How a refund is worked out
Your refund is simply the tax withheld during the year minus the tax you actually owe.
- Assessable income: salary and wages from your income statement, plus interest, net rent, dividends and any other income.
- Less deductions to arrive at taxable income.
- Tax on taxable income at the resident rates for that year, less the low income tax offset.
- Plus the Medicare levy and, if you had no private hospital cover and earned above the threshold, the Medicare levy surcharge.
- Plus your compulsory HELP repayment, worked out on repayment income (taxable income plus reportable fringe benefits, reportable super contributions and net investment losses).
- Compare with the PAYG withheld on your income statement. More withheld than owed means a refund; less means a bill.
Worked example: $75,000 salary with $1,200 of deductions
2025–26: salary $75,000, tax withheld $15,500, deductions $1,200
Taxable income falls to $73,800. Tax on that at the 2025–26 rates is $4,288 + 30% of $28,800 = $12,928, and the Medicare levy is $1,476, so the total payable is $14,404. With $15,500 withheld, the estimated refund is $1,096.
- Taxable income
- $73,800
- Total tax payable
- $14,404
- Tax withheld
- $15,500
Estimate · 2025–26 income year
- Salary and wages
- $75,000.00
- Less deductions
- −$1,200.00
- Taxable income
- $73,800.00
- Tax on taxable income
- $12,928.00
- Medicare levy
- $1,476.00
- Total payable
- $14,404.00
- Less PAYG withheld
- -$15,500.00
- Refund
- $1,096.00
What is different for 2025–26 and 2026–27
For returns you are lodging now (2025–26), the second bracket is 16%, HELP repayments start at $67,000 of repayment income and the Medicare levy surcharge starts at $101,001 for singles. For next year’s return (2026–27), the second bracket is 15%, HELP starts at $69,528 and the surcharge at $105,001. Because PAYG withholding switched to the new rates on 1 July 2026, the rate cut flows through your pay rather than arriving as a bigger refund.
Ways to improve your result legitimately
- Keep records for every work-related deduction: receipts, logbooks, a diary of working-from-home hours.
- Use the fixed-rate method correctly for working from home: it covers energy, phone, internet and stationery, so do not claim those separately.
- Claim the cost of managing your tax, including last year’s tax agent fee.
- Check private health insurance before the end of June if your income is near the surcharge threshold.
- Use the ATO’s pre-filling. Bank interest, dividends and government payments are pre-filled from late July; lodging too early can mean missing income and getting an amended assessment later.