Individual income tax rates in Australia

When you earn money, you usually have to pay tax in Australia. However, knowing exactly what the Australian Tax Office (ATO) defines as earnings and working out what income tax rate you fall under can be tricky. So to make things easier, we've created an easy to follow guide. Below you'll find the income tax rates for Australian residents, foreign residents and working holiday makers for this financial year and next financial year.

What are income tax rates?

Income tax rates are used to work out the amount of tax you need to pay the Australian Tax Office (ATO) every financial year. If you earn money in Australia, you'll most likely have to pay income tax. The tax-free threshold is $18,200, so if you earn anything below that, you won't be required to pay income tax. Otherwise, the tax bracket you fall into will depend on how much you earn.

You need to pay income tax if you're working and are an Australian citizen, resident, foreign worker or visa holder (like a working backpacker).

Income tax rates and brackets in Australia

Income tax rates differ depending on your resident status. The tables below outline the tax brackets for residents, foreign residents and working holiday makers for both 2022-23 and 2023-24.

Australian Residents 2023-24

Australian Residents 2022-23

Foreign Residents 2023-24

Foreign Residents 2022-23

Working holiday makers 2023-2024
Applicable to workers on the 417 visa and 462 visa

Working holiday makers 2022-2023
Applicable to workers on the 417 visa and 462 visa

What is considered taxable income?

Your taxable income can include any of the following:

• Employment income

  This covers any income you receive for full-time, part-time, casual or freelance work. Your employment income includes:

  • Salary/wages
  • Bonuses and tips
  • Income protection payments (however income protection premiums are tax-deductible)
  • Allowances including travel, car and meals
  • Lump sum payments, such as redundancy payments
  • Fringe benefits in excess of $2,000 over the financial year (you need to declare this, but you don't generally need to pay tax on it)

• Investment income

  Investment incomes can include rent from a property you own, interest you receive from bank accounts, income from managed funds and capital gains.

• Business income

  If you make money from a business you run with others, you need to declare your share of the income. You won't need to lodge a different business tax return if you're a sole trader though.

• Foreign income

  Even if it's already been taxed overseas, you need to declare any foreign income you receive if you're considered a resident for tax purposes. The ATO will work out if you need to pay tax in Australia depending on your situation.

• Pensions and annuities

  For most, an income from super is tax-free from age 60. If you are younger though, there are usually taxable elements, like employer contributions and personal contributions claimed as tax deductions, and tax-free elements, like after tax and government co-contributions. The main thing to know is that you probably need to declare it all so the ATO can work out how much is taxable.

  It's a similar situation with annuities (like life insurance payments) which are usually taxable as well.

• Government payments

  Government payments, like the Age Pension, should also be declared on your tax return even though they're often exempt from tax. Declaring them ensures that you're eligible for the appropriate tax offsets. Other taxable payments can include child support payments.

How do levies affect your tax rate?

Wondering where the Medicare levy comes in to all of this? We've broken it down in plain English below.

Medicare levy

The Medicare levy is what goes towards giving all Australians access to Medicare. You pay this levy in addition to the income tax you pay. All-in-all, it makes up 2% of your taxable income. Generally, your employer withholds this amount from you so that it can go towards the levy and it's calculated by the ATP when you lodge your tax return at the end of the year.

However, if you earn below a certain amount, you don't need to pay the Medicare Levy. In 2018/19, this was less than $22,399 and $35,419 for seniors and pensioners. If your income is between $22,398 and $27,997, you only need to pay part of the Medicare levy.

Medicare levy surcharge

Similarly, if you earn above a certain amount and don't have private health insurance, you need to pay an additional amount, known as the Medicare levy surcharge (MLS). Here's a breakdown of how much you might need to pay:

If you purchase private health insurance, you won't have to pay the Medicare levy surcharge.

How to work out how much tax you'll pay

You can use Finder's tax calculator to work out how much tax you are likely to pay this financial year. By following the steps above of what's considered taxable income, you can enter your gross annual income into the calculator and it'll give you a tax figure based on that number. Keep in mind that it doesn't take into account your personal or financial situation, Medicare levy, capital gains tax you need to pay and various other factors outlined above, so you'll still need to put in a little research to work out how much you'll pay.

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FAQs

• Can I reduce my tax rate?

  Yes, one of the main ways you can reduce your tax rate is through a salary sacrifice. This is when you and your employer agree to give up part of your future salary in return for a non-cash benefit of a similar value, like super contributions or vouchers.

• Do tax deductions impact tax rates?

  When you claim an income tax deduction, the deductible personal contributions should count towards your reportable super contributions. This means that the deduction will impact your income for some tax offsets, concessions, the Medicare levy surcharge and other government benefits.

• Do I have to declare all my income?

  Yes. You need to declare your income for the entire financial year on your tax return. This includes:

  • Employment income
  • Super pensions
  • Government payments
  • Business income
  • Investment income

  • Foreign income
  • Other income, including insurance payments, gift payments and bonuses
  • Crowdfunding

• How is tax deducted from my income?

  In most cases, tax is usually deducted from your monthly income if you are employed on a full-time or part-time basis. Come the end of the financial year, you may be entitled to a credit for the tax that has been withdrawn from your pay. It all depends on how much you've earned over the year and how much your income has changed.

• Are income protection payments considered employment income?

  Income protection payments are considered a form of employment income and are therefore subject to tax. If you've received income protection payments over the course of the financial year, make sure you remember to include them in your tax return.

• Are centrelink payments considered income?

  Yes, but generally, if you are only receiving centrelink payments, you probably won't have to pay any tax. You might have to pay tax if you receive any other taxable income over the course of the tax year. Youth Allowance, Austudy and Age Pension are all taxable payments.

• Are there any type of payments that are not considered income?

  Some payments are not included as income. These can include:

  A life insurance payment.

  • Some Australian government pensions, such as the disability support pension when paid to someone under the pension age.
  • Some Australian government allowances, such as the carer allowance and the child care subsidy.
  • Some overseas Australian Defence Force and Federal Police personnel pay.
  • Some Australian Government education payments.
  • Some scholarships, bursaries, grants and awards.