How to Calculate Income Tax for Individuals

How to Calculate Income Tax for Individuals

Nobody likes having to pay income taxes, am I right? If you’re one of the thousands of Australia’s dreading the taxman, then you’re probably a little anxious as to how much tax you have to pay. In fact, as tax accountants, it’s one of our most-asked questions.

Understanding individual income tax rates and then trying to determine how much tax is then payable can be an overwhelming task. However, with a little understanding of tax rates, the task of calculating your income tax can be a little clearer.

At Grow Advisory Group, we specialise in individual income tax and are here to help. We can assist in all your tax needs, including lodging individual tax returns. We can also help you get a better grasp of taxes by providing a comprehensive guide on how to calculate income tax. So, continue reading this article to find out everything you need to know about income tax.

What is Income Tax?

Before you look at how to calculate income tax, let’s look at what income tax actually is.

Income tax is an imposed tax levied on an individual’s salary, wage and other income. In Australia, income tax works on a scaled system whereby the more money you make, the more tax you must pay.

How is Income Tax Calculated?

Various criteria determine the total income tax for individuals. Thus, it’s handy to have an understanding of all the factors at play. First, you have the sliding scale and surcharges, which determines the payable tax based on your income; then you have additional deductions that reduce the payable tax to determine the total tax payable.

Let’s take a look at this in more detail:

Determining Taxable Income

The first step in calculating income tax is to determine your taxable income. To do this, you must combine all incomes (salary, wage, investment income etc.) and subtract deductions (work-related expensive such as vehicle and travel expenses, uniform and clothing, education, etc.). You can find out more about what you can deduct here.

Next, you need to determine the gross tax payable. To do this, take your taxable income and apply the tax rates. Listed below are the 20-21 tax rates for Australian residents. Click here to see all tax rates.

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

Then, you have to determine the net tax payable. This figure is derived by subtracting tax offsets from the gross tax payable. Tax offsets, also referred to as rebates, are applicable to individuals with an invalid relative, Australian seniors and pensioners, low and middle-income earners, amongst others. Click here to find out more about offsets and rebates.

To determine the final amount owing (or refund),  you then have to add the 2% Medicare Levy and subtract tax credits and refundable offsets (e.g. franking credits etc.).

You now know how to calculate income tax. If this sounds all too confusing for you, then seek the help of Grow Advisory Group’s income tax specialists.


Income tax is something that we cannot avoid. If you’re looking to determine how much tax you have to pay, then you first need to determine your taxable income, then determine the gross tax payable. Once this is obtained, you need to work our your net tax payable. Then, you will have everything needed to formulate your payable income tax. Or, you could save yourself a lot of hassle by having Grow Advisory Group take care of your income tax for you.

Click here to find out more or visit our contact page to call your closest office.



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    Disclaimer: The information contained in this blog is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from an accountant and/or financial adviser.

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