Australian Tax Rate Calculator 2021
Calculate your income tax, Medicare levy, and net pay for the 2020-2021 financial year
Comprehensive Guide to Australian Tax Rates 2021
The 2020-2021 financial year (1 July 2020 to 30 June 2021) brought several important changes to Australia’s tax system. This comprehensive guide will help you understand how your income is taxed, what deductions you can claim, and how to optimize your tax position.
Key Changes in 2021 Tax Rates
The Australian government introduced Stage 2 of its personal income tax plan in the 2020-21 Budget, bringing forward tax cuts originally scheduled for 2022. These changes included:
- Increasing the upper threshold of the 19% tax bracket from $37,000 to $45,000
- Increasing the upper threshold of the 32.5% tax bracket from $90,000 to $120,000
- Increasing the Low Income Tax Offset (LITO) from $445 to $700
- Increasing the Low and Middle Income Tax Offset (LMITO) from $1,080 to $1,080 (extended for another year)
Australian Resident Tax Rates 2020-2021
The following tables show the tax rates that applied to Australian residents for the 2020-2021 financial year:
| Taxable Income | Tax on this Income | Effective Tax Rate |
|---|---|---|
| $0 – $18,200 | Nil | 0% |
| $18,201 – $45,000 | 19% for each $1 over $18,200 | 0% – 19% |
| $45,001 – $120,000 | $5,092 plus 32.5% for each $1 over $45,000 | 19% – 32.5% |
| $120,001 – $180,000 | $29,467 plus 37% for each $1 over $120,000 | 32.5% – 37% |
| $180,001 and over | $51,667 plus 45% for each $1 over $180,000 | 37% – 45% |
Non-Resident Tax Rates 2020-2021
Non-residents are not entitled to the tax-free threshold and pay tax on every dollar earned in Australia:
| Taxable Income | Tax on this Income |
|---|---|
| $0 – $120,000 | 32.5% for each $1 |
| $120,001 – $180,000 | $39,000 plus 37% for each $1 over $120,000 |
| $180,001 and over | $61,200 plus 45% for each $1 over $180,000 |
Medicare Levy 2020-2021
The Medicare levy is 2% of your taxable income, in addition to the tax you pay on your taxable income. However, there are some exceptions:
- Low-income earners: The levy is reduced or eliminated for individuals with taxable incomes below certain thresholds. For singles, the threshold was $23,226 in 2020-21. For families, it was $39,167 plus $3,597 for each dependent child.
- Exemptions: Some people are exempt from paying the Medicare levy, including:
- Medical certificate holders (severe medical condition)
- Foreign residents
- People not entitled to Medicare benefits
- Medicare Levy Surcharge: High-income earners without private hospital cover may pay an additional surcharge of 1% to 1.5% of their income.
Tax Offsets and Rebates
Tax offsets (also called rebates) directly reduce the amount of tax you pay. The main offsets available in 2020-2021 were:
- Low Income Tax Offset (LITO): Up to $700 for individuals with taxable income up to $37,500. The offset gradually reduces for incomes between $37,500 and $66,667.
- Low and Middle Income Tax Offset (LMITO): Up to $1,080 for individuals with taxable income between $37,000 and $90,000. The offset gradually reduces for incomes between $90,000 and $126,000.
- Senior Australians and Pensioners Tax Offset (SAPTO): Available to seniors and pensioners with rebate income below certain thresholds.
- Private Health Insurance Rebate: A rebate on private health insurance premiums, income-tested with three tiers.
Superannuation Contributions
Superannuation is Australia’s retirement savings system. For the 2020-2021 financial year:
- The Superannuation Guarantee (SG) rate was 9.5% of your ordinary time earnings (OTE). This was scheduled to increase to 10% from 1 July 2021.
- The concessional contributions cap was $25,000 for all individuals regardless of age.
- The non-concessional contributions cap was $100,000, with the ability to bring forward three years’ worth of contributions ($300,000) if certain conditions were met.
- Contributions tax was 15% for concessional contributions and 0% for non-concessional contributions (though these may be subject to other taxes if you exceed the caps).
HECS/HELP Repayments
The Higher Education Contribution Scheme (HECS) and Higher Education Loan Program (HELP) require compulsory repayments when your income exceeds certain thresholds. For 2020-2021:
| Repayment Income | Repayment Rate |
|---|---|
| Below $46,620 | 0% |
| $46,620 – $53,884 | 1% |
| $53,885 – $57,656 | 2% |
| $57,657 – $61,991 | 2.5% |
| $61,992 – $66,905 | 3% |
| $66,906 – $72,426 | 3.5% |
| $72,427 – $78,595 | 4% |
| $78,596 – $85,459 | 4.5% |
| $85,460 – $93,069 | 5% |
| $93,070 – $101,499 | 5.5% |
| $101,500 – $110,790 | 6% |
| $110,791 – $120,999 | 6.5% |
| $121,000 – $132,098 | 7% |
| $132,099 and above | 8% |
Tax Deductions You Can Claim
Tax deductions reduce your taxable income, which can lower the amount of tax you pay. Common deductions include:
Work-Related Expenses
- Vehicle and travel expenses (work-related)
- Clothing, laundry and dry-cleaning expenses (occupation-specific or protective)
- Home office expenses (especially relevant during COVID-19)
- Self-education expenses (if directly related to your current job)
- Tools, equipment and other assets (if used for work)
Other Deductions
- Gifts and donations to deductible gift recipients
- Interest, dividend and other investment income deductions
- Cost of managing tax affairs
- Personal super contributions (if eligible)
- Income protection insurance premiums
Tax Planning Strategies for 2021
Here are some legitimate strategies to help minimize your tax liability:
- Salary Sacrificing: Arranging with your employer to forgo part of your salary in return for benefits like additional super contributions can reduce your taxable income.
- Pre-pay Expenses: If you have deductible expenses due early in the next financial year, consider paying them before 30 June to claim the deduction sooner.
- Delay Income: If possible, defer receiving income until after 30 June to push the tax liability into the next financial year.
- Super Contributions: Make personal super contributions before 30 June to claim a tax deduction (subject to contribution caps).
- Investment Property: Bring forward repairs or maintenance on investment properties to claim deductions in the current financial year.
- Charitable Donations: Make donations to registered charities before 30 June to claim deductions.
- Capital Gains Tax (CGT) Planning: If you have capital losses, consider realizing them to offset against capital gains.
Common Tax Mistakes to Avoid
Many taxpayers make errors that can lead to delays in processing or even audits. Here are some common mistakes to avoid:
- Incorrectly claiming work-related expenses: You can only claim expenses that are directly related to earning your income and for which you have records.
- Not declaring all income: All income must be declared, including cash jobs, side hustles, and income from sharing economy platforms.
- Claiming private expenses: You cannot claim private expenses like gym memberships or everyday clothing, even if they might help you at work.
- No receipts or records: You must keep records for all claims for 5 years from the date you lodge your tax return.
- Incorrectly claiming home office expenses: The ATO has specific rules about what you can claim when working from home.
- Not lodging on time: Even if you can’t pay your tax bill, you should still lodge your return on time to avoid penalties.
How the ATO Uses Data Matching
The Australian Taxation Office (ATO) uses sophisticated data matching to ensure taxpayers are meeting their obligations. They receive data from:
- Banks and financial institutions (interest earned)
- Employers (salary and wage information)
- Share registries (dividend payments)
- Property transactions (capital gains)
- Cryptocurrency exchanges
- Ride-sharing and gig economy platforms
- Overseas tax authorities (through international agreements)
This data is cross-referenced with the information in your tax return. Discrepancies may trigger an audit or review.
What to Do If You Can’t Pay Your Tax Bill
If you find yourself unable to pay your tax bill by the due date, it’s important to act quickly:
- Lodge your return on time: Even if you can’t pay, lodging on time avoids the failure-to-lodge penalty.
- Contact the ATO: They may be able to arrange a payment plan that suits your financial situation.
- Consider a tax agent: A registered tax agent can help you navigate complex situations and may be able to negotiate with the ATO on your behalf.
- Prioritize your super guarantee payments: If you’re an employer, super guarantee payments take priority over other debts.
- Be aware of interest charges: The ATO charges interest on late payments, so it’s better to pay as much as you can as soon as possible.
Where to Get Help with Your Tax
If you need assistance with your tax affairs, there are several options available:
- Registered Tax Agents: Professionals who can prepare and lodge your tax return, provide advice, and represent you in dealings with the ATO.
- ATO Website: The ATO website has comprehensive information and tools, including the myTax online lodgment service.
- Tax Help Program: A network of ATO-trained and accredited community volunteers who provide a free and confidential service to help people complete their tax returns.
- Financial Counsellors: Free services that can help if you’re experiencing financial difficulty and need assistance with tax debts.
- Accountants: Can provide more comprehensive financial advice beyond just tax preparation.
Important Tax Dates for 2021
Here are the key tax dates you need to be aware of for the 2020-2021 financial year:
- 30 June 2021: End of the 2020-2021 financial year
- 14 July 2021: Due date for PAYG payment summaries to be provided to employees
- 28 July 2021: Due date for PAYG withholding payment to the ATO for the June quarter
- 31 October 2021: Due date for lodging your tax return if you’re preparing it yourself (unless you’re using a tax agent)
- 28 February 2022: Due date for lodging if you’re using a tax agent and they’re registered by 31 October 2021
- 5 June 2022: Due date for lodging if you’re using a tax agent who registered after 31 October 2021
If you’re expecting a refund, lodging early can mean getting your money sooner. If you have a tax debt, lodging early gives you more time to arrange payment.
Impact of COVID-19 on 2021 Taxes
The COVID-19 pandemic had significant impacts on the 2020-2021 financial year, with several special arrangements in place:
- JobKeeper Payments: These were taxable income and needed to be included in your tax return.
- JobSeeker Payments: Also taxable and needed to be declared.
- Early Release of Super: If you accessed your super early under the COVID-19 early release scheme, this was tax-free and didn’t need to be included in your tax return.
- Working from Home Deductions: The ATO introduced a temporary “shortcut method” allowing people to claim 80 cents per hour for all their running expenses, rather than calculating specific costs.
- Instant Asset Write-Off: The threshold for instant asset write-off was temporarily increased to $150,000 for businesses with aggregated annual turnover of less than $500 million.
State and Territory Taxes
While income tax is collected by the federal government, states and territories impose other taxes:
- Payroll Tax: A state tax on wages paid by employers, with thresholds varying by state.
- Land Tax: An annual tax on land ownership, with different rules in each state and territory.
- Stamp Duty: A tax on certain transactions, most commonly the purchase of property.
- Motor Vehicle Taxes: Registration fees and stamp duty on vehicle purchases.
These taxes are separate from your income tax return but can significantly affect your overall tax position.
International Tax Considerations
If you have international income or assets, there are additional tax considerations:
- Foreign Income: Australian residents must declare worldwide income, including foreign employment income, rental income, and capital gains.
- Foreign Tax Credits: You may be able to claim a foreign income tax offset for tax paid overseas on income that’s also taxable in Australia.
- Controlled Foreign Companies (CFC) Rules: These rules attribute certain income of foreign companies to Australian resident shareholders.
- Transfer Pricing: Rules to ensure that transactions between related entities are conducted at arm’s length.
- Double Tax Agreements: Australia has tax treaties with many countries to prevent double taxation and fiscal evasion.
International tax matters can be complex, and professional advice is often recommended.
Future Tax Changes to Be Aware Of
While this guide focuses on the 2020-2021 financial year, it’s worth being aware of some upcoming changes:
- Stage 3 Tax Cuts: Scheduled to commence from 1 July 2024, these will further reduce tax rates and increase thresholds.
- Superannuation Guarantee Increase: The SG rate is scheduled to gradually increase to 12% by 2025.
- Single Touch Payroll (STP) Expansion: STP reporting is being expanded to include more information and will eventually replace payment summaries.
- Digital Economy Measures: New rules for taxing digital services and multinational enterprises.
Final Tips for a Smooth Tax Time
To make your tax time as smooth as possible:
- Keep Good Records: Maintain organized records of all income and expenses throughout the year.
- Use Technology: Consider using apps or software to track expenses and receipts digitally.
- Understand Your Obligations: Know what you need to declare and what you can claim.
- Lodge on Time: Even if you can’t pay immediately, lodging on time avoids penalties.
- Seek Advice When Needed: If your situation is complex, don’t hesitate to consult a professional.
- Review Your PAYG: Check that your employer is withholding the correct amount of tax from your pay.
- Consider Pre-Filling: The ATO pre-fills much of your tax return information – check that it’s correct.
Remember, while it’s important to claim all the deductions you’re entitled to, it’s equally important to only claim what you’re legitimately entitled to. The ATO’s data matching capabilities mean they’re likely to notice discrepancies.
Authoritative Resources
For the most accurate and up-to-date information, refer to these official sources:
- ATO Individuals Tax Return 2021 – Official ATO information for the 2021 tax return
- Australian Government Budget 2020-21 – Details of tax changes announced in the 2020-21 Budget
- Treasury Personal Income Tax Plan – Information about the government’s personal income tax plan