Income tax calculator

You can also claim deductions if you are in negative gearing. This strategy is especially beneficial for property investors who rent out their properties. Check out our guide to negative gearing if you're looking for a more in-depth explanation.

As mentioned earlier, there are ways to reduce your income taxes as a homeowner.

For instance, if you work in a dedicated home office, you will be able to deduct some of the costs like mortgage repayments, home insurance, depreciation of office equipment, maintenance fees, phone and internet bills, and utility expenses.

If you have a spare room that you rent out, you will also be eligible to claim some tax deductions. Think of it as having a residential rental property. The difference, however, lies in how much you can claim. In this case, you have to apportion the expenses on a floor-area basis based on the area solely occupied by the renter. Know more about other tax benefits homeowners can claim by reading this guide.

If you’re an employee it’s normal to have taxes automatically deducted from every pay cycle. However, if not, that means you might face a tax bill at the end of the financial year. This could work out to be thousands of dollars and is something you will need to account for.

Similarly, if you work two jobs, you usually have the option to claim the tax-free threshold on one of the jobs. However, if you claim this for both jobs this means you might face a tax bill at the end of the financial year. If you work two jobs it’s important to only claim this for one - usually the higher-earning one. This can be changed by talking to your employer.

Most if not all salaried jobs in Australia are labeled PAYE - pay as you earn. This means that taxes are automatically deducted from your regular pay and you don’t need to worry about doing that yourself. The main key benefit of this is that you don’t actually physically miss that money - it never hit your bank account in the first place, and so you don’t feel the hit.

Income taxes also go towards paying for things like healthcare, roads, infrastructure projects, and more. Every end-of-financial year the Australian Tax Office will send you a breakdown of how your income taxes were spent.

Calculating taxes is handy for a variety of reasons. The first is that there is gross income and net income. Net income is what actually appears in your bank account every pay cycle. Jobs are often quoted in gross salary in Australia. So for example, you might have a $100,000 salary, but receive less than that because of taxation. This is important when it comes time to figure out your budget, how much you can afford with rent, the mortgage, and more.

The second is that you’ll quickly realise if you’re being taxed too much or too little. The third is that if you receive a bonus or other work-related windfall, such as leave loading, you can work out ahead of time how much you might be taxed on that pay cycle.

Australia has a progressive tax system, meaning the more you earn the more you’re taxed. At present Australia’s five income tax brackets include:

• $0-$18,200: 0%

• $18,201 - $45,000: 19%

• $45,001 - $120,000: 32.5%

• $120,001 - $180,000: 37%

• $180,001+: 45%

Note these are marginal rates, meaning only the income between these brackets is taxed at that amount. That means if you earn $100,000, $18,200 of that isn’t taxed at all; the next portion up to $45,000 is taxed at 19%; and the remaining portion up to $120,000 is taxed at 32.5%.

This means you’d be taxed $22,967, which is a real rate of just under 23%. This figure does not include the 2% Medicare levy or any HELP/HECS debt payable, and so on.

The income tax brackets are also set to be reduced and simplified from the 2024-25 financial year.