PAYG tax withholding rate update story

New 2016-17 PAYG withholding tax rates announced

Information verified correct on October 21st, 2016

How much tax should be withheld from your pay for the 2016-17 financial period?

The Australian Taxation Office (ATO) has released new Pay As You Go (PAYG) tax rates for individuals for the 2016/2017 financial year. This follows changes to tax and superannuation legislation announced earlier this year. The new rates, which are applicable from 1 October, 2016, include changes to the 32.5% tax threshold.

Read on to find out how the new rates may impact tax withheld from your pay.

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    Why change tax rates?

    Changes to PAYG tax rates are designed to encourage work participation and productivity by reducing the tax rate for average full-time workers. From 1 October, the 32.5% tax threshold will apply to those who earn between $37,001 – $87,000. Previously, this applied to incomes from $37,001 – $80,000. By increasing the threshold, more average income earners will pay a lower rate of tax on their income.

    How much tax should I pay?

    Updated tax rates for resident taxpayers

    Taxable incomeTax on this income
    0 – $18,200Nil
    $18,201 – $37,00019c for each $1 over $18,200
    $37,001 – $87,000$3,572 plus 32.5c for each $1 over $37,000
    $87,001 – $180,000$19,822 plus 37c for each $1 over $87,000
    $180,001 and over$54,232 plus 45c for each $1 over $180,000

    Source: ATO Website

    Updated tax rates for non-resident taxpayers

    Taxable incomeTax on this income
    0 – $87,00032.5c for each $1
    $87,001 - $180,000$28,275 plus 37c for each $1 over $87,000
    $180,001 and over plus 45c for each $1 over $180,000

    Source: ATO Website

    Reduced tax amount for the full year

    If you earnYour tax is reduced by
    $80,000 or less$0
    $87,000 or more$315

    Source: ATO Website

    Case Study – Daniel’s Income Tax

    Daniel’s taxable income is $82,000.

    With the threshold increase, Daniel will pay $18,197 in tax, which is $90 less than he would have paid under the old threshold.

    The new tax rates applies from 1 October 2016. If you earn more than $80,000 and have paid extra tax, it will be credited back to when you lodge your 2017 tax return.

    Clarizza Fernandez

    Clarizza is's assistant publisher for banking and investments. She works to empower consumers in making informed decisions on all things banking and investments. In her spare time, she Googles: 'Sydney's best dog parks' and 'Best pasta Sydney.'

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