have to pay more taxes. However, if your income is $18,200 or lower, you do not have to pay tax (tax-free threshold).
How Income Tax is Calculated
As mentioned, you are exempted from any tax obligations if your income is $18,200 or less. If your income is $18,201 up to $37,000, you will have to pay 19c per $1 over $18,200. The next group involves people who earn $37,001 to $90,000 where the tax return is raised to $3,572 + 32.5c for every $1 above 37,000.
Individuals who earn more than $90,000 up to $180,000 will need to pay $20,797 in taxes plus 37c for every dollar above $90,000. Finally, people whose incomes exceed $180,000 will pay $54,097 plus 45c for every dollar over $180,000.
Aside from the rates mentioned above, almost all taxpayers have to pay two per cent for the Medicare levy.
According to the ATO, children who are 17 and below who earn income that does not relate to compensations, estate proceeds, or work, will have a higher tax rate that can go beyond 60%. For parents whose child’s situation applies, it may be helpful to discuss the matter with a tax adviser.
Tax for Australian Residents
If you take a look at any income tax table that shows the income threshold and tax payables on the particular income, it can get confusing. Instead of relying on a chart that lists all the taxable incomes in Australia, our tax calculator will make things easier for you.
Our calculator makes everything simpler for taxpayers in the country. The income tax you pay will depend on your earnings weekly, fortnightly, monthly, or annually. We will take care of subtracting the immediate deductions, such as your tax offsets or salary sacrifice. It is where your Tax File Number becomes useful, so let it work for you by declaring it.
Many deductions only give you benefits after you have lodged your tax return for that particular year. Therefore, you should always submit your tax returns on time.
This calculator will generate your tax correctly since it is updated for the tax year 2020-2021. The amount you will get tells you how much should be withheld from your annual salary or periodic wage.
Some factors will influence your income tax, specifically the Low and Middle Income Tax Offset. These tax cuts only work by increasing the mentioned scheme and therefore direct cutting of rates is not applicable. It means that most taxpayers will get a more significant offset once they have put in their tax return for the tax year.
When you calculate your taxes, you may encounter a few terms, including:
- Gross vs net income: Your gross income is the pay you receive before paying your taxes while your net income is the amount after taxes or your take-home pay.
- Salary vs wage: If you are paid by salary, it means there is a fixed amount determined by the employer. Wage, on the other hand, is typically an hourly rate. It differs depending on the number of hours you spend working.
How is your tax calculated?
If you earn a salary, you can use the calculator. You only have to enter the amount that you receive in the specific box. Most of the time, employers provide salaries annually.
Sometimes, you already know how much you will earn annually, but you have no plans for working with your employer for the whole year. Our calculator can help you determine the right amount of tax that you will pay, both based on your yearly salary and the actual income tax payment at the end of the year.
For you to understand better, here is an example:
- The annual figure that your employer gave to you as your salary is $67,000.
- In this case, your total tax will be $13,582.
- However, you only have plans for working in that company for five months. Therefore, your actual tax will only be $5,659.17. You get this number by dividing $13,582, which is the projected tax, total by 12. Then you multiply the quotient ($1,113.83) by five or the number of months that you will work.
- Since you will only work for five months, your real earnings will only be $27,916.67.
- The total amount of tax that you should pay will be adjusted to $1,705.
It should be noted that your tax will still correspond to your annual earnings. However, your end-of-the-year tax will only be based upon your actual income.
You can use the calculator to add in your taxes for different jobs. If you are an employee, you can also utilise the calculator to determine your employees’ taxes. This way, it will become much easier to work out separate paychecks.
Meanwhile, if you receive wages, our calculator can help compute your income tax as well. You just have to adjust the calculator according to how you get paid, whether weekly, fortnightly or monthly.
As with salaries, the total wage you get for every period can change your tax rate. You will find this calculator useful, especially if you receive extra payments, such as commissions or overtime rates. It becomes easier for you to see how much you truly earn after taxes despite the fluctuations. Your employer may withhold a specific amount for your tax duties. This amount will be calculated on each pay cycle.
Tax for Non-Residents
Non-residents can make a substantial living in Australia, however until they have residency they are subject to different tax laws and thresholds than Australian Residents.
The focus of the calculator is the individual income tax. The rates will be based upon the income year that you have selected for computation. Your residency status will also affect the amount that you will pay for your tax.
If you are a foreign resident, your tax will be much higher than Australians living in the country. Also, it should be remembered that foreigners are not entitled to a tax-free threshold. Therefore, even if you earn lower than $18,200, you will still have to pay the tax. The only exception is if you are living in the country for six months. You will then be allowed to be in the part-year tax-free threshold.
If you plan on using the calculator for medical levy and medical levy surcharge, you will not benefit from it. You may also want to look elsewhere if you wish to calculate any of the following:
- Temporary budget repair levy
- First home super saver scheme
- Study and training support loans, such as TSL and SFSS liabilities
Important information for Working Holiday Visa holders
For those who need to compute their working holiday tax obligations, this calculator may be useful. If you work in Australia, part of your payment will go to your taxes. You will also have to lodge your tax return annually depending on your total income.
Holidaymakers have a different tax computation. The first $37,000 of their income will have a 15% tax, and the rest will be taxed at regular rates. If your visa is either a 417 or 462 subclass, you are a working holiday and work and holidaymaker respectively.
Working holidaymakers should also know that employers have to pay their superannuation. Not all employees are eligible, but if you are, the amount will be deducted from your pay.
To learn more, check out our complete working holiday tax guide below!
Here at TaxReturn.com.au, We strive to provide the most accurate income tax calculations for you. However, please remember that the results will only be based on the information you have provided.
Use the information you receive as a guide about how your taxable income should be. It will be limited based on various factors, including your contributions and other fees. The calculator also does not include investment returns and any other regulatory changes.