When tax time rolls around in Australia, a key figure often overlooked is Adjusted Gross Income (AGI). While AGI is a term more commonly heard in the US, it’s gaining traction in Australia’s financial circles, especially as the 2025 tax reforms roll out. Understanding AGI is increasingly important for Australians looking to make the most of deductions, manage investment income, and stay compliant with new ATO requirements.
What Is Adjusted Gross Income (AGI)?
Adjusted Gross Income, or AGI, refers to your total income from all sources, minus specific deductions or adjustments allowed by the Australian Taxation Office (ATO). While the ATO uses the term ‘taxable income’ more commonly, the concept of AGI is becoming more relevant as financial products and investment reporting become more sophisticated. AGI serves as a baseline for determining eligibility for certain deductions, credits, and government benefits.
- Salary and wages: All employment income before tax.
- Investment income: Interest, dividends, and capital gains.
- Business income: Profits from sole trading or small business.
- Adjustments: Deductible super contributions, personal deductible expenses, and certain investment losses.
For 2025, the ATO has expanded the list of reportable income streams, including digital assets and gig economy earnings, which now factor into AGI calculations.
Why AGI Matters: Tax, Benefits, and Borrowing Power
Understanding your AGI can have a direct impact on your tax bill, access to government benefits, and even your ability to secure a loan.
1. Tax Deductions and Offsets
Many deductions and offsets are calculated based on AGI thresholds. For example, the 2025 Low and Middle Income Tax Offset (LMITO) phases out as AGI increases. Similarly, deductions for personal super contributions and private health insurance rebates are tied to your AGI.
- If your AGI exceeds $90,000 (single) or $180,000 (family), the Medicare Levy Surcharge applies.
- Childcare subsidies and Family Tax Benefits are also means-tested using AGI-like calculations.
2. Government Benefits and Support
With the 2025 update to Centrelink means testing, more support payments—including JobSeeker and Youth Allowance—use AGI as the foundation for eligibility. The inclusion of digital and side-gig income means more Australians must accurately report and adjust their gross income.
3. Loan Applications and Financial Planning
Banks and lenders increasingly ask for AGI as part of their loan approval process. AGI gives a clearer picture of your real earning power, especially if you have multiple income sources. A higher AGI can boost your borrowing power, but it may also tip you into a higher tax bracket or reduce your eligibility for some government benefits.
How to Calculate Your AGI in 2025
Calculating your AGI starts with your total assessable income. From there, you subtract allowable adjustments:
- Add up all income: salary, rental income, dividends, gig work, crypto gains.
- Subtract deductions: work-related expenses, self-education, deductible super contributions, and investment losses.
- Factor in new 2025 adjustments: digital asset income reporting and expanded gig economy categories.
Example: Sarah, a Melbourne-based marketing consultant, earned $110,000 from her job, $8,000 from freelance gigs, $2,000 in dividend income, and $1,000 from cryptocurrency trading. She contributed $5,000 to her super (deductible) and claimed $2,500 in work-related expenses. Her AGI would be:
- Total income: $110,000 + $8,000 + $2,000 + $1,000 = $121,000
- Minus adjustments: $5,000 (super) + $2,500 (expenses) = $7,500
- AGI: $121,000 – $7,500 = $113,500
This AGI figure will now determine Sarah’s eligibility for certain offsets, government support, and her Medicare Levy Surcharge liability.
2025 Policy Updates: What’s New?
- Digital Assets: The ATO now requires detailed reporting of income from digital platforms and cryptocurrencies as part of AGI.
- Gig Economy: Uber, Airbnb, and other platform earnings are automatically reported to the ATO and included in AGI calculations.
- Expanded Deductions: More flexible rules for super contributions and work-from-home expenses, with digital logs accepted as evidence.
Failing to report all income streams can trigger ATO audits and penalties, so 2025 is the year to get AGI right.
Conclusion
As the 2025 financial year unfolds, Adjusted Gross Income is no longer just a technical term—it’s central to how Australians manage tax, benefits, and borrowing. With new rules around digital income and expanded deduction categories, understanding AGI is essential for anyone looking to stay ahead financially.
