(Assessable income + assessable capital gains – allowable deductions) x (income tax rate) + applicable levies – tax offsets = tax payable
Examples of assessable income include:
Assessable income does not include:
If you sell a capital asset, such as real estate or shares, you usually make a capital gain or a capital loss. This is the difference between what it cost you to acquire the assets and what you receive when you dispose of it. Capital gains tax (CGT) applies to any gains made on the sale of non-exempt assets. Exempt assets for CGT purposes include your family home, car and personal use assets such as furniture. For assets acquired on or after 20 September 1985 and held for more than 12 months, half the capital gain is counted as an assessable capital gain for individuals. If the asset was held for less than 12 months the full capital gain is assessable. Refer to our ‘An introduction to Capital Gains Tax’ spreadsheet for further information on CGT.
To be an allowable deduction, an expense must have been:
If you buy equipment or other assets to help earn your income, you can claim a deduction for some or all of the cost.
If the equipment is used for both work and private purposes:
The type of deduction you claim depends on the cost of the asset:
You can claim the cost of travelling:
You can’t claim the cost of driving your car between work and home because:
So long as you are already working in your profession and generating an income, the above items are deductible.
Personal concessional contributions to superannuation up to $25,000 may be tax deductible. Refer to our ‘Understanding superannuation: the accumulation phase‘ factsheet for further details.
You can claim a deduction for expenses incurred in earning interest, dividend, rental or other investment income. These expenses include interest and associated borrowing costs. Refer to our ‘Novated leasing and other car financing options for doctors‘ factsheet for further details.
Broadly, there are four different tax rate scales applicable to income earned that apply to different circumstances of individuals:
The relevant tax rate scales for 2021-22 are set out below.
|Taxable income||Tax on this income|
|0 – $18,200||Nil|
|$18,201 – $45,000||19c for each $1 over $18,200|
|$45,001 – $120,000||$5,092 plus 32.5c for each
$1 over $45,000
|$120,001 – $180,000||$29,467 plus 37c for each
$1 over $120,000
|$180,001 and over||$51,667 plus 45c for each
$1 over $180,000
|Taxable income||Tax on this income|
|0 – $120,000||32.5c for each $1|
|$120,001 – $180,000||$39,000 plus 37c for each $1 over $120,000|
|$180,001 and over||$61,200 plus 45c for each $1 over $180,000|
Income received by minors can be taxed in different ways depending on the source of income and the status of the child. Minors who meet the following definitions are referred to as ‘excepted persons’ and are subject to taxation at the above adult taxation rates:
Minors may also receive ‘excepted income’. This includes:
Excepted income is taxed at the same rates as adults in the above tables.
If a minor receives no excepted income or does not meet the requirements of an excepted ‘person’, then income is subject to the following tax rates:
|Income||Tax rates for the 2021-22 Income year|
|$0 – $416||Nil|
|$417 – $1,307||Nil plus 66% of the excess over $416|
|Over $1,307||45% of the total amount of income that is not excepted income|
Tax rates for non-residents who are under 18
|Income||Tax rates for the 2021-22 Income year|
|$0–$416||32.5% of the entire amount|
|$417–$663||$135.20 plus 66% of the excess over $416|
|Over $663||45% of the entire amount|
‘Working holiday makers’ refers to those on visas 417 (working holiday) and 462 (work and holiday). Neither of these visas permit work in the medical sector.
|Taxable Income||Tax rates for the 2021-22 Income year|
|$0 – $45,000||15c for each $1|
|$45,001 – $120,000||$6,750 plus 32.5c for each $1 over $45,000|
|$120,001 – $180,000||$31,125 plus 37c for each $1 over $120,000|
|$180,001 and over||$53,325 plus 45c for each $1 over $180,000|
The Medicare levy applies to most resident adult taxpayers, with the full rate of 2% applied to taxable income over $29,032 for singles and $48,958 (combined) for couples.
There are some circumstances where persons may be exempt from the levy and these include:
The following table illustrates thresholds for the Medicare levy for 2020/2021 as the thresholdsfor the current year are typically not released until the following year’s Federal budget:
|No Medicare levy payable where taxable income is below||Reduced Medicare levy where taxable income is between||Full levy of 2% where income exceeds|
|Singles taxable income||$23,226||$23,227 – $29,032||$29,032|
|Couples taxable income||$39,167||$39,168 – $48,958||$48,958|
|Singles entitled to SAPTO*||$36,705||$36,705 – $45,881||$45,881|
|Couples entitled to SAPTO*||$51,094||$51,095 – $63,867||$63,867|
*SAPTO – Seniors and pensioners tax offset
Add $3,597 to the lower threshold and $4,496 to the upper for each dependent child or student.
The Medicare surcharge applies to high income earners who do not hold adequate private health insurance. It is not based purely on taxable income, but rather calculated on taxable income, reportable fringe benefits, reportable super contributions and total net investment losses.
|Taxpayer||No surcharge||1% surcharge||1.25% surcharge||1.5% surcharge|
|Singles||$90,000 or less||$90,001 – $105,000||$105,001 – $140,000||Over $140,000|
|Families*||$180,000 or less||$180,001 – $210,000||$210,001 – $280,000||Over $280,000|
* Family income threshold increases by $1,500 for each additional dependent child
Unlike allowable deductions which reduce assessable income, tax offsets, sometimes referred to as rebates, directly reduce the amount of tax payable. Tax offsets can be used to reduce the tax payable on your income. Any excess tax offsets however are not refunded to the taxpayer.
|Taxable income||Tax offset|
|$37,001–$48,000||$255 + 7.5c for each dollar over $37,000|
|$90,001 +||$1,080 reduces by 3c per dollar over $90,000|
|Tax payer||Tax offset|
|Single||$2,230 reducing by 12.5c per dollar over $32,279. Offset cuts out at $50,119|
|Couple (each)||$1,602 reducing by 12.5c per dollar over $28,974. Offset cuts out at $41,790|
|Separated due to illness||$2,040 reducing by 12.5c per dollar over $31,279. Offset cuts out at $47,599.|
If your spouse (married or de facto) is earning a low income or not working, you may be eligible to claim a tax offset. The maximum offset available is $540, where your spouse’s total income (assessable income + reportable fringe benefits + reportable super contributions) is $37,000 or less and you have contributed a maximum $3,000 to superannuation for your spouse. If your spouse’s income exceeds $37,000, the offset reduces by 18c per dollar over $37,000 and cuts out at $40,000.
Dr Jones is an Australian resident RMO and earns $95,000 p.a. During the financial year, she has purchased a stethoscope for $230, paid $85 in professional membership fees and attended a medical conference for $367, incurring associated travel expenses of $650. In addition, she contributed $3,000 to her spouse’s superannuation account. She has $1,500 interest income from a term deposit. Her spouse is currently on sabbatical and has no taxable income for the financial year. She holds eligible private health insurance.
Dr Jones’ tax position can be calculated this way:
This factsheet is a guide only, and does not represent professional taxation advice. The team at Doctors Wealth Management can review your situation and recommend a solution for your individual circumstances. Book an appointment today or call 1800 128 268.
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