Pay Calculator
The Pay Calculator also works as an Income Tax Calculator. Once you enter in details about your pay, you’ll see figures displayed in the Breakdown table which indicate the total amount of taxable income you earn, along with the amount of tax deducted from your salary or wages.
Pay Calculator for Salary Earners
This is particularly useful if you are provided with an annual salary figure, but won’t be working with the company for the full year. In this instance, a salary calculator can help you calculate the amount of tax you will be paying based on your annual salary, versus the actual amount you will be required to pay at the end of the year.
For example:
- Your salary is $60,000 per year
- The projected total amount of annual tax you will pay is $11,067
- You will only be working for the company for six months of the year before travelling
- Your total tax paid in that time will be $5533.50
- As you only work for six months, your total earnings will therefore only be $30,000
- The actual total amount of annual tax you will pay for the year is $2,142
While you will still pay tax according to your projected annual earnings ($60,000), your end-of-year tax will only be calculated on your actual earnings ($30,000).
Example of income tax applied to earnings
| Annual salary | $60,000 |
|---|---|
Marginal tax rate | 32.5% |
Annual tax paid | $11,067 |
Annual take home pay | $48,933 |
Income Tax Calculator for Wage Earners
If you earn a wage and receive bonuses or overtime pay, you may find the amount of tax you pay differs between payslips. Your employer withholds a certain amount of your earnings to put aside for tax obligations, and calculates this amount each pay cycle.
If you have overpaid tax throughout the year due fluctuations in your wages, you will receive a refund at the end of the year.
You can use the Tax Return Calculator to estimate your end-of-year refund.
Pay Calculator FAQ
What is the difference between gross and net income?
The easiest way to understand the difference between gross and net income is:
- Your gross income is the amount you earn before tax
- Your net income is your take-home pay
Another common term you'll hear is 'taxable income'. This is your gross pay, minus any eligible deductions. The most common example of a deduction is salary sacrificing. Basically this involves your employer making payments for certain eligible personal expenses on your behalf using your pre-tax salary. Examples include salary sacrificing a car (through an arrangement known as a novated lease) or your home loan payments.
What is the difference between salary and wages?
Salary is a fixed amount paid to an employee by their employer, and wages are a variable amount paid to an employee based on their hourly rate multiplied by the hours worked within a set period of time. Wages can fluctuate based on the number of hours worked by an employee, whereas a salary is a regular amount which is not influenced by working fewer or greater hours.
Can I use the pay calculator if I’m paid hourly and not on salary?
If you are paid at an hourly rate — i.e. not on a salary — you can use the Pay Calculator just as you would for other forms of income. Simply adjust the Pay Frequency settings from Annual to Monthly, Fortnight, or Weekly to match the frequency of payments from your employer, and you can see how details about your pay for each specified pay period.
How do I calculate tax from previous years?
Yes. The Money Pay Calculator can be used to calculate taxable income and income tax for previous tax years, currently from the 2015-2016 tax year to the most recent tax year, 2020-2021. Simply select the appropriate tax year you wish to include from the Pay Calculator menu when entering in your income details.
The article discusses Pay and Income Tax Calculators, offering insights into the breakdown of taxable income, tax deductions, and differences between gross and net income. It covers aspects like salary versus wages, understanding deductions, and calculating tax for different pay frequencies and previous tax years.
1. Pay Calculator for Salary Earners:
- Utilizes annual salary figures to estimate taxes but can adjust for partial-year work, helping calculate tax based on actual earnings.
- Example: An annual salary of $60,000, working for only six months, resulting in different projected and actual tax amounts due to partial-year earnings.
2. Income Tax Calculator for Wage Earners:
- For individuals earning wages, bonuses, or overtime pay, the amount of tax may fluctuate between pay cycles due to variations in earnings.
- Overpaid tax throughout the year can result in a refund at year-end, calculated using the Tax Return Calculator.
3. Pay Calculator FAQ:
- Clarifies the distinction between gross income (earnings before tax) and net income (take-home pay).
- Defines 'taxable income' as gross pay minus eligible deductions, such as salary sacrificing (e.g., novated leases or home loan payments).
Key Concepts Covered:
Gross vs. Net Income:
- Gross income: Earnings before tax.
- Net income: Take-home pay after deductions.
Taxable Income:
- Gross pay minus eligible deductions (e.g., salary sacrificing).
Salary vs. Wages:
- Salary: Fixed amount paid to an employee.
- Wages: Variable amount based on hourly rate multiplied by hours worked.
Pay Frequency:
- The calculator adjusts for different pay periods—monthly, fortnightly, or weekly.
Hourly Pay Calculation:
- The Pay Calculator accommodates hourly pay by adjusting the pay frequency settings.
Calculating Previous Year's Tax:
- The Money Pay Calculator can compute taxable income and tax for past tax years (2015-2016 to 2020-2021) by selecting the relevant tax year from the menu.
This comprehensive overview covers various scenarios, clarifies distinctions between salary and wages, and explains how to calculate taxes for different payment structures, frequencies, and previous tax years.
