If you’re earning any sort of income in Australia or overseas, you’ll most likely have to pay some amount of tax to the Australian Taxation Office (ATO). But just how much can you earn before you have to pay tax? When do you have to pay tax?
In this article we get to the bottom of what is income tax, what are the tax brackets in Australia, the different types of taxable incomes, and your personal tax rate. With this information, we hope you know when you have to pay tax!
Let’s quickly go over what income tax is.
So, what is income tax?
If you’re not familiar with income tax already, it’s a type of tax you pay to the Australian Government on the income you earned for the financial year (1 July to 30 June) from a job or investments.
How is income tax calculated in Australia?
Income tax is calculated based on how much you earn, in addition to any deductions or offsets you claim. For example, if you’re an employer, your employer will deduct tax from your pay and send it to the ATO on your behalf.
If you’re self-employed, you will need to set aside money and pay it to the ATO yourself.
At the end of each financial year you can lodge a tax return, using online tax return services such as One Click Life, to either (hopefully) get some of those taxes back as a tax refund, or pay more tax because you’ve earnt too much.
So, what percentage of tax do I pay in Australia?
What are the tax brackets in Australia?
For Australian residents, the amount of tax you pay is simply based on how much you earnt and scales with the more you earn. The first $18,200 you earn falls under the tax-free threshold, relevant individual tax rates are then applied for every dollar earned above. This means that you have to pay tax on every dollar after the tax free threshold of $18,200. This is when you start paying tax in Australia for a resident.
The current Australian tax brackets 2024 are as follows:
| Total 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 |
(source: Australian Taxation Office – ATO)
The Australian tax brackets 2023 are as follows:
| Total 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 |
(source: Australian Taxation Office – ATO)
Income tax rates for foreign residents
Different tax brackets apply to people who are foreign residents for tax purposes. The process in which income is declared in Australia remains the same, including employment income, rental and/or capital gains. The tax rates however, are different to residents.
Foreign Residents Income Tax Brackets 2024
| Total Taxable Income | Current Tax Rates in Australia |
| $0 – $120,000 | 32.5c for each $1 |
| $120,001 – $180,000 | $39,000 plus 37c for each $1 over $120,000 |
| $180,001 and over | $61,200 plus 45c for each $1 over $180,000 |
When do you start paying tax in Australia when you’re a foreign resident? The above table sets out the tax bracket. The tax table means foreign residents working in Australia start paying tax from their first dollar of earnings in Australia.
Income tax rates for working holiday makers
Working holiday makers are individuals who hold Working Holiday Visas 417 and 462. Considered as a foreign-resident for tax purposes, you will only be taxed on the income you earn in Australia and fall into a different tax bracket.
Essentially, the tax free threshold in Australia does not apply to you, but rather you are only taxed 15c per dollar vs the non-resident rate of 19c per dollar.
Working Holiday Maker Income Tax Brackets 2024
| Total Taxable Income | Current Tax Rates in Australia |
| $0 – $45,000 | 15c for each $1 |
| $45,001 – $120,000 | $6,750 plus 32.5c for each $1 over $45,000 |
| $120,001 – $180,000 | $31,125 plus 37c for each $1 over $120,000 |
| $180,001 and over | $53,325 plus 45c for each $1 over $180,000 |
This tax brackets table means that you starting paying tax on your first dollar of earnings in Australia.
Now that you know all about Australian income tax rates and how much is income tax in Australia, let’s discuss what you’re potentially being taxed on.
What income is taxable?
If you’re an Australian resident for tax purposes, the income you earn in Australia and overseas that goes above the tax free threshold ($18,200) will be taxed, regardless of how you received it.
Income that is taxable
- Employment salary and wages
- Income from trusts, partnerships or businesses
- Interests, dividends and capital gains from investments
- Work allowances: travel, laundry, uniforms and vehicle
- Government payments
- Bonuses
- Pensions
- Foreign income
Income that is not taxable
- Certain government pensions, allowances and payments
- Disability support pension, carer allowance, child care subsidy, and education payments for students under 16 years of age
- Certain scholarships, grants and awards
- Lottery winnings and other prizes, such as game show prizes
- Child support and spousal maintenance payments
- Gifts and rewards, such as birthday presents
- Government super co-contributions
- Tax-free part of your redundancy payment
3 Ways to reduce taxable income
In other words, how to pay less tax in Australia. There are a number ways you could potentially reduce the amount of tax you pay each year including, claiming tax deductions, certain tax offsets, and/or choosing to salary package (salary sacrifice).
- Claim tax deductions
Common tax deductions help you reduce your taxable income before the tax is calculated. How tax deductions work is that you can claim some money (not the full cost) on the tax deductible item or service, which can include things such as work-related travel expenses or tax return service fees.
- Tax offsets
Also known as tax rebates, help you reduce the amount of tax payable — providing you meet a certain eligibility criteria — and are applied once your tax has been calculated. Tax offsets can include low-income and middle-income earners to pensioners and seniors, invalid relatives, and the taxable part of income from your superannuation.
- Salary packaging
Also known as salary sacrificing, is when you allocate a part of your salary to pay certain expenses before income tax is calculated. For example, you could arrange to have a part of your salary go towards car payments, and therefore reduce your taxable income.
Need help calculating your income tax?
The One Click Life online tax return service includes an in-built tax calculator to automatically calculate your tax refund. It’s super easy and only takes a couple of minutes to lodge your tax return online.
If you’d prefer just to use an online tax calculator for now, you can use any of our online tax calculators to provide and estimate of your tax position.
Simply enter your TFN (we’ll automatically grab your details from the ATO) and pre-fill your income details, add your deductions, and we’ll give you an accurate tax refund estimate. See how it works.