What are the Australian Tax Brackets?
- July 25, 2023
- 10 min read
Do you really need to know what the tax brackets are in Australia? Yes. For several reasons.
Have you just started earning your own money or taxable income?
Have you been given a pay rise?
Wondering if your employer is paying the right amount of income tax on your wages?
These are all good reasons to check what tax bracket you’re in.
Why?
Because knowing your tax bracket can help you work out how much money you will receive into your bank account after income tax has been deducted.
We call this net pay.
It’s also a good check to ensure your employer is taking out the right amount of income tax from your taxable income.
If your employer isn’t taking out enough tax from your taxable income, you will find you owe the Australian Taxation Office (ATO) money when you complete your annual tax return.
Nobody wants this kind of surprise!
If your employer is taking out too much income tax, you will be owed a refund from the ATO.
While this is a nice bonus (yay!) to receive a lump sum refund, you could have been taking home more money each pay to help you pay your bills and mortgage, perhaps.
Let’s explain the tax brackets.
Overview:
- What are tax brackets?
- Are there exceptions to the Australian tax brackets?
- What are the 2022-23 income tax brackets in Australia?
- What are the 2023-24 income tax brackets in Australia?
- Income tax rates calculator
- Are income tax brackets changing in 2023/24?
- What’s the difference between marginal tax rate and average tax rate?
- How much income tax do I pay if I make $50,000?
- How much income tax do I pay if I make $100,000?
- How much income tax do I pay if I make $200,000?
- When do you get a tax refund?
- What about company tax?
What are tax brackets?
Tax brackets show how much income tax an individual should be paying depending on how much money they earn as taxable income.
These rates apply to people who are Australian residents for tax purposes.
Are there exceptions to the Australian tax brackets?
Yes, there are exceptions. Taxable income earned under the following circumstances will use different tax brackets –
- Individuals who are foreign residents for tax purposes.
- Children under the age of 18, who receive unearned income (income they did not work for) will pay special tax rates. This includes unearned income from interest on investments, or dividends from shares.
- Working holidaymakers – people on working visas in Australia have different tax brackets on their taxable income.
It’s important when looking at tax brackets that you select the correct financial year. These tax brackets can change between tax years.
Need help with your taxes? Book a call to understand how Sleek can simplify your life!
What are the 2021-22 income tax brackets in Australia?
If you are looking at the Australian tax brackets for the financial year 2021-22 –
| Resident tax rates 2021–22 | |
| Taxable income | Tax 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 |
| $180,001 and over | $51,667 plus 45 cents for each $1 over $180,000 |
What are the 2023-24 income tax brackets in Australia?
If you are looking at the Australian tax brackets for the financial year 2023-24
Taxable income | Tax 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 |
$180,001 and over | $51,667 plus 45 cents for each $1 over $180,000 |
But what does this all mean?
Here’s an explanation of these tax brackets to make it easier to understand, especially helpful if you are new to paying income tax in Australia.
Start at the first line.
It says in the financial year 2022-23 if your taxable income is earned between $0 and $18,200 per annum, you will not pay income tax!
This is called the tax-free threshold.
OK, then what happens, say, if you earn $32,500 as taxable income?
Looking at the second line, the table says for wages or salaries between $18,200 and $45,000, you will pay 19 cents in income tax for each $1 earned over $18,200.
So how much income tax is that?
Let’s do the calculations:
Total taxable income = $32,500
For the first $18,200 of taxable income you earn, you pay no income tax. Your tax bill is zero!
The remaining taxable income of $14,300 ($32,500 minus $18,200 from the lowest tax bracket) – multiply this by 0.19 cents, and you will pay $2,717 income tax on this income.
The total income tax on $32,500 taxable income is $2,717.
Income tax rates calculator
Instead of doing the calculations yourself, the ATO has kindly provided a tax calculator to help you work out how much income tax you should be paying on your taxable income.
You will need to enter details about yourself such as taxable income if you owe a HECS debt from tertiary or other education or SFSS payment is due.
It will also include any new regulations or offsets such as the low and middle-income tax offset, that are applicable for the financial year.
Try it out for yourself –
Are income tax brackets changing in 2023/24?
There is no change to the tax brackets in 2023-24.
As you can see in the two tax bracket tables for the financial years 2022-23 and 2023-24 above, they remain unchanged.
What are the Stage 3 Tax Changes?
The latest Federal Budget did not reveal any new taxes regarding the Stage 3 personal income tax cuts, which commence on 1 July 2024.
Those earning between $45,000 and $200,000 will have their marginal rate cut from 32.5% to 30%. The 37% marginal rate is eliminated at this time and three brackets will remain – 19%, 30%, and 45%. 94% of taxpayers are estimated to have a marginal tax rate of 30% or less with these changes.
What’s the difference between marginal tax rate and average tax rate?
You may have heard friends or your accountant discussing marginal and average tax rates. It will help to know what the difference between them is.
A marginal tax rate is the highest percentage rate of tax you pay – according to the tax table.
So, if you earn $100,000, your marginal tax rate is 32.5% – this is the highest tax rate you will pay. Check this out in the table above.
An average tax rate is the total amount of tax divided by income. This gives you a more accurate rate of tax on this income.
Going back to our example above, if you earn $100,000, your average tax rate is 22.77%.
Let’s quickly look at some tax bracket scenarios so you can truly understand how the tax tables work with the Australian Tax Office –
How much income tax do I pay if I make $50,000?
If your taxable income is $50,000 a year as an Australian resident for tax purposes, you will be taxed $4,967. Your average tax rate is 9.93% and your marginal tax rate is 32.5%.
This does not include any deductions/expenses/offsets/Medicare levy to claim.
How much income tax do I pay if I make $100,000?
If your taxable income is $100,000 a year as an Australian resident for tax purposes, your income tax will be $22,767.
Your average tax rate is 22.77% and your marginal tax rate is 32.5%.
This does not include any deductions/expenses/offsets/Medicare levy to claim.
How much income tax do I pay if I make $150,000?
If your taxable income is $150,000 a year as an Australian resident for tax purposes, your income tax will be $42,817.
Your average tax rate is 28.54% and your marginal tax rate is 37.0%.
This does not include any deductions/expenses/offsets/Medicare levy to claim.
How much income tax do I pay if I make $200,000?
If your taxable income is $200,000 a year as an Australian resident for tax purposes, you will be taxed $63,667. Your average tax rate is 32% and your marginal tax rate is 45%.
This does not include any deductions/expenses/offsets/Medicare levy to claim.
When do you get a tax refund?
You will receive a tax refund if you have paid too much income tax for the financial year and/or you have claimed eligible deductions.
It will be paid into your nominated bank account after your tax return has been submitted and checked by the Australian Taxation Office.
Have a play around with the tax bracket calculator so you can see how much income tax you will be paying on your taxable income, wages or salary.
If you get stuck or have a question, let us know through our chat box.
What about Company Tax?
Are you up-to-date on the distinction between company tax and sole trader tax? Companies registered in Australia are liable to pay the current company tax rate of 25%. Submitting a company tax return is straightforward – we can help walk you through the process. Don’t forget that it must be submitted before 15 May following the financial year. If you need support from experienced professionals in any aspect of taxation, Sleek is here for you. Our team specialises in providing bespoke solutions for all types of compliance challenges, whether that’s capital gains, GST, payroll, or – most importantly – company tax. We’ve got your back!
Thinking about outsourcing tax and accounting services for your business? Sleek’s got just the thing for you.
You might be interested in reading about:
