Australian Income Tax Calculator

Income Tax Calculation

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

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 Calculation

The Medicare Levy is a tax that funds Australia's public health system (Medicare). Most Australian taxpayers pay this levy, which is calculated as a percentage of your taxable income.

How the Medicare levy is calculated:

• If your income is at or below the low income threshold, you don't pay the Medicare levy
• If your income is between the low income threshold and the full levy threshold, you pay a reduced levy of 10% of the amount over the low income threshold
• If your income is above the full levy threshold, you pay the full 2% Medicare levy on your entire taxable income

People eligible for the Seniors and Pensioners Tax Offset (SAPTO) have higher Medicare levy thresholds.

How Tax Offsets Work

Tax offsets (also known as tax rebates) directly reduce the amount of tax you pay, unlike deductions which reduce your taxable income. Offsets are applied after your tax is calculated.

For example, if your calculated tax is $8,000 and you're entitled to a $700 LITO, your final tax payable would be $7,300.

The LITO is automatically calculated by the ATO when you lodge your tax return - you don't need to separately claim it.