How Australian take-home pay is actually calculated

Gross, taxable and take-home are three different numbers

A job ad quotes gross salary. Your tax return is calculated on taxable income. Your bank account receives take-home pay. On a simple salary with no deductions the first two are the same figure, which is why the distinction is easy to miss — but the moment a deduction, a bonus or some bank interest enters the picture they separate, and every later step in the calculation is driven by taxable income rather than by the number on the contract.

Gross salary   − deductions        = taxable income
Taxable income → income tax, Medicare levy, study loan repayment
Gross salary   − tax − levy − loan = take-home pay

Notice what is missing from that chain: employer superannuation. The 12% superannuation guarantee is an employer cost paid into your fund, not a deduction from your pay, so it does not reduce take-home pay at all. It is only entangled with your salary when an employer advertises a package that already includes it, which is a separate trap covered in salary plus super versus a total package.

The 2026–27 rates apply in layers, not all at once

Resident income tax is charged on slices of income. For 2026–27 the first $18,200 is tax-free, the slice from $18,200 to $45,000 is taxed at 15%, the slice from $45,000 to $135,000 at 30%, then 37% to $190,000 and 45% above that. The single most common error in estimating your own pay is applying one rate to the whole salary: 30% of $95,000 would be $28,500, which overstates the tax by nearly ten thousand dollars.

The $4,020 in the third row is worth recognising, because it is the shortcut the ATO publishes and the one payroll uses. Once you are inside the 30% bracket the tax is simply $4,020 plus 30 cents for every dollar above $45,000, and the same structure repeats higher up. For the full mechanics of thresholds and marginal rates, see Australian income tax brackets for 2026–27.

Following $95,000 from gross to bank account

Two adjustments sit between the bracket calculation and the final figure. The low income tax offset reduces income tax by up to $700, but it tapers as income rises and reaches nil at $66,667, so at $95,000 it is worth exactly nothing. The Medicare levy adds 2% of taxable income, and it is charged separately from income tax, which matters because the offset cannot be used against it.

Why your payslip and your tax return never quite agree

Your employer does not calculate your annual tax. It applies the ATO’s PAYG withholding formula to each individual pay: convert the pay to a weekly equivalent, apply the published coefficients for that band, and round the result to the nearest dollar. Two features of that method guarantee a small mismatch with the year-end assessment. The rounding is real money repeated 26 times a year, and the formula assumes every pay is representative of the whole year — perfectly reasonable for a steady salary, and quite wrong if you start in March or take unpaid leave.

Withholding on this salary comes to $20,956 across a year of fortnightly pays against $20,920 finally assessed, so about $36 too much has been withheld and comes back as a refund. That is the honest size of the effect: dollars, not hundreds. Anything larger in your own refund is being driven by deductions, offsets, or income the withholding never saw — not by rounding.

What can make the gap much bigger

• Starting or leaving a job mid-year, so your pays are not representative of a full year of income.
• A second job, where the tax-free threshold is claimed once but each employer withholds on its own pay only.
• A bonus or lump sum, which withholding treats differently from ordinary pay.
• Deductions, including the standard work deduction, which reduce tax at lodgement but never reduce withholding.
• A study loan, where the compulsory repayment is assessed on your income for the year while withholding uses a separate scale.

The other things that come out before you see it

Income tax and the Medicare levy are universal for a resident on this salary. Three more items are conditional, and each has its own threshold rather than being a percentage of everything.

• Medicare levy shade-in. The 2% levy is not charged below $28,011 of taxable income, and between $28,011 and $35,013 only 10 cents in each dollar above the lower figure is charged. Above $35,013 the full 2% applies. Family thresholds are higher and are set out in the Medicare levy and the Medicare levy surcharge.
• Medicare levy surcharge. A separate charge of 1% to 1.5% for higher-income earners without appropriate private hospital cover, starting at $105,000 of income for a single person in 2026–27. It is not the levy, and having hospital cover avoids it entirely.
• Study and training loan repayments. Nothing is payable below $69,528 of repayment income for 2026–27; above that a compulsory repayment is assessed with your return. See how HELP and HECS repayments come out of your pay for the bands and the refund surprise they cause.

Salary sacrifice sits slightly apart from all of these. Redirecting part of your salary into super reduces the salary that tax is calculated on, so take-home pay falls by less than the amount sacrificed — but the money is locked in your fund until you can access it. The rules for what an employer must contribute regardless are in the superannuation guarantee, explained.

What the OzCalc salary calculator does and does not model

The salary calculator deliberately reports two different things at once, for the reason described above. The weekly, fortnightly and monthly figures use PAYG withholding, so they should match a payslip. The annual figure uses year-end brackets, the low income tax offset and the Medicare levy, so it matches an assessment. The difference between the two is shown as an estimated return rather than being smoothed away.

It assumes you are a resident for the full year with a single, steady salary and no other income. It does not model a second job on the same taxable income, bonuses or lump sums, overtime, salary sacrifice, offsets other than LITO, or the seniors and pensioners offset. The $1,000 standard deduction is off by default precisely because your employer does not withhold for it. Family Medicare thresholds live on the Medicare levy calculator, the withholding formula itself is on the PAYG calculator, and income tax handles a taxable income you have already worked out. Every result is an estimate; your notice of assessment is the number that settles it.

Common questions