2021 Tax & Pay Calculator
Budget 2020 Tax Update
The Federal Government has announced a range of tax changes in the October 2020 Budget. These tax changes can be grouped into two main categories:
1. One-off tax relief
In 2020-21, low-and middle-income earners will receive one-off tax relief of up to $1,080 for singles, and up to $2,160 for dual income families. The government has labelled this tax relief a “one-off additional benefit” on top of the existing low and middle income tax offset (LMITO).
Taxpayers who are eligible for this tax relief will receive more money in their regular pay packets because their employer will reduce the amount of tax normally taken out of their pay. This tax reduction will be applied to eligible taxpayers and backdated from July 1, 2020 through to the end of this financial year. The amount a taxpayer will save under this one-off tax relief will be dependent on their taxable income.
2. Stage 2 tax cuts
The government has also brought forward tax cuts planned for July 1, 2022 to July 1, 2020. These changes include:
- Increasing the low-income tax offset from $445 to $700, providing an additional $255 in tax relief.
- Increasing the top threshold of the 19% personal income tax bracket from $37,000 to $45,000 (providing up to $1,080 in tax relief).
- Increasing the threshold of the 32.5% tax bracket from $90,000 to $120,000 (providing up to $1,350 in tax relief).
These tax cuts will be backdated to July 1, 2020, and once the bill for these changes goes through Parliament they will be then passed on to eligible taxpayers through their regular pay packets.
Total tax savings for 2020-2021
To get an idea of what kind of total tax savings taxpayers on a range of different incomes could make in 2020-2021 (compared to 2017-2018), the Australian Government has provided the following breakdown:
- $40,000 taxable income: $1,060 saving
- $60,000 taxable income: $2,160 saving
- $80,000 taxable income: $2,160 saving
- $100,000 taxable income: $2,445 saving
- $120,000 taxable income: $2,745 saving
- $140,000 taxable income: $2,565 saving
- $160,000 taxable income: $2,565 saving
- $180,000 taxable income: $2,565 saving
- $200,000 taxable income: $2,565 saving
These potential savings are indicative estimates for individual taxpayers in 2020-2021 based on all tax relief measures in the October 2020 Budget, according to government figures. Actual outcomes for individuals and households may differ.
The income tax calculator calculates the tax payable on gross wages paid in equal weekly amounts. The rates are obtained from the Australian Tax Office. No allowance is made for tax deductions, Medicare or other levies &/or payments.
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.
→Related article: Income Tax Brackets and Rates in Australia: 2020/2021
How much tax will you be contributing? For individual taxpayers who are Australian residents for tax purposes, the following rates apply for the 2019/20 financial year.
|Taxable income||Tax on this income|
|0 – $18,200||Nil|
|$18,201 – $37,000||19c for each $1 over $18,200|
|$37,001 – $90,000||$3,572 plus 32.5c for each $1 over $37,000|
|$90,001 – $180,000||$20,797 plus 37c for each $1 over $90,000|
|$180,001 and over||$54,097 plus 45c for each $1 over $180,000|
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%.
The ATO also notes children under 18 who earn “unearned income” (that is, income that does not relate to employment, compensation or the proceeds of an estate) are subject to a higher tax rate of up to 66%. If you have a child who may be in this situation, it could be a good idea to discuss this with your registered tax adviser.
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.
Following on from that, the ATO offers the following examples of assessable income:
- salary and wages
- interest from bank accounts
- dividends and other income from investments
- bonuses and overtime an employee receives
- commission a salesperson receives
- government payments such as the age pension, newstart allowance and youth allowance
Some income streams, such as some allocated pensions, some government pensions and some education payments are not assessable income.
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.