How is take-home pay calculated in Australia?
Your take-home pay is the amount of money you have available after
deductions from your gross income.
For most Australian employees, the main deductions are income tax and the
Medicare levy. Your employer generally withholds tax from your salary
throughout the year and pays it to the Australian Taxation Office (ATO)
on your behalf.
The amount of tax you pay depends on your taxable income and the applicable
Australian income tax rates.
Because Australian income tax is progressive, you don't pay the highest
tax rate on your entire salary. Instead, different portions of your
taxable income are taxed at different rates.
That's why knowing your gross salary doesn't immediately tell you how much
money you'll have available to spend.
Our calculator gives you a simple estimate of your after-tax income so you
can start planning your household budget.
What is my take-home pay?
Your take-home pay depends on your gross salary and your individual
circumstances.
For example, someone earning $100,000 a year doesn't receive $100,000 in
their bank account. A portion of their income goes towards income tax and
the Medicare levy, leaving them with a lower amount to spend, save or
invest.
The same principle applies at every salary level.
Knowing your estimated take-home pay is useful when you're:
- Comparing job offers
- Negotiating your salary
- Deciding whether you can afford a house
- Working out how much rent you can afford
- Planning a household budget
- Deciding whether to buy a car
- Working out how much you can save
- Considering a career change
- Planning for a change in household income
The most useful number isn't necessarily your annual salary.
It's the amount you actually have available to live on.
What can I afford on my salary?
Knowing your take-home pay is only the first step.
The more important question is:
What can I actually afford?
Your salary needs to cover much more than tax. You may have rent or
mortgage payments, groceries, utilities, transport, insurance, debt
repayments, entertainment, savings and other household expenses.
That's why we created our How Much Can I Afford? calculator.
Once you've calculated your take-home pay, you can use your income to
estimate a comfortable housing budget and see how much you may be able to
afford based on your household income, debts, living expenses and deposit.
How much of my income should I spend on housing?
Housing is usually one of the biggest expenses in an Australian household
budget.
A commonly used budgeting guideline is to keep housing costs around 30%
of household income, although the right amount depends on your income,
debts, family circumstances, location and other expenses.
For some households, spending 30% of income on housing may be comfortable.
For others, it may leave too little money for everyday expenses and
savings.
Rather than relying on a single percentage, it's useful to look at your
whole household budget.
That's why our affordability calculator considers your income alongside
your existing debts and living expenses.
Recommended monthly housing spend by salary
The following table gives some examples of recommended, comfortable
monthly spend on housing (rent or mortgage) based on about 30% of
household income, with a minimum buffer for living expenses:
| Gross Annual Salary |
Recommended Monthly Spend on Housing |
| $80,000 |
$1,291 |
| $100,000 |
$1,937 |
| $120,000 |
$2,277 |
| $140,000 |
$2,608 |
| $160,000 |
$2,913 |
| $180,000 |
$3,218 |
Important information about our calculators
The results provided by What Can I Afford? are estimates for budgeting
and planning purposes only.
Your actual take-home pay can vary depending on your individual
circumstances, including deductions, salary packaging, HELP/HECS debt,
private health insurance, Medicare levy surcharge, tax offsets and other
factors.
Similarly, our affordability estimates are not a guarantee that a bank
or other lender will approve a particular loan.
Before making significant financial decisions, consider obtaining
professional financial or lending advice appropriate to your circumstances.
Our calculators are designed to give you a useful starting point for
understanding your numbers.