This calculator helps you estimate your income taxes according to the Personal Income Tax Plan - a three-phase plan of tax cuts currently being implemented in Australia. It was initiated in 2018, and Stage 2 is to come into effect in 2020/21, two years earlier than originally planned.
Type in your taxable income and see how much money will stay in your pocket thanks to this plan! 💰💰
Your income tax savings
Calculate for
one person
Your taxable income
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Show the summary of tax changes
Your income tax cuts compared to 2019/20:
Savings in 2020/21
$
Savings from 2021/22 to 2023/24
$
Savings from 2024/25 onwards
$
Disclaimer
Be aware that this tool computes the income tax without the Medicare Levy.
Remember that you may be eligible for Family Tax Benefits (FTB), Seniors and Pensioners Tax Offset (SAPTO) or other benefits/offsets. For details, check the government websites:
or consult a tax advisor.

In November 2020, more than 11.6 million Australians should experience the first benefits of new income tax cuts. They were decided on 9th October, when Parliament voted on one of the most important Federal Budgets in decades: Australia is going to face a budget deficit of around $281.4 billion, the highest since World War II, and the first recession in nearly 30 years. One element of the Government's plan to tackle this situation is to bring forward Stage 2 of the Personal Income Tax Plan to take effect from July 1, 2020 - two years earlier than originally planned. Now, employers have until 16th November to adjust their payroll.

Many factors impacting how much income tax you pay will change: tax rates, thresholds, tax offsets, etc. That's why we've prepared this income tax cuts calculator - now you can quickly find out how much you're going to save over the next several years. We hope it will help you better plan your budget. Do you already know what you're going to spend the extra money on? 🤑

What is the Personal Income Tax Plan?

The Personal Income Tax Plan, announced on 8th May 2018, is a seven-year plan of income tax cuts. This plan is designed to lower the income tax for the vast majority of Australians. It has three stages: Stage 1 came into force back in 2018/19, and Stage 3 is planned for 2024/25 onwards. Stage 2 was initially scheduled for 2022/23, but the government announced that they were to bring it forward two years - to the coming financial year 2020/21.

❗ Remember that financial years in Australia start on 1st July one year and last till 30th June of the following year. For instance, the financial year 2019/20 is the period between 1st July, 2019, and 30th June, 2020.

The main ingredient of the Personal Income Tax Plan is to change the marginal tax rates and their respective thresholds. Also, the government plans to make some changes to tax offsets. As there are many factors, finding out how much you can save thanks to this plan can be quite challenging - for details, click here. That's why our income tax cuts calculator is here for you! In the next section, we explain how to use it.

How much will I save? Income tax cuts calculator

  1. Choose who you want to calculate the tax savings for:

    • one person; or
    • a couple.

    In each case, you then need to enter data on taxable income. In the case of a couple, you must enter any two of the following: your taxable income, your spouse's taxable income, or your joint taxable income. If you're not sure what taxable income is, see the explanation below.

  2. Our income tax cuts calculator shows your income tax savings over the next five years as well as their sum and average per year.

  3. The income tax cuts calculator plots your income tax between 2017/18 (the year before the government's plan kicked in) up to 2024/25 (when the final part, Stage 3, of the plan should come into effect) so that you can see the total impact of the whole plan on your income tax.

  4. Two more plots are available. With their help, you can see:

    • How much you would have to pay if it were not for tax offsets; and
    • What tax rate applies to you.
  5. Change the mode from summary to details to see detailed calculations of all the ingredients of your tax:

    • What tax rate applies to you;
    • What is your income tax before offsets;
    • How much LITO and LMITO you get; and
    • What is your final tax payable.
⚠️ Be aware that this income tax cuts calculator does not take into account the Medicare levy.

If you are not familiar with any of the terms mentioned above, check the following sections. First, we explain basic rules for calculating income tax and then provide details of the changes due to the Personal Income Tax Plan.

How is income tax calculated?

To find the amount of income tax you owe, you need to follow these three steps:

  1. Determine your taxable income based on your assessable income and the tax deductions you're eligible for.
  2. Calculate the tax payable based on your taxable income and the table of marginal tax rates in effect for a given year.
  3. Correct the tax payable by tax offsets available to you.

We will now go through all these financial notions one-by-one.

What is your assessable income?

Assessable income mostly consists of the income you receive for work:

However, other sources of income also count! For instance:

⚠️ Correct calculation of your assessable income is of utmost importance when it comes to income tax. If you have lots of different sources of income, it's best to consult a tax advisor to avoid mistakes.

What deductions are you allowed?

Not all of your assessable income is taxed. You may be eligible for some tax deductions, which reduce the amount of your income that is going to be taxed. The most common deductions are work-related expenses, for instance:

There are lots of other deductions as well. For example, charitable donations can be deducted from your assessable income too! For more details, check the government website on tax deductions.

What is your taxable income and tax payable?

Taxable income is the part of your assessable income that is taxed. The formula is very straightforward: taxable income is assessable income minus all deductions you are eligible for.

Tax payable is the amount of tax you're due, based on your taxable income and tax rates. The good news is that tax offsets can decrease the amount of tax payable!

What offsets are you eligible for?

Tax offsets are subtracted from your tax payable to determine the final amount of income tax you have to pay. It may even happen that they bring your income tax all the way down to $0! There are several tax offsets available. The two related to the Personal Income Tax Plan are LITO and LMITO:

  • LITO is Low Income Tax Offset. The full amount of $700 is available for people earning up to $37,000, while those who earn less than $66,667 may receive some part of LITO.

  • LMITO is Low and Middle Income Tax Offset. It is a temporary offset and 2020/21 is the last year LMITO is available. People with annual taxable income between $48,000 and $90,000 get the full amount of $1,080; those who earn up $126,000 get some part of LMITO.

There are some rules you should know about these tax offsets:

  1. The effects of LITO and LMITO accumulate!

  2. If you're entitled to any of these offsets, the Australian Taxation Office (ATO) will apply them automatically - you don't need to do anything.

  3. LITO and LMITO are non-refundable tax offsets: they lower the tax you're due but can't be turned into a tax refund (if your tax payable were to fall beneath $0 because of LITO or LMITO, you wouldn't receive any cash). Also, they can't be used to cover your Medicare levy.

What about couples? 👩‍❤️‍👨

In Australia each individual is taxed separately - there's no special rules for married couples as in some other countries. The joint income tax payed by a couple is simply the sum of their individual taxes.

Tax rate changes due to Personal Income Tax Plan

Here we present to you how the Personal Income Tax Plan will affect tax rates and thresholds. Tax offsets are discussed in the next section.

In summary:

  • In Stage 2 (2020/21 onwards), income thresholds for 19%, 32.5%, and 37% rates will increase; and
  • In Stage 3 (2024/25 onwards), the 32.5% and 37% rates will be replaced by a 30% rate. In addition, the income threshold for the highest (45%) rate will increase.

Here's a table summarizing the rate and threshold changes:

Overview of tax rate changes

Tax rate Current Stage 2 Stage 3
0% $0 to $18,200 $0 to $18,200 $0 to $18,200
19% $18,201 to $37,000 $18,201 to $45,000 $18,201 to $45,000
30% $45,001 to $200,000
32.5% $37,001 to $90,000 $45,001 to $120,000
37% $90,001 to $180,000 $120,001 to $180,000
45% over $180,000 over $180,000 over $200,000

⚠️ Be careful to read the above table correctly! It shows marginal tax rates: tax rates paid on portions of your income exceeding the respective thresholds. That means that if your taxable income is $30,000, then only its portion exceeding $18,200 is subject to the 19% tax rate. In other words, you will pay 19% * ($30,000 - $18,200) = $2,242.

✔️ To make life easier, we attach two more tables to help you quickly determine your income tax by hand, should you ever need to do this. Using these tables, you only need to find the row describing your taxable income and then perform the calculation in the right column. And don't forget that offsets can then lower the amount of tax you owe!

Tax rates 2020/21 - 2023/24

Taxable income Tax rate
up to $18,200 nothing
$18,201 to $45,000 19% * (taxable income - $18,200)
$45,001 to $120,000 $5,092 + 32.5% * (taxable income - $45,000)
$120,001 to $180,000 $29,467 + 37% * (taxable income - $120,000)
$180,001 or more $51,666 + 45% * (taxable income - $180,000)

Tax rates 2024/25 onwards

Taxable income Tax rate
up to $18,200 nothing
$18,201 to $45,000 19% * (taxable income - $18,200)
$45,001 to $200,000 $5,092 + 30% * (taxable income - $45,000)
$200,001 or more $51,592 + 45% * (taxable income - $200,000)

Tax offsets changes due to Personal Income Tax Plan

In general, LITO rises to $700 (it was $455 in Stage 1) and LMITO stays in effect for one more financial year 2020/21. Here are the details:

LMITO (available 2018/19 - 2020/21)

Taxable income LMITO
up to $37,000 Up to $255
$37,001 to $48,000 $255 + 7.5% * (taxable income - $37,000)
$48,001 to $90,000 $1,080
$90,001 to $126,000 $1,080 - 3% * (taxable income - $90,000)

LITO from 2020/21 onwards

Taxable income LITO
up to $37,500 $700
$37,501 to $45,000 $700 - 5% * (taxable income - $37,000)
$45,001 to $66,667 $325 - 1.5% * (taxable income - $45,000)
$66,667 or more nothing

Examples of how to calculate income tax (2020/21 rules)

  1. Taxable income of $35,000:

    • Tax before offsets: 19% * ($35,000 - $18,200) = $3,192
    • LITO: $700
    • LMITO: $255
    • Total tax offset: $700 + $255 = $1,155
    • Income tax due: $3,192 - $1,155 = $2,237
  2. Taxable income of $60,000:

    • Tax before offsets: $5,092 + 32.5% * ($60,000 - $45,000) = $9,967

    • LITO: $325 - 1.5% * ($60,000 - $45,000) = $100

    • LMITO: $1,080

    • Total tax offset: $300 + $855 = $1,180

    • Income tax due: $9,967 - $1,180 = $8,787

  3. Taxable income of $125,000:

    • Tax before offsets: $29,467 + 37% * ($125,000 - $120,000) = $31,317
    • LITO: you're entitled to
    • LMITO: $1,080 - 3% * ($125,000 - $90,000) = $30
    • Total tax offset: $30
    • Income tax due: $31,317 - $30 = $31,287
Anna Szczepanek, PhD