Advanced Tax Calculator 2025

Income Tax Calculation

Your income tax is calculated using a progressive tax system based on your taxable income (gross income minus deductions). The more you earn, the higher percentage you pay on amounts above certain thresholds.

ABN Income and Expenses

If you have income through an Australian Business Number (ABN), you need to declare this income and any related expenses:

• All income earned through contractual work with an ABN must be reported
• You can claim deductions for expenses directly related to earning this income
• Net ABN income (income minus expenses) is added to your taxable income
• Keep detailed records of all ABN income and expenses for your tax records

ABN holders typically need to lodge Business Activity Statements (BAS) and may be required to pay GST.

Capital Gains Tax (CGT)

Capital Gains Tax applies when you sell an asset for more than you paid for it. This includes shares, cryptocurrency, property, and other investments:

• CGT Discount: If you've owned an asset for more than 12 months, you're eligible for a 50% discount on the capital gain
• Capital Losses: Can be offset against capital gains but cannot be used to reduce other income
• Net Capital Gain: Is added to your taxable income and taxed at your marginal tax rate

The calculation: Net Capital Gain = (Short-term profits + 50% of Long-term profits) - Capital losses

Medicare Levy for Families

The Medicare levy helps fund Australia's public health system. For families, the Medicare levy calculation depends on your combined family income and number of dependent children:

• No Medicare levy is payable for family incomes below the low-income threshold
• A reduced levy applies for incomes in the phase-in range (10% of the excess over the low-income threshold)
• The full Medicare levy (2% of taxable income) applies above the full levy threshold
• For each dependent child, your threshold increases, reducing the Medicare levy for families with children

For Medicare levy purposes, dependent children are those under 21 years old, or full-time students aged 21-24 years.

Medicare Levy Surcharge (MLS)

The Medicare Levy Surcharge is an additional tax (on top of the Medicare levy) paid by higher income earners who don't have private hospital cover.

• Who pays: Higher income earners without appropriate private hospital cover
• Rate: 1%, 1.25%, or 1.5% of your taxable income, depending on your income tier
• Avoiding MLS: Take out private hospital cover with a registered Australian health insurer

For families, the MLS is calculated based on combined family income. The surcharge is applied for each day you don't have private hospital cover.

Medicare Levy Surcharge Thresholds for 2024-25

For families with more than one dependent child, add $1,500 to the threshold for each additional child.

Tax Deductions

Tax deductions reduce your taxable income. Common deductions include:

• Work-related expenses (uniforms, tools, training)
• Vehicle and travel expenses for work purposes
• Home office expenses
• Self-education expenses related to your current employment
• Donations to registered charities

Always keep receipts and documentation for all claimed deductions.

Tax Withheld and Refunds

Throughout the year, your employer withholds tax from your salary and remits it to the ATO. When you lodge a tax return:

• If your total tax payable is less than the tax withheld, you'll receive a refund
• If your total tax payable is more than the tax withheld, you'll need to pay the difference

Low Income Tax Offset (LITO)

The Low Income Tax Offset (LITO) is a tax offset that reduces the amount of income tax you pay. The amount of LITO you receive depends on your taxable income:

• $37,500 or less: You get the maximum offset of $700
• $37,501 to $45,000: $700 minus 5 cents for every dollar above $37,500
• $45,001 to $66,667: $325 minus 1.5 cents for every dollar above $45,000

LITO reduces your tax payable but cannot reduce it below zero. Any unused offset cannot be refunded.

Medicare Levy

The Medicare levy helps fund Australia's public health system (Medicare). Most Australian taxpayers pay the Medicare levy as part of their income tax.

The levy is calculated as follows:

• No Medicare levy is payable for incomes below the low-income threshold
• A reduced levy applies for incomes in the phase-in range (10% of the excess over the low-income threshold)
• The full Medicare levy (2% of taxable income) applies above the full levy threshold

Some taxpayers may be exempt from paying the Medicare levy, or may pay a reduced amount, depending on their circumstances.