Paying taxes is an unavoidable aspect of earning income in Australia. The government levies taxes on income, property sales, and purchases. That can get complicated if not addressed on tome..
The ATO collects income tax from working Australians every fiscal year, from 1 July to 30 June of the following year. Let’s break down how to calculate tax in Australia by identifying the tax rate that applies to you.
Australia practices a progressive tax rate system, meaning your marginal tax rate will depend on your taxable income each financial year. The higher your income, the higher the marginal rates you’ll need to pay. This applies to non-residents as well.
For example, if you earn $100,000 in a financial year, you will pay 30c for each dollar you earn based on tax rates for foreign residents.
You can find the tax rate that applies to you by identifying your tax residency and then determining the tax bracket you fall into. Check out our tax return calculator for a rough estimation.
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What Are the ATO Tax Rates in 2026?
Resident Tax Rates in Australia 2025-26
| Income Thresholds | Tax Rate | Tax Payable |
|---|---|---|
$0 – $18,200 | 0% | No tax payable |
$18,201 – $45,000 | 16% | 16c for every dollar over $18,200 |
$45,001 – $135,000 | 30% | $4,288 plus 30c for every dollar over $45,000 |
$135,001 – $190,000 | 37% | $31,288 plus 37c for every dollar over $135,000 |
$190,001 and over | 45% | $51,638 plus 45c for every dollar over $190,000 |
- You are exempt from paying income tax if you earn $0 to $18,200.
- If you make between $18,201 and $45,000, you pay a tax rate of 16% plus 16 cents for each dollar over $18,200.
- If your income falls between $45,001 and $135,000, you pay 30%, plus $4,288 and 30 cents for each dollar over $45,000.
- If your income is between $135,001 and $190,000, the tax rate is 37%, plus $31,288 and 37 cents for each dollar over $135,000.
- If you earn $190,001 or higher, you are subject to pay a tax rate of 45% – $51,638, plus an additional 45 cents for every $1 earned above $190,000.
Non-Resident Tax Rates 2025-2026 in Australia
| Income Thresholds | Tax Rate | Tax Payable |
|---|---|---|
0 – $135,000 | 30% | 30c for each $1 |
$135,001 – $190,000 | 37% | $40,500 plus 37c for each $1 over $135,000 |
$190,001 and over | 45% | $60,850 plus 45c for each $1 over $190,000 |
Non-residents are subject to different marginal tax rates with no tax-free threshold.
- If you earn between $0 and $135,000, you pay a tax rate of 30%, with 30 cents for each dollar earned.
- If your income is between $135,001 and $190,000, the tax rate is 37%, plus $40,500 and 37 cents for each dollar over $135,000.
- If you earn $190,001 or higher, you are subject to a tax rate of 45%, with $60,850 plus an additional 45 cents for every dollar earned above $190,000.
Working Holidaymaker Tax Rates 2025–2026
Working holidaymakers or temporary residents must also pay tax on their income, with a different marginal tax rate.
- Earnings from 0 to $45,000 are taxed at 15 cents for each $1.
- Incomes from $45,001 to $135,000 are taxed at $6,750 plus 30 cents for each $1 over $45,000.
- Gains from $135,001 to $180,000 are taxed at $33,750 plus 37 cents for each $1 over $135,000.
- Earnings over $180,001 are taxed at $54,100 plus 45 cents for each $1 over $180,000.
Types of Australian Taxes for Expats and Investors
Australian Income Tax
Australian income tax is the rate charged by the ATO based on your income. For example, if you earn a yearly rental income of $50,000, you will be taxed at 30% by the ATO. Your tax rate is determined by how much you make, with higher earners paying a higher tax rate.
Capital Gains Tax (CGT)
In addition to their regular income tax, taxpayers must also pay capital gains tax. This is included in your annual tax return itself.
Suppose you sell a property and realise a capital gain of $50,000. In that case, you must report it on your tax return, which the ATO will add to your taxable income. That may result in you being pushed into a higher tax bracket unless you qualify for exemptions.
Medicare Levy Surcharge
In addition to your regular income tax, you may need to pay the Medicare Levy Surcharge depending on your tax residency.
All Australian residents must contribute 2% of their taxable income to the Medicare Levy, regardless of their income level.
However, certain exemptions or additions are available depending on how much you earn. These include the following:
- Tier 0: If you earn up to $93,000 as an individual or up to $186,000 as a family, you are exempt from the Medicare Levy Surcharge.
- Tier 1: If your income is between $93,001 and $108,000 (or $186,001 to $216,000 for families), the surcharge is 1%.
- Tier 2: If your income is between $108,001 and $144,000 (or $216,001 to $288,000 for families), the surcharge is 1.25%.
- Tier 3: If you earn $144,001 or more as an individual (or $288,001 or more for families), the surcharge is 1.5%.
This surcharge is added to the standard Medicare Levy if you do not have private health insurance and fall into one of these income brackets.
What Is Included in Assessable Income?
Assessable income refers to the amount of income that is subject to taxation. You must report all of your assessable income on your tax return annually to the ATO.
- Employment Income: Employment income encompasses all the money you receive for working, including full-time, part-time, and casual work.
- Super and Annuities: You may be subject to taxation if you receive regular income from your superannuation fund or annuities. It’s essential to accurately report your reportable super contributions, as ATO may sometimes owe you a tax refund.
- Government Payments: Payments like carer benefits and the Age Pension must be included on your tax return, even though some government payments may not be taxable.
- Investment Income: Taxable investment income includes interest from savings or investment accounts, dividends and returns from managed funds, rental income from investment properties, and capital gains from the sale of assets.
- Capital Gains: If you sell an asset (like real estate, shares, or other investments) for more than you paid, the profit is considered a capital gain and is subject to tax. The gain is included in your assessable income.
- Foreign Income: Suppose you’re considered an Australian tax resident. In that case, you must report foreign income, even if you have already paid taxes on those earnings in another country.
What Deductions Can I Claim?
If you are paying your salary tax, you can claim work-related expenses as a deduction. However, you must prove that you incurred the costs, were not reimbursed, and are directly related to earning your income.
However, you cannot claim deductions for costs associated with government-funded education programs, such as the Higher Education Loan Program.
A receipt is typically sufficient evidence. The same tax deduction rules apply to other sources of income, such as investment properties. You must provide proof that any expenses incurred are directly related to the upkeep and maintenance of the property.
Other Tax Deductions You May Be Eligible For
- Accounting expenses related to your tax affairs
- Gifts and donations
- Interest charged by the ATO
- Interest, dividends, and other investment income deductions, such as rental property management fees or home loan interest repayments
- Personal superannuation contributions
- Income protection insurance
If you have any questions about tax deductions, it is advisable to seek professional financial advice.
How to Calculate Tax in Australia: Step-by-Step
Calculating tax in Australia involves several key steps, which depend on your residency status, income level, and the types of income you earn. Here’s an overview of how tax is calculated for individuals.
Determine Your Residency Status
In Australia, your tax obligations are influenced by whether you are classified as a resident or a non-resident for tax purposes. Residents are taxed on their worldwide income, while non-residents are only taxed on income earned within Australia. To determine whether you’re a resident or a non-resident, the Australian Taxation Office (ATO) uses various tests, such as the resides test, the domicile test, and the 183-day test.
Calculate Your Taxable Income
Your taxable income is the total income you earn, minus allowable deductions. Income can include salary or wages, business income, interest, dividends, and rental income, among other sources. Deductions can be made for work-related expenses, self-education, charitable donations, and more.
For non-residents, the taxable income would include only the income earned in Australia. For example, if you are a non-resident working in Australia and earn $ 80,000 a year, this entire amount would be considered taxable income in Australia, as it was earned within the country.
Apply the Tax Rates
Australia uses a progressive tax system, meaning the more you earn, the higher your rate of tax. Non-residents are not entitled to the tax-free threshold of AUD 18,200.
Apply Any Other Taxes or Levies
In addition to income tax, Australia has other taxes that may apply to individuals, such as the Medicare Levy. However, non-residents are not subject to the Medicare Levy, which is a 2% charge on your taxable income. This means non-residents generally do not have to pay this additional tax.
Other potential taxes might include Capital Gains Tax (CGT) on the sale of assets, but for non-residents, CGT may apply only to certain Australian assets, such as property. The rules for CGT are complex, and it is advised to seek professional guidance if you have assets to sell.
Calculate Your Final Tax Liability
After applying the relevant tax rates and deductions, you can calculate your final tax liability. If tax has been withheld by your employer, this amount will be deducted from your total tax liability, and any remaining balance will be due when you lodge your tax return. If too much tax has been withheld, you may be entitled to a refund.
By understanding the relevant tax rates and lodging your tax return, you can ensure you meet your tax obligations and avoid overpaying or underpaying.
AU Tax Calculation Doesn't Need to Be Complicated!
Determining the correct amount of taxes owed can be simple, but figuring out which expenses are deductible can be confusing.
If you’re a non-resident for tax purposes in Australia, you do not have a tax-free threshold and cannot claim most tax offsets, but you still need to file a tax return for all Australian income.
If you’re still a bit hazy, feel free to book a consultation with our Australian tax specialist. Make your taxes effortless without all the stress!
FAQs about Australian Tax Calculation
How much tax do I pay in Australia?
Calculating your tax liability can be done using the government’s tax calculator. The formula for determining your assessable income is to consider all your worldwide income (if you are a tax resident in Australia) and subtract any expenses related to earning that income.
The final step is to apply any tax offsets and, if required, add the Medicare Levy.
How do I calculate my taxable income in Australia?
Calculating your tax liability can be done using the government’s tax calculator. The formula for determining your assessable income is by considering all your worldwide income (if you are a tax resident in Australia) and subtracting any expenses related to earning that income.
The final step is to apply any tax offsets and, if required, add the Medicare Levy.
How to calculate my Australian taxes?
To calculate your taxes, you can either use the government’s tax calculator or follow these steps:
- Determine your assessable income, including any money earned in Australia and globally if you’re an Australian tax resident.
- Deduct any expenses related to making money.
- Determine your taxable income for the financial year.
- Determine your tax bracket and calculate your gross tax payable.
- Deduct any tax offsets, such as the middle-income tax offset, to determine your net tax payable.
- Add the Medicare Levy unless your taxable income is below $90,001 and you have sufficient private health insurance and private patient hospital coverage.
- Subtract any tax credits and refundable offsets to find your total amount owed or due to be refunded.
How to lodge a tax return?
Filing a tax return in Australia is vital if you have earned any income, even if it is a lower amount. You may be eligible for a refund if you submit a return.
The tax year runs from 1 July to 30 June, but you have until October of the same year to file your return. You can complete this simple process online.
What percentage of tax do I pay in Australia?
As a foreign resident, you are subject to higher tax rates on all income earned in Australia compared to Australian permanent residents. However, you will pay a lower tax rate on all globally earned income if you are an Australian tax resident.
What is the difference between tax offsets and deductions?
Both tax offsets and tax deductions help to lower the amount of tax you owe on your income. Tax offsets specifically reduce the amount of tax payable, for example, through salary sacrifice or CGT exemption.
On the other hand, tax deductions lower the amount of taxable income, thereby minimising the overall tax you pay.
How much tax do I pay in Australia as a non-resident or expat?
Non-residents are taxed on Australian income at higher rates starting from the first dollar earned, as there is no tax-free threshold. The Foreign Resident Tax Calculator and Australian Income Tax Calculator can provide exact figures based on your income and residency status.
You can check the latest Australian Tax Brackets 2024 for non-residents to see which rates apply to different income levels.
How much tax will I get back if I earn $60,000 as a non-resident?
For non-residents, tax is calculated without any tax-free threshold, meaning that every dollar earned is taxable. If you earned $60,000, use the Australian Tax Calculator for Non-Residents to determine the tax payable and potential refunds based on the tax withheld by your employer.
How much is $200,000 a year taxed in Australia for non-residents?
For an income of $200,000, non-residents fall into the 45% tax bracket, with $60,850 in base tax plus 45 cents for each dollar over $190,000. Use the Australian Income Tax Calculator for non-residents to determine exact tax liability.
How much is $100,000 income taxed in Australia for non-residents?
Earning $100,000 as a non-resident puts you in a higher tax bracket. Non-residents typically pay around 30% on income from $0 to $135,000 and progressively higher rates above that threshold. Use the Foreign Resident Tax Calculator for a precise calculation based on 2024 tax rates.
