Individual Income tax rates in Australia

What are the income tax rates set by the ATO each financial year and which bracket do you fall under??

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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 2019-20 and 2020-21.

Australian Residents 2020-21

Income threshold Tax paid on income 2020/2021Tax rate
$0 – $18,200Nil0%
$18,201 – $37,00019c for each $1 over $18,20019%
$37,001 – $90,000$3,572 and 32.5c for each $1 over $37,00032.5%
$90,001 – $180,000$20,797 and 37c for each $1 over $90,00037%
$180,001 and over$54,097 and 45c for each $1 over $180,00045%

Australian Residents 2019-20

Income threshold Tax paid on income 2020/2021Tax rate
$0 – $18,200Nil0%
$18,201 – $37,00019c for each $1 over $18,20019%
$37,001 – $90,000$3,572 and 32.5c for each $1 over $37,00032.5%
$90,001 – $180,000$20,797 and 37c for each $1 over $90,00037%
$180,001 and over$54,097 and 45c for each $1 over $180,00045%

Foreign Residents 2020-21

Income thresholdTax paid on income 2020/2021Tax rate
0 – $90,00032.5c for each $132.5%
$90,001 – $180,000$29,250 and 37c for each $1 over $90,00037%
$180,001 and over$62,550 and 45c for each $1 over $180,00045%

Foreign Residents 2019-20

Income thresholdTax paid on income 2020/2021Tax rate
0 – $90,00032.5c for each $132.5%
$90,001 – $180,000$29,250 and 37c for each $1 over $90,00037%
$180,001 and over$62,550 and 45c for each $1 over $180,00045%

Working holiday makers 2020-2021
Applicable to workers on the 417 visa and 462 visa

Income thresholdTax to pay on this income (2020-21)Rate
0 – $90,000$5,550 and 32.5c for each $1 over $37,00032.5%
$90,001 – $180,000$22,775 and 37c for each $1 over $90,00037%
$180,001 and over$56,075 and 45c for each $1 over $180,00045%

Working holiday makers 2019-2020
Applicable to workers on the 417 visa and 462 visa

Income thresholdTax to pay on this income (2019-20)Rate
0 – $90,000$5,550 and 32.5c for each $1 over $37,00032.5%
$90,001 – $180,000$22,775 and 37c for each $1 over $90,00037%
$180,001 and over$56,075 and 45c for each $1 over $180,00045%

What is considered taxable income?

Your taxable income can include any of the following:

What are tax offsets and how do they impact my tax rate?

As the ATO states, a tax offset (sometimes referred to as rebates) reduces the amount of tax you need to pay. You don't need to work out if you're eligible; the ATO will do that for you and then let you know. This tax offset can only reduce the tax you pay to zero. You won't be refunded anything. The list below outlines the groups eligible for tax offsets.

Low income

The low income tax offset gives you up to $445 back if you earn $37,000 or less. That amount is reduced by 1.5c for every dollar over $37,000 you earn.

IncomeLow income tax offset amounts
$37,000 or less$445
$37,001 – $66,667$445 (1.5c less for every dollar you earn over $37,000)

Middle income

The low and middle income tax offset gives you up between $255 and $1,080 back and is available to Australian residents with a taxable income of less than $126,000. Low income earners may be able to receive both tax offsets.

IncomeLow and middle income tax offset amounts
$37,000 or less$255
$37,001 – $48,000$255 + 7.5c for every dollar you earn above $37,000 (with a maximum benefit of $1,080)
$48,001 – $90,000$1,080
$90,001 – $126,000$1,080 (3c less for every dollar you earn over $90,000)

Seniors and Pensioners Tax Offset

Senior Australian citizens may be eligible for the seniors and pensioners tax offset so long as they have:

  • Reached pension age, and
  • Pass the rebate income threshold

The amount back you'll be entitled to depends on your status and total rebate income. You may be eligible for up to $2,230 if you are single and your rebate income was less than $50,119. If you have a spouse and your combined rebate income was less than $83,580, you will also be entitled to the offset.

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:

Income threshold for individualsIncome threshold for familiesRate of surcharge
Up to $90,000Up to $180,0000%
$90,001 – $105,000$180,001 – $210,0001%
$105,001 – $140,000$210,001 – $280,0001.25%
$140,001 and more$280,001 and more1.50%

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.

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.

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