How your tax refund is worked out
A tax refund happens when the tax taken out of your pay during the year (called PAYG withholding) adds up to more than the tax you actually owe once your return is assessed. The Australian Taxation Office gives the difference back to you. If too little was withheld, you have a tax bill to pay instead.
The calculation has four steps, and the calculator above shows each one:
| Step | What happens |
|---|---|
| 1. Taxable income | Your total income minus the deductions you claim. |
| 2. Tax payable | Income tax on that taxable income (progressive brackets), plus the Medicare levy and any surcharge, minus tax offsets like the LITO. |
| 3. Compare | Tax already withheld, minus the tax payable. |
| 4. Result | A positive number is your refund; a negative number is tax to pay. |
Why deductions increase your refund
Every dollar of deductions reduces your taxable income, not your tax bill directly. So a deduction is worth your marginal tax rate: if you're in the 30% bracket, a $1,000 deduction lowers your tax by about $300 (plus 2% Medicare levy), which flows straight through to a bigger refund. Only claim deductions you genuinely incurred and can substantiate — the ATO can ask for receipts.
The 2025–26 resident tax rates
The calculator uses the official ATO resident rates. For 2025–26 (1 July 2025 to 30 June 2026):
| Taxable income | Tax on this income |
|---|---|
| $0 – $18,200 | Nil (the tax-free threshold) |
| $18,201 – $45,000 | 16c for each $1 over $18,200 |
| $45,001 – $135,000 | $4,288 + 30c for each $1 over $45,000 |
| $135,001 – $190,000 | $31,288 + 37c for each $1 over $135,000 |
| $190,001 and over | $51,638 + 45c for each $1 over $190,000 |
On top of income tax, most people pay the 2% Medicare levy, and the calculator applies the Low Income Tax Offset (LITO) of up to $700 automatically for lower earners. Pick an earlier year in the calculator to apply that year's brackets and offsets.
What this calculator doesn't include
To keep the estimate clean, it doesn't include compulsory HELP/HECS repayments (these are collected at tax time too and can turn an expected refund into a smaller one — check our HECS-HELP repayment calculator), nor capital gains, investment income, or every possible offset. Treat the result as a solid guide, not a guarantee.
Worked example: $75,000 income, $14,788 withheld
A resident earning $75,000 in 2025–26 with private hospital cover, no deductions:
Income $75,000
In this case withholding matched the bill exactly. Add $1,000 of deductions and the tax payable drops by about $320, so the refund becomes roughly $320.