Australian Income Tax Calculator

What is Australian Income Tax?

Australian Income Tax is a system of taxation where individuals pay a portion of their earnings to the Australian government. The amount of tax paid is determined by a person's taxable income and residency status. Australia uses a progressive tax system, meaning that the tax rate increases as the taxable income increases.

The Australian Income Tax Formula

The general formula for calculating Australian income tax is:

\[Tax = \sum_{i=1}^{n} (Income_{i} \times Rate_{i})\]

Where:

• \(Income_{i}\) = Taxable income in bracket i
• \(Rate_{i}\) = Tax rate for bracket i
• n = Number of applicable tax brackets

Step-by-Step Tax Calculation

1. Determine the individual's residency status (resident or non-resident).
2. Identify the applicable tax brackets and rates based on residency status.
3. Calculate the tax for each bracket where income falls: \[Tax_{bracket} = (Income_{in bracket} - Lower threshold) \times Rate_{bracket}\]
4. Sum up the tax from all applicable brackets to get the total tax.
5. Calculate the effective tax rate: \[Effective Rate = \frac{Total Tax}{Total Income} \times 100\%\]

Example Calculation

Let's calculate the income tax for an Australian resident with an annual income of $85,000:

1. $0 - $18,200: \(18,200 \times 0\% = $0\)
2. $18,201 - $45,000: \((45,000 - 18,200) \times 19\% = $5,092\)
3. $45,001 - $85,000: \((85,000 - 45,000) \times 32.5\% = $13,000\)
4. Total Tax: \($0 + $5,092 + $13,000 = $18,092\)
5. Effective Tax Rate: \(\frac{18,092}{85,000} \times 100\% = 21.28\%\)

Visual Representation

The blue portion of the bar represents the effective tax rate (21.28%) for the given income.