Pay Packet

What happens to your pay packet, how is it calculated, the tax calculations
(including TFN and tax free thresholds), the superannuation contributions
from your income and the Superannuation Guarantee Levee (SGL)
Pay Packet is defined as wages or salary, or an envelope
containing cash wages and a pay slip!
How is Pay Packet calculated?
It is calculated by deducting taxes and superannuation from the employees total annual
income.
What is tax?
Taxes are one of the main sources of government revenue and there are many different
types of taxes in Australia but the one that is most likely to affect you as an employee in
your working life is the personal income tax. The personal income tax depends on how high
your income is and PAYG is the most common of paying personal income tax.
What is TFN?
TFN is an abbreviation for Tax File Number and its a unique nine-digit series of number
issued to a taxpayer (individual or organisation) provided by the Australian Taxation Office
(ATO). TFN is issued as a way of documenting the taxpayers income and expenditure and it
can be used for tax returns by the taxpayer.
What is Tax Free Threshold?
Tax free threshold is for any Australian resident whose yearly income consists of less than
$18, 200, no tax will be calculated. And if you earn more than $18, 200, the taxpayer will
only pay income tax on the earnings over $18, 200.
Example of a tax calculation
Lydia Parrishs total income: $205, 000
Total deductions: $18, 000
Total tax before deductions:
(refer to the PAYG income tax rates table
- $54, 547 + [(Annual income Taxable
income) x 0.45]
$54, 547 + {($205, 000 - $180, 001) x 0.45}
= $65, 796.55
Total tax after deductions
(Total tax before deductions Total
deductions)
$65, 796.55 - $18, 000
= $47, 796.55
Total tax for Lydia Parrish is $47, 796.55, if the total tax after deductions end up as a
negative number, she would not have to pay tax and the government will pay her that
negative number amount of money.
Pay As You Go System (PAYG) Income tax rates 2014-2015 (rates for 2014-15 apply from 1
July 2014)
Taxable Income Tax on this income
0 - $18, 200 Nil
$18, 201 - $37, 000 19c for each $1 over $18, 200
$37, 001 - $80, 000 $3, 572 plus 32.5c for each $1 over $37, 000
&80, 001 - $190, 000 $17, 547 plus 37c for each $1 over $80, 000
$180, 001 and over $54, 547 plus 45c for each $1 over $180, 000

Superannuation Contributions
Superannuation is the amount of money contributed to a fund as future retirement money
which can be accessed and claimed once you reach a certain age (55-60 years) with an
exception of severe financial hardship.
Superannuation Guarantee Levy (SGL)
Superannuation Guarantee Levy is a compulsory system of superannuation support for
Australian employees, certain percentage of employees wage or salary contributed by
employers to a super fund. The system was introduced in 1992. The rate has increased to
9.5% from the 9.25% that applies for the 2013-14 year.