Understanding wages vs salary: What you take home after tax
Your take-home pay depends on whether you earn wages or a salary, but both are taxed the same way – use the ATO rates and Medicare thresholds to estimate what you keep.
Wages vs salary: What lands in your bank account
When you look at a job advertisement, you might see an hourly wage or an annual salary. Both are forms of pay, but the amount that actually reaches your bank account after tax and the Medicare levy depends on how you earn it. This guide explains the difference between wages vs salary and how to estimate your take-home pay.
The difference between wages and salary
Wages are paid per hour worked. If you work 38 hours a week at the national minimum wage, you earn $26.44 per hour, or $1,004.90 per week – that's $52,255 per year before tax. Wages often include penalty rates, overtime, and allowances, which can push your total above the base rate.
Salary is a fixed annual amount, usually expressed as a total package. For example, a job might offer $80,000 per year plus super. The super guarantee is 12% from 1 July 2026, so the employer pays an extra $9,600 into your super fund – but that money is not part of your take-home pay. When comparing wages vs salary, remember that salary is often quoted inclusive of super, while wages are typically plus super.
Both wages and salary are treated as ordinary income for tax purposes. The Australian Taxation Office applies the same resident tax rates and Medicare levy regardless of how you are paid. The key is to know your taxable income – that is, your gross pay minus any allowable deductions.
How tax and Medicare affect your take-home
For the 2026–27 income year, the ATO tax rates for residents are:
- $0 – $18,200: Nil
- $18,201 – $45,000: 15c for each $1 over $18,200
- $45,001 – $135,000: $4,020 plus 30c for each $1 over $45,000
- $135,001 – $190,000: $31,020 plus 37c for each $1 over $135,000
- $190,001 and over: $51,370 plus 45c for each $1 over $190,000
On top of that, you pay the Medicare levy of 2% of your taxable income, unless you are on a low income. The latest single-person thresholds are $28,011 and $35,013. If you earn below $28,011, you pay no Medicare levy. Between $28,011 and $35,013, you pay 10c per dollar over the lower threshold. Above $35,013, you pay the full 2%.
You may also be eligible for the Low Income Tax Offset (LITO). The maximum LITO is $700 for taxable incomes up to $37,500, then it phases out. For example, at $45,000 the offset is $325, and it reduces further until it reaches zero at $66,667. LITO can only reduce your tax to zero – it cannot create a refund.
Example: Minimum wage take-home
Let's say you earn the national minimum wage of $26.44 per hour, working 38 hours a week, 52 weeks a year. That's $52,255 annual gross. Using the 2026–27 rates:
- Tax: $6,196.50 (before offsets)
- Medicare levy: $1,045.10 (full 2%)
- LITO: approximately $216 (reduces tax to $5,980)
- Total deductions: about $7,025
- Annual take-home: roughly $45,230
- Fortnightly take-home: about $1,739
This is an estimate – your actual take-home may vary due to rounding in tax tables, HELP/HECS repayments, or salary sacrifice arrangements. Use our Take-home pay calculator for a personalised figure.
Why super doesn't appear in your bank account
If your job advert says "$80,000 plus super", the $80,000 is your salary before tax. The employer pays an additional 12% into your super fund – that's $9,600 – but it's not part of your take-home. If the advert says "$80,000 including super", your salary is actually about $71,429 and the rest goes to super. Always check whether the figure is inclusive or exclusive of super when comparing wages vs salary.
Using the right tools
To work out your exact take-home, start with your gross pay. If you're paid by the hour, multiply your hourly rate by your weekly hours and by 52. If you're salaried, use your annual figure. Then apply the tax rates and Medicare levy. The Tax and Medicare guide explains the offsets and thresholds in more detail.
Remember: the national minimum wage is set by Fair Work and reviewed each year. As of 1 July 2026, it is $26.44 per hour or $1,004.90 per week. Award wages may be higher, and some awards have introductory rates that are lower than the minimum wage – but those rates are temporary.
Questions
What is the difference between wages and salary for tax purposes?
Wages are typically paid by the hour and can vary with hours worked, while salary is a fixed annual amount. For tax and Medicare levy, both are treated as ordinary income – the same tax rates and thresholds apply. The key difference is that salary is often quoted as a total package including super, whereas wages may be quoted as an hourly rate plus super.
How do I calculate my take-home pay from a salary?
Start with your annual salary (excluding super if it's quoted as plus super). Subtract the tax using the 2026–27 resident rates: nil on the first $18,200, 15c per dollar to $45,000, 30c to $135,000, and so on. Then subtract the 2% Medicare levy. If your taxable income is under $66,667, you may also qualify for the Low Income Tax Offset (LITO), which reduces your tax. The result is your annual take-home pay. Divide by 26 for a fortnightly amount.
Does the Medicare levy apply to all wages and salaries?
Yes, the Medicare levy of 2% applies to your taxable income. However, if your income is below $28,011 (single), you pay no Medicare levy. Between $28,011 and $35,013, you pay a reduced rate (10c per dollar over the lower threshold). Above $35,013, you pay the full 2%. These are the latest published single-person thresholds.