Pay Comparison Methodology: What the Scenario Engine Includes

General information only. This is not tax or financial advice. Consult a registered tax agent for advice specific to your situation.

The Pay comparison engine lets you run side-by-side scenarios — different salary levels, sacrifice amounts, contractor rates, HELP repayment settings, and more — using the same underlying tax logic that powers the individual calculators across Austax.tools. This page explains the tax rules baked into the engine, the assumptions it makes, and where the boundaries lie.

Tax calculation basis

All calculations use 2025–26 ATO tax parameters:

• Income tax rates and thresholds as published by the ATO for the 2025–26 income year.
• Medicare levy at 2% of taxable income, with the low-income reduction applied where applicable.
• Medicare Levy Surcharge (MLS) at 1%, 1.25%, or 1.5% depending on income tier, applied if the MLS toggle is on and no qualifying private health insurance is assumed.
• HELP repayment rates under the marginal repayment system, applied to repayment income above the minimum threshold. The 2025–26 thresholds and rates apply.
• Low Income Tax Offset (LITO) and Low and Middle Income Tax Offset (LMITO) — LMITO ended in 2022–23 and is not included. LITO applies at the current scale.

When the engine is updated for a new tax year, all of these parameters are updated simultaneously to maintain consistency across scenarios.

Superannuation

The engine includes superannuation guarantee (SG) at 12% of ordinary time earnings for employee scenarios. Super is calculated on the gross (pre-sacrifice) ordinary earnings unless otherwise specified. Super contributions are shown as a component of total remuneration but are not included in take-home pay — they represent money going into the super fund, not cash in hand.

For salary sacrifice scenarios, concessional contributions reduce the SG base used for the employer super calculation, consistent with how most employers calculate SG on post-sacrifice ordinary earnings. Some employment contracts protect the SG base — if yours does, the standard scenario will understate your employer super slightly.

Employee scenarios

Employee scenarios calculate net pay from a gross salary or package figure. The calculation sequence is:

1. Start with gross annual income.
2. Subtract pre-tax salary sacrifice (if any) to get taxable income.
3. Apply income tax at 2025–26 marginal rates.
4. Apply Medicare levy and MLS based on taxable income and settings.
5. Calculate HELP repayment on repayment income (which adds back reportable fringe benefits and other items — see assumptions below).
6. Apply LITO.
7. The result is net annual income. Divide by pay frequency for per-period figures.

Bonus scenarios

The bonus engine estimates the tax impact of a one-off bonus by calculating the marginal tax on the bonus amount. It compares this to the tax that would typically be withheld on the bonus pay run under ATO withholding tables (which annualise the bonus and may over- or under-withhold depending on timing). The output shows estimated net bonus and the likely withholding position.

Contractor scenarios

Contractor scenarios allow comparison between an employee salary and a contractor daily or hourly rate. The engine applies:

• GST at 10% on gross contract revenue (for GST-registered contractors). GST collected is excluded from income for tax purposes.
• Business expenses entered by the user, deducted from assessable income.
• Voluntary super: contractors do not receive employer SG by default, but the scenario allows you to model contributions you choose to make.
• No payroll tax, workers’ compensation, or employer compliance costs: these are not modelled. See boundaries below.

The employee-equivalent comparison shows what gross salary would produce the same net outcome, accounting for the absence of SG and the presence of business expenses.

Rounding

All dollar figures are rounded to the nearest dollar throughout the calculation. Intermediate steps are not rounded — rounding occurs only on final output values. This means the displayed annual and per-period figures may differ by $1 from manually multiplying a rounded weekly figure by 52.

Assumptions

The engine operates under the following default assumptions unless you change a setting:

Assumption	Default
Residency	Australian resident for tax purposes
Private health insurance	Not held (MLS applies if income exceeds threshold)
Dependants	None (no dependent offsets or family thresholds applied)
HELP debt	Off by default; toggle on to include repayments
Salary sacrifice	$0 unless specified
SG rate	12%
GST registration	On by default for contractor scenarios
Business expenses	$0 unless specified

Changing any of these assumptions can materially affect the output. The residency assumption in particular makes a large difference — foreign residents are taxed at a flat rate with no tax-free threshold and no LITO, so the engine should not be used for non-residents without selecting the appropriate residency setting.

HELP repayment income

HELP repayments are calculated on repayment income, not just taxable income. Repayment income includes taxable income plus reportable fringe benefits, total net investment losses, and reportable employer super contributions. In the pay engine, where salary sacrifice is involved, the reportable employer super contribution amount (the sacrifice amount in excess of the SG base) is added back to calculate repayment income. This means salary sacrifice does not reduce your HELP repayment obligation dollar-for-dollar.

What the engine does not cover

The Pay app is a planning tool, not a payroll system. It does not model:

• Payroll tax: levied by state and territory governments on employers above a threshold. Not relevant to employee take-home calculations but relevant to employer cost comparisons.
• Workers’ compensation insurance premiums: relevant to employer costs and some contractor arrangements.
• Entity structuring: operating as a company, trust, or partnership rather than as a sole trader changes the tax treatment significantly. The contractor scenarios model sole trader economics only.
• Personal advice about your legal obligations: whether you are correctly classified as an employee or contractor, whether you are required to register for GST, and what deductions you can legitimately claim all depend on your specific facts.

How to use the engine well

Keep each scenario clean and purposeful. The most useful comparisons change one material variable at a time — for example, toggling HELP on and off to see the repayment impact, or comparing a salary sacrifice level of $0 against $10,000 to see the take-home difference.

Running ten simultaneous changes across two scenarios makes it harder to attribute the difference to any single decision. Build the baseline carefully first, then test one alternate at a time.

For narrower, one-off questions — a standalone HELP repayment estimate, a single income tax calculation, or a specific comparison — the individual calculators are often a cleaner starting point. Browse the single calculators for focused tools.

Guides that use this methodology

• Contractor vs Employee — What actually changes your pay when you switch from PAYG to ABN — GST, super, deductions, and hidden costs.
• Salary Sacrifice — How concessional contributions affect your take-home, HELP repayments, and Medicare Levy Surcharge.
• HELP Repayment — The 2025–26 marginal repayment system — thresholds, rates, and monthly impact.

Browse all side-by-side comparisons on the compare hub.