Working out potential take home pay
Within the next six months I’ll be reentering the workforce on a salary that’s likely to be a lot smaller than I’m currently on. I like to be prepared so I’ve already made a budget to work out how small a salary I can survive on. Here’s how to do it:-
Research salaries
There are plenty of places you can research salaries. A few good choices for research are:-
You’ll find that these days most jobs are offered as salary packages, i.e. an amount including superannuation. With the industry I’m planning to enter I expect a salary package of around $40,000 per annum.
Break your salary package into salary + superannuation
Once you find your salary package amount you’ll need to work out how much is actually salary for you and how much is for superannuation. Otherwise you can’t work out how much you need to budget.
The simplest way to do this is to take the total salary package amount and divide by 1.09. If the amount of superannuation goes up beyond 9% in future then adjust that figure accordingly (e.g. if it goes up to 9.5% it’ll become 1.095).
You’ll then have the non-superannuation component. Multiply that amount by 9% and you’ll have the superannuation component. Add them both together and you’ll have your total salary package again.
Work out your take home pay
To work out how much of that salary package will land in your pocket and not tax, head to the Australian Taxation Office’s PAYG calculator. Just follow the prompts.
When it comes to your income, if you think you’ll be paid fortnightly choose the fortnight option, then take the non-superannuation component of your salary package and divide by 26 (i.e. number of fortnights in a year). Enter this amount as your pay.
If you think you’ll be paid monthly then take the non-superannuation component of your salary package and divide by 12 (i.e. the number of months in a year). Enter this amount as your pay.
If you have a HELP/HECS debt or a Financial Supplement Loan be sure to mark those buttons as well.
You’ll be greeted with an amount that’ll land in your pocket (after withholding tax) each pay cycle.
What to do with that information
I like to be prepared. Having my likely take home pay on hand has enabled me to create a budget long before I start a new job. It also served as a job-search tool because I know how low I can go with salary before I’m not getting ahead anymore.
On the flip-side, this process also works well for budgeting if you think you’re in for a pay rise in future.
Try it yourself if you think your salary is likely to change in the future.
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