The rate is a marginal rate plus the Medicare levy.
The three bands are the 2026–27 resident brackets at their edges. Under
$45,000
the marginal rate is 15%; from there to
$135,000
it is 30%; above that it is 37%. The Medicare levy adds 2% to each, which is where 17%, 32% and 39% come from.
A marginal rate is what the next
dollar costs, and that is the right question when one more invoice has just been paid.
It is not what the year averages to: the first $18,200 is tax-free, and
above $190,000 the rate is 45%. So the figure runs high for someone
near the bottom of the lowest band and low for someone well past the top of the highest.
If you are the second, set aside more.
Per the ATO's
tax rates for Australian residents
and its guidance on the Medicare levy.
This is an instalment you pay yourself, not withholding.
Nobody takes tax out of an invoice before it reaches you. An employer
withholds
from wages; a sole trader pays income tax on their own account, through
PAYG instalments
during the year once the ATO asks for them, and the balance with the return. The money
arrives whole and the tax on it is still owed, which is the whole reason to set some of
it aside on the day.
The ATO works an instalment out from your last return. This page works one out from the
invoice in front of you. They are two estimates of the same debt, and the return is what
settles it.
Per the ATO's guidance on PAYG instalments.
The GST comes out first, and it is one eleventh.
A registered seller's invoice total includes GST, and the GST inside a GST-inclusive
amount is one eleventh of it — not 10% off. That eleventh was collected for the ATO and
goes on the next BAS; it was never income, so income tax is worked out on what is left
after it. $1,100
received is $100
of GST and $1,000
of yours, before income tax.
That eleventh is the whole of the
GST calculator
, which explains why it is a division and not a subtraction.
Not registered? Then there is no GST in it.
A seller who is not registered for GST charges none, so the whole amount is theirs
before income tax and the GST card reads zero. Registration is compulsory once turnover
reaches $75,000
in a year, and GST-free sales count toward that figure even though no GST is charged on
them.
Per the ATO's guidance on registering for GST.
This page reports arithmetic on the published rates.
What is 32% of $1,000
is a question it can answer; which band you are in
depends on deductions, other income and the rest of the year, and there is no registered
tax agent behind Bilby.
The longer questions — what counts toward the threshold, whether an overseas client is
GST-free — are worked through in the
guides
, with the ruling or the section named beside each claim.