Income Tax Calculator

What is an Income Tax Calculator?

The Tax Calculator is an AI Powered tool that enables the user to derive income tax to be paid in a financial year from the comfort of their home. This tool is readily available online and is highly accessible and user-friendly. The user is just required to mention their Annual income before tax and any other taxable income, and they would be able to review the following values:

• Income Tax Payable
• Income Tax After Tax and Medicare Levy
• Marginal Tax Rate.

How is Income Tax Calculated from the Tax Calculator?

The Income Tax calculator allows the taxpayer to compute the tax payable in a financial year based on the taxpayer's income. One can use the calculator to derive the amount of income tax payable and the marginal tax rate. For a better understanding, let us take an example.

Suppose your annual income is $90,000 before any deductions. Mention the yearly income in the respective field. Mention any additional income if applicable in the other taxable income field. If not, mention the nil value in the field. Select the financial year; in this case, it would be 2022-23. Select ‘Calculate’ after mentioning the values in the field, and you will be able to review the estimated tax, which will be $19,717. The calculator will also provide the user with the marginal tax rate levied, i.e. 32.5% and Income after the tax and medicare levy on the income that is $1,800.

Income Tax Rates

The Income Tax Rates are based on the income of the resident and foreign nationals in Australia.

Tax for Australian Residents

The following table showcases the tax rate applied to the residents in Australia concerning their income.

The income	Tax rate applied on the Income
0 - $18,200	Nil
$18,201 - $45,000	19 Cents per dollar for every dollar more than $18,200
$45,001 - $1,20,000	$5,092 + 32.5 cents per dollar for every dollar more than $45,000
$1,20,001 - $1,80,000	$29,467 + 37 cents per dollar for every dollar more than 1,20,000
$1,80,001 and over	$51,667 + 45 Cents per dollar for every dollar more than $1,80,000

• The above rates does not include medicare levy of 2%.

Tax for Non-Residents

The following table showcases the tax rates applied to non-residents in Australia with respect to their income.

The taxable Income	Tax rate applied on the Income
0 - $120,000	is 32 Cents for every Dollar
$120,001 - $1,80,000	$39,000 + 37 Cents for every dollar more than $120,000
$1,80,001 and over	$61,200 + 45 Cents for every dollar more than $180,000

How does the Australian Tax Office Define Income?

The Australian Tax office (ATO) categorises income as assessable, exempt, and non-exempt.

Assessable Income

The assessable income refers to the income that is liable for taxes. In case the income of a taxpayer exceeds the tax-free threshold, the resident or the foreign national is legally obliged to pay taxes concerning their income. The assessable income that one must declare includes

• Salary and Wages
• Tips, gratuities and other such payments one receives for the services provided.
• Allowances receives for clothing and laundry.
• Interest earned from financial institutions.
• Investments earned from dividends and other receipts.
• Additional income received in the form of bonuses and overtime.
• Commissions received from sales.
• Pensions and rent received.

The taxpayer must also declare any form of cash received, including cash cheques, when lodging their tax return. One can claim a tax-free threshold of up to $18,200 from a single source of income in a single accounting year.

Exempt Income

The exempt income refers to the income exempted from taxes. However, taxpayers must mention the income received in their tax returns as they are utilised in other taxes-related calculations.

• Government pensions and payments
• Educational payments

In case the taxpayer only receives exempt income, they are not required to pay any income tax for the same.

Non-Assessable and Non-Exempt Income

The taxpayer is not required to include income in their tax return if they fall under the Non-Assessable and Non-Exempt Income category. Generally, Non-Assessable includes

• Employment Termination Payment (ETP) component that is tax-free.
• Co-contributions (Super)
• Payments made towards the relief fund for 2019-20 bushfires.

Taxable Income

Taxable income refers to the income that is eligible for taxes. The taxable income is derived after all the allowable deductions from the assessable income.

Assessable Income - Deductions Applicable = Taxable Income

It must be noted that taxpayers can only claim deductions where they incurred expenses without reimbursement.

What Deductions are Allowed?

Taxpayers in Australia can claim deductions in their tax returns for expenses incurred. The employees can claim deductions on the work-related expenses they have incurred.

Work-Related Expenses

In case a taxpayer wants to claim deductions on work-related expenses. Their expense must meet the following rules:

• The money was spent on oneself and was not reimbursed.
• The expense must be related to the earnings of the taxpayer.
• One must maintain a record to prove the expense incurred.

Taxpayers can only claim a deduction on work-related expenses if the expense were incurred for work and private use. However, it is to be noted that an individual cannot claim a deduction on the expenses reimbursed by the employer. One can claim deductions on the following work-related expenses:

• Motor vehicle and car expenses
• Travel expenses
• Laundry, clothing and dry-cleaning expenses
• Self-education expenses.

Other Work-related Expenses

Taxpayers can also claim deductions on the expenses paid throughout earning an income. An individual can claim deductions on the following expenses:

• Expenses incurred during Work from Home
• Expenses incurred for COVID-19 tests
• Internet and phone, data expenses
• Expenses on tools, equipment and other assets
• Union fees, bargaining agent fees, and subscription to association

Other expenses

Taxpayers can also claim deductions on expenses incurred outside the course of earning income or any income-producing activities. One can claim the following expenses in ‘other returns’ from the ‘other deduction’ category.

• Expenses incurred to manage taxes
• Gifts and Donations
• Deduction on investment income such as interest and dividends.
• Income Protection Insurance

What to Expect with The New Tax Scheme?

The taxpayer must account for the following changes per the New Tax Scheme while filing their income tax.

• One can claim deductions on the expenses incurred to conclude COVID-19 tests.
• Jobseeker Payments are now replacing other welfare payments.
• The COVID-19 disaster payments provided by the Australian government fall under non-assessable and non-exempt income (NANE).
• The cost of living payments made to the eligible individuals in April 2022 fall under the non-assessable and non-exempt income (NANE).
• Taxpayers are required to include the Disaster Recovery Allowance in their tax returns as the allowance is taxable.
• The tax offset for low and middle-class Australian residents has been increased by $420 to $1,500.