Australia Tax Rate Calculator: Everything You Need to Know
Paying taxes is an unavoidable aspect of earning income. The government levies taxes on income, property sales, and purchases. That can get complicated.
Our complete guide to Australian tax rates answers questions such as what tax you should pay based on your income or if you sell an Australian property while residing abroad.
How Does Australian Tax Work?
The ATO collects income tax from working Australians every fiscal year, from 1 July to 30 June of the following year. The current fiscal year is 2022-2023. Although tax rates have remained unchanged since 2017, they may be adjusted annually by the ATO.
It’s important to note that “foreign resident” here doesn’t refer to non-Australians, but rather anyone who is a non-resident for tax purposes in Australia. You must take a tax residency test to determine residency status for tax purposes.
How to Calculate Your Marginal Tax Rate in Australia
Australia practices a progressive tax rate system which means your marginal tax rate will depend on your taxable income each financial year. The higher your income, the higher the marginal rates you will need to pay. This applies to non-residents as well.
For example, if you earn $100,000 in a financial year, you will pay 32.5c for each dollar you earn based on tax rates for foreign residents.
Check out the tax rates for non-residents for more information.
Types of Australian Taxes
Australian Income Tax
Australian income tax is the rate charged by the ATO based on your income. For example, if you earn a yearly income of $50,000, you will be taxed at 32.5% by the ATO.
Your tax rate is determined by how much you make, with higher earners paying a higher tax rate (for the portion of their income above the threshold, which is $45,001).
Medicare Levy Surcharge
In addition to your regular income tax, you need to pay the Medicare Levy Surcharge. All Australian taxpayers contribute 2% of their taxable income to the Medicare Levy, regardless of their income level, in addition to their income tax.
However, certain exemptions or additions are available depending on how much you earn. These include the following:
- if you earn less than $23,226 are exempt from the Medicare Levy
- if your income is less than $29,033, the amount you pay is reduced
- if you make above a certain amount ($90,001) and do not have private health insurance, you must pay an additional surcharge to the Medicare Levy, which is 1%, 1.25%, or 1.5% of your total net income
Capital Gains Tax
In addition to their regular income tax, taxpayers must also pay capital gains tax. The ATO requires buyers to withhold 12.5% of the property value for foreign residents selling property. You can claim back this amount when you file your tax return.
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.
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.
- 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.
Do I Need to Pay Taxes?
As a resident of Australia, you must pay income tax if your earnings exceed the tax-free threshold.
However, as an expat, your status as a tax resident depends on your intention to return to Australia. You must take various tests to prove that you are no longer a resident.
Confused? Determine your tax residency in Australia right away!
Tax Rate Calculator Australia 2023-2024
Resident Tax Rates
- 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 19% plus 19 cents for each dollar over $18,200.
- If your income falls between $45,001 and $120,000, you pay 32.5%, plus $5,092 and 32.5 cents for each dollar over $45,000.
- If your income is between $120,001 and $180,000, the tax rate is 37%, plus $29,467 and 37 cents for each dollar over.
- If you earn $180,001 or higher, you are subject to pay a tax rate of 45% – $51,667, plus an additional 45 cents for every $1 earned above $180,000.
Foreign Resident Tax Rates 2023-2024
Non-residents are subject to different marginal tax rates with no tax-free threshold.
- For earnings between 0 and $120,000, you must pay 32.5 cents for each $1 earned.
- For incomes between $120,001 and $180,000, you must pay $39,000 plus 37 cents for each $1 over $120,000.
- For earnings over $180,001, you must pay $61,200 plus 45 cents for each $1 earned over $180,000.
Working Holidaymaker Tax Rates 2023–2024
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 $120,000 are taxed at $6,750 plus 32.5 cents for each $1 over $45,000.
- Gains from $120,001 to $180,000 are taxed at $31,125 plus 37 cents for each $1 over $120,000.
- Earnings over $180,001 are taxed at $53,325 plus 45 cents for each $1 over $180,000.
How Can I Deduct My Taxes?
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.
Tax Rates Don'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.
Suppose you are considered a foreign resident for tax purposes. In that case, 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 check out the Australian tax rules for expats.
Frequently Asked Questions
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.
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.
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.
Foreign residents earning an income in Australia face progressive tax rates. For those earning up to $120,000, the tax rate is 32.5%. For that earning between $120,001 to $180,000, the tax rate is 37%. And for those earning over $180,001, the tax rate is 45%.
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.
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.
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