Gross vs Net Income in Australia: What's the Difference?

Gross income: what it actually means🔗

Gross income is your total earnings before anything is taken out: the number on your contract, the figure in job ads, and the ATO's starting point for calculating your tax. It can include salary and wages, overtime and bonuses, allowances, rental income, and investment income like dividends and interest. When someone says they “earn $85,000 a year,” they almost always mean their gross salary. The take-home figure is a different story.

Net income: the number that actually hits your bank🔗

Net income is what's left after all deductions are removed from your gross. For employees it's commonly called take-home pay, the number that matters when you're working out whether you can afford rent, a car repayment, or a weekend away. Net income is always lower than gross (unless you earn below the tax-free threshold of $18,200, where they can be the same). The question is what gets taken out in between.

What gets taken out between gross and net🔗

For a standard Australian employee in 2024-25, here's what reduces your gross before it reaches your account.

• PAYG income tax, withheld each pay and sent to the ATO, based on the marginal tax brackets (16%, 30%, 37%, 45% for 2024-25).
• The 2% Medicare levy, which most residents pay on top of income tax (some low-income earners are exempt or pay less).
• A HELP/HECS repayment, if you have a student loan. Income-contingent, starting at 1% from $54,435 and rising with income.
• Salary sacrifice, if arranged. These pre-tax amounts reduce your gross before tax is calculated, which lowers your tax bill.

Wait, where does super fit in?🔗

Here's one of the most common misconceptions in Australian personal finance: super is not deducted from your gross salary. Your employer's Super Guarantee contribution (11.5% of ordinary time earnings in 2024-25) is paid on top of your gross as an additional employer cost. On $85,000, your employer pays $85,000 salary plus $9,775 super, a total cost of $94,775. That $9,775 goes straight to your super fund and never passes through your bank account, but it's not coming out of your pay either. The one exception is voluntary salary sacrifice into super, which you set up to reduce your gross before tax.

Worked example: $85,000 gross to take-home pay🔗

For a resident earning $85,000 gross in 2024-25 with no HECS and no salary sacrifice: income tax is $16,288 (0% on the first $18,200, 16% on the next $26,800, 30% on the remaining $40,000), plus the 2% Medicare levy of $1,700, for $17,988 in deductions. That leaves a net income of about $67,012.

These are approximate. Use the ATO Tax Withheld Calculator or our salary calculator for exact payroll amounts.

How a HECS-HELP debt reduces your take-home further🔗

If you have a HELP debt (formerly HECS), repayments are deducted from your pay alongside income tax once you tick the box on your TFN declaration. In 2024-25, repayments start at 1% from $54,435 and scale up with income. At $85,000, the repayment rate is 4.5%, so $85,000 times 4.5% = $3,825 a year. That takes your annual net from $67,012 to about $63,187, roughly $147 less per fortnight. HECS repayments aren't a tax (you're repaying a debt), but the cash-flow effect on your take-home is identical.

Why gross vs net matters for budgeting, renting and borrowing🔗

• Budgeting. Always build your budget from net income. Budgeting from gross is one of the most common reasons people feel broke on a decent salary. A budget template helps.
• Renting. The 30%-of-income rule of thumb should be checked against your net, not gross. At $85,000 gross, 30% is ~$490/week, but 30% of your $67,012 net is ~$387/week, a $100/week difference.
• Loan applications. Lenders assess borrowing capacity using gross (a standardised figure), but stress-test your repayments against actual cash flow. Think in net terms for what you can really afford.
• Comparing job offers. Compare the net figures. A $95,000 role with salary sacrifice can leave more take-home than a $100,000 role without it.

Gross vs net income for the self-employed and sole traders🔗

For a sole trader, gross income is your total business revenue before expenses, and net income is what's left after allowable business expenses (tools, software, home office, vehicle costs). It's your net income that gets taxed. So a sole trader with $120,000 revenue and $30,000 of expenses is taxed on $90,000, not $120,000.

The bottom line: gross is the headline, net is what you actually live on, and super sits on top of both. Budget, rent, and borrow off your net, compare job offers on net, and remember the employer's super is a bonus that never hits your bank account. Work out your own figure with the salary calculator.

❓ Frequently asked questions🔗