2021 Tax & Pay Calculator
- How is income tax calculated and what is the rate of income tax?
- How much do you have to earn to pay tax?
- What is taxable income?
How is income tax calculated and what is the rate of income tax?
We love to grumble about them, but taxes keep our public services alive. The government hopes to collect tens of billions in taxation revenue each year – even though this year has seen the announcement of tax cuts across all brackets.
How much tax will you be contributing? For individual taxpayers who are Australian residents for tax purposes, the following rates apply for the 2020/21 financial year.
|Total taxable income||Tax rate|
|$0 – $18,200||No tax|
|$18,201 – $45,000||19c for each $1 over $18,200|
|$45,001 – $120,000||$5,092 plus 32.5c for each $1 over $45,000|
|$120,001 – $180,000||$29,467 plus 37c for each $1 over $120,000|
|$180,001 and over||$51,667 plus 45c for each $1 over $180,000|
→Related article: Income Tax Brackets and Rates in Australia: 2020/2021
How much do you have to earn to pay tax?
The ATO advises you will have to pay income tax on every dollar over $18,200 that you earn; earnings below that are tax-free. In addition to the rates in the table above, most taxpayers are also charged a Medicare levy of 2%. You can find out more about the tax-free threshold.
What is taxable income?
Income tax is applied to “taxable income”. So: what is your taxable income? The ATO defines taxable income as follows:
Your taxable income is the income you have to pay tax on. It is the term used for the amount left after you have deducted all the expenses you are allowed to claim from your assessable income. Assessable income – allowable deductions = taxable income.
For Australian residents for tax purposes, the income you earn worldwide (from Australia and overseas) from this list that exceeds the tax-free threshold of $18,200 can be taxed. This applies whether it’s paid in cash, cheque or electronically.
- Salary and wages
- Tips and gratuities
- Interest from bank accounts
- Work allowances, such as for travel, clothing, laundry and your vehicle
- Dividends and capital gains from your investments
- Overtime payments
Please note that the information on this page and site is general information only and should not be used as the basis for any tax-related decision making. Please discuss your personal situation with a registered tax agent or other qualified tax adviser.