How to Calculate PAYE in Australia: A Complete Guide 2024-2025

PAYE (Pay As You Earn) - it's how your employer takes tax out of your paycheck every payday. If you've ever wondered why your take-home pay is less than your salary, or how to figure out exactly what you'll get, this guide breaks it down step by step.

What is PAYE in Australia?

PAYE, or Pay As You Earn, is the system where your employer deducts tax from your salary each pay period. In Australia, this includes:

  • Income Tax: Calculated using progressive tax brackets
  • Medicare Levy: 2% of your taxable income
  • Low Income Tax Offset (LITO): A tax reduction for lower-income earners

2024-2025 Australian Tax Brackets

Australia uses a progressive tax system with five brackets:

  • $0 - $18,200: 0% (tax-free threshold)
  • $18,201 - $45,000: 19%
  • $45,001 - $135,000: 30%
  • $135,001 - $190,000: 37%
  • $190,001 and above: 45%

How Progressive Tax Works

Progressive tax means you only pay the higher rate on income above each threshold. For example, if you earn $50,000:

  • First $18,200: $0 tax (tax-free threshold)
  • $18,201 - $45,000: 19% = $5,092
  • $45,001 - $50,000: 30% = $1,500
  • Income tax before offsets: $6,592
  • LITO reduces this further (see LITO section below)
  • Plus Medicare Levy: $50,000 × 2% = $1,000
  • Total tax: ~$6,717 (after LITO and Medicare)

Medicare Levy

Most Australian residents pay a Medicare Levy of 2% on their taxable income. This helps fund Australia's public healthcare system. The levy applies to all income above the tax-free threshold.

Low Income Tax Offset (LITO)

The Low Income Tax Offset reduces the amount of tax you pay if your income is below certain thresholds:

  • Maximum offset: $700 for incomes up to $37,500
  • Phase-out 1: Reduces by 5 cents per dollar between $37,500 and $45,000
  • Phase-out 2: Reduces by 1.5 cents per dollar between $45,000 and $66,667
  • No offset: For incomes above $66,667

Superannuation

Superannuation (super) is Australia's retirement savings system. In 2024-2025:

  • Employer contribution: 11% of your salary (mandatory)
  • Important: Super is paid in addition to your salary, not deducted from it
  • Employee contributions: Optional, deducted from your salary if you choose to contribute

Step-by-Step Calculation Example

Let's calculate the take-home pay for someone earning $75,000 per year:

Step 1: Calculate Income Tax

  • $0 - $18,200: $0 tax
  • $18,201 - $45,000: ($45,000 - $18,200) × 19% = $5,092
  • $45,001 - $75,000: ($75,000 - $45,000) × 30% = $9,000
  • Total income tax: $14,092

Step 2: Apply LITO

Income is above $66,667, so no LITO applies.

Step 3: Calculate Medicare Levy

$75,000 × 2% = $1,500

Step 4: Calculate Total Deductions

$14,092 (tax) + $1,500 (Medicare) = $15,592

Step 5: Calculate Net Income

$75,000 - $15,592 = $59,408 take-home pay

Step 6: Add Superannuation

$75,000 × 11% = $8,250 (employer contribution, not deducted)

Using Our Tax Calculator

The easiest way to calculate your Australian PAYE is to use our free tax calculator:

  1. Enter your gross annual salary
  2. Select your pay period (yearly, monthly, or weekly)
  3. Optionally enter your employee super contribution percentage
  4. Get instant results with detailed breakdown

Calculate Your Australian Tax Now

Use our free calculator to get accurate estimates

Calculate Now

Important Considerations

  • Tax year: Australian tax year runs from July 1 to June 30
  • Individual circumstances: This guide covers basic calculations. Your actual tax may vary based on deductions, offsets, and other factors
  • Official advice: For complex situations, consult the Australian Taxation Office (ATO) or a qualified tax professional

Conclusion

Getting your head around PAYE means you can actually plan your finances properly and know what you're worth when negotiating salaries. Tax can get complicated fast, especially with deductions and offsets, so use our calculator to get started - but for anything complex, it's worth checking with the ATO or a tax professional.