Stay Updated On Tax and Accounting
Understanding Australian tax brackets is the first step to figuring out how much tax you’ll actually pay. A lot of people think their whole income gets taxed at one rate, but that’s not how it works. Only the portion that falls into each bracket gets taxed at that rate, so your final tax bill might not be as bad as you think.
In this guide, we’ll break it all down, cover what’s new for 2024–25, and help you get a clearer picture of what to expect at tax time.
What are tax brackets?
Tax brackets are income ranges that determine how much tax you pay on your earnings. In Australia, the system is progressive, which means your income is taxed in slices, not all at once.
For example, if you earn $70,000, part of your income is taxed at 0%, part at 19%, and the rest at 32.5%. The higher your income, the more brackets you move through, but only the portion within each range is taxed at that bracket’s rate. This system aims to keep things fair and balanced for all earners.
What are the current Australian tax brackets for 2024–25?
Here are the resident income tax rates for 1 July 2024 to 30 June 2025, straight from the Australian Taxation Office (ATO). This is what you’ll use to see how your income is taxed.
Taxable Income | Tax you’ll pay on this income |
$0 – $18,200 | Nil |
$18,201 – $45,000 | 16 cents for each $1 over $18,200 |
$45,001 – $135,000 | $4,288 plus 30 cents for each $1 over $45,000 |
$135,001 – $190,000 | $31,288 plus 37 cents for each $1 over $135,000 |
Over $190,000 | $51,638 plus 45 cents for each $1 over $190,000 |
Just a couple of important things to remember:
- These rates don’t include the Medicare levy. That’s usually an extra two percent of your taxable income.
- Also, these rates are for you if you’re an Australian resident for tax purposes for the whole income year. If you’re a foreign resident or here on a working holiday visa, different rates will apply.
For comparison: Australian resident tax rates (1 July 2023 – 30 June 2024)
Taxable Income | Tax you’ll pay on this income |
$0 – $18,200 | Nil |
$18,201 – $45,000 | 19 cents for each $1 over $18,200 |
$45,001 – $120,000 | $5,092 plus 32.5 cents for each $1 over $45,000 |
$120,001 – $180,000 | $29,467 plus 37 cents for each $1 over $120,000 |
Over $180,000 | $51,667 plus 45 cents for each $1 over $180,000 |
Tax-free threshold in Australia in 2025
The tax-free threshold in Australia is $18,200. This means you don’t pay any income tax on the first $18,200 you earn in a financial year if you’re an Australian resident for tax purposes.
Once you earn above that threshold, tax kicks in based on the applicable tax brackets. If you have multiple jobs, only one employer should apply the tax-free threshold to avoid a tax bill. It’s a key part of keeping taxes fair for lower-income earners.
Marginal tax rate for 2024-25
Marginal tax rate means you don’t pay the top rate on all your income. For example, if you earn $50,000:
- The first $18,200 is taxed at 0%.
- The next chunk of your income (from $18,201 up to $45,000) is taxed at 16%.
- Then, the part of your income from $45,001 up to $50,000 is taxed at 30%.
So, only a part of your income is taxed at the higher rates.
How does the progressive tax system in Australia work?
Here’s the thing about Australia’s tax system: it’s actually pretty fair. The more you earn, the more tax you pay. Simple as that.
Progressive tax means higher earners pay higher rates. So if you’re just starting out and earning $20,000, you’ll pay less tax (as a percentage) than someone pulling in $200,000.
Example:
Let’s say you earn $60,000. You don’t pay 32.5% on the whole amount, that’s a common mistake people make.
Here’s what you’d actually pay:
- First $18,200: $0 (tax-free)
- Next $26,800 ($18,201 to $45,000): $5,092
- Remaining $15,000 ($45,001 to $60,000): $4,875
Total tax: $9,967 (about 16.6% of your income)
Why progressive tax matters for your business
If you’re running a business, understanding this helps you plan better. Whether you’re paying yourself a salary or taking dividends, knowing these brackets helps you make smarter decisions about timing and structure.
What income is taxable in Australia?
In Australia, taxable income includes most types of income you earn, not just your salary. If it boosts your bank account, chances are it’s taxable.
Here’s what counts as taxable income:
- Salary and wages
- Bonuses and commissions
- Business income (if you’re self-employed)
- Rental income
- Capital gains (from selling assets like shares or property)
- Interest from bank accounts
- Dividends from shares
- Some government payments (like JobSeeker or Age Pension)
However, some things like certain scholarships, tax-free government benefits, and gifts are not taxable. When in doubt, the ATO has a full breakdown, or a good accountant can help you sort it out.
How Sleek helps you understand Australian tax brackets
Tax brackets sound simple until you’re trying to figure out how much you’ll actually pay, what counts as income, and where the Medicare levy fits in.
Sleek’s accounting services take the guesswork out of it. We clarify how Australian tax brackets work, so you know exactly where you stand and how to plan smarter.
You get:
- Clear advice tailored to your income or business structure
- Help maximising deductions and minimising tax legally
- Support from local experts who speak your language
Whether you’re earning a salary, running a side hustle, or growing a business, Sleek takes the complexity out of tax so you can focus on what matters most.
FAQs about tax brackets in Australia
Yes. You can legally reduce taxable income in Australia through deductions (e.g., work expenses, donations), tax offsets, super contributions, and smart business structuring.
Yes. Australian tax brackets are different for non-residents. They don’t receive the $18,200 tax-free threshold and pay higher tax rates starting with the first dollar earned.
Small businesses don’t use personal tax brackets. Instead, companies pay a flat corporate tax rate: 25% for base rate entities with under $50 million turnover and 30% for others.
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