How the Income Tax Calculator Works (With a Worked Example)
Estimates the income tax, low income tax offset and Medicare levy an Australian resident pays on a year of taxable income. This guide walks through what each input means, the formula behind the answer and a worked example using typical Australian figures. You can follow along in the free Income Tax Calculator.
Why it matters
Australia taxes individuals on a progressive scale, so each extra dollar can be taxed at a different rate from the last. On top of income tax, most residents pay the 2% Medicare levy, and many carry HELP debts that are repaid through the tax system. Employers withhold tax from each pay under PAYG, and the annual tax return squares up the difference.
What you need to enter
The calculator asks for 1 input. The table shows each one with the example value used later in this guide.
| Input | Example value |
|---|---|
| Annual taxable income ($) | 90000 |
The formula
Tax is worked out bracket by bracket using the 2025–26 resident rates (0% to $18,200, 16% to $45,000, 30% to $135,000, 37% to $190,000 and 45% above). The low income tax offset is subtracted, then the 2% Medicare levy is added.
Worked example
Entering the example values above gives these results:
| Result | Value |
|---|---|
| Total tax and Medicare | $19,588.00 |
| Income tax (after low income offset) | $17,788.00 |
| Medicare levy | $1,800.00 |
| Take-home pay | $70,412.00 |
| Effective tax rate | 21.76% |
The headline figure is $19,588.00 (total tax and Medicare). Change any input in the calculator and every result updates instantly, so you can test different scenarios side by side.
How the total tax and Medicare changes with annual taxable income
The table below keeps every other input at the example value and moves only “Annual taxable income ($)” up and down by 10% and 20%. It shows how sensitive the total tax and Medicare is to that one figure.
| Annual taxable income ($) | Total tax and Medicare |
|---|---|
| 72,000 | $13,828.00 |
| 81,000 | $16,708.00 |
| 90,000 | $19,588.00 |
| 99,000 | $22,468.00 |
| 108,000 | $25,348.00 |
At 72,000 the result is $13,828.00; at 108,000 it is $25,348.00. If a small change in this input moves the answer a lot, it is worth double-checking that figure before you rely on the result.
A practical tip
Your employer withholds tax through the year, so compare this estimate with the PAYG withheld on your income statement to see whether a refund or a bill is likely.
Keep going
Before relying on the number, read Getting the Most From a Income Tax Calculator: Tips and Common Errors. You might also find these guides useful:
- Pay Calculator (Take-Home Pay): Formula, Example and What the Result Means
- Using a Salary Sacrifice Calculator in Australia: A Step-by-Step Guide
- Hourly to Salary Calculator Explained for Australians
Frequently asked questions
- Are these results exact?
- They are estimates based on standard resident rates. Your actual tax depends on your full circumstances, offsets and any private health insurance position. The ATO’s own tools or a registered tax agent give a definitive answer.
- Do the calculators work for non-residents?
- No. Non-residents have different rates, no tax-free threshold and no Medicare levy. These calculators assume you are an Australian resident for tax purposes.
- When do tax rates change?
- Rates usually change on 1 July, the start of the Australian financial year. Check the ATO website each July for the current figures.
Run your own numbers in the Income Tax Calculator.
Open the calculatorGeneral information only. Rates and thresholds change, usually on 1 July. Confirm current figures with the ATO or the relevant authority, and get personal advice for decisions about your situation.