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Income tax

Find out how much tax you need to pay

Page reading time: 3 minutes

When you earn money from work or investments, you usually have to pay tax on your income.

The amount you pay depends on:

  • how much you earn, and
  • any deductions or offsets you can claim

Income tax is usually paid to the government as you earn throughout the year.

If you're an employee, your employer will deduct tax from each pay and send it to the Australian Taxation Office (ATO) on your behalf.

If you're self-employed, you need to set aside and pay the money yourself.

At the end of each financial year, most people need to lodge a tax return with the ATO. You can do it yourself online through myTax or with the help of an accountant or tax agent.

Calculate how much tax you'll pay

In Australia, income is taxed on a sliding scale.

The table below shows income tax rates for Australian residents aged 18 and over.

Tax rates 2020-21

Taxable income

Tax on this income

0–$18,200

Nil

$18,201–$45,000

19c for each $1 over $18,200

$45,001–$120,000

$5,092 plus 32.5c for each $1 over $45,000

$120,001–$180,000

$29,467 plus 37c for each $1 over $120,000

$180,001 and over

$51,667 plus 45c for each $1 over $180,000

This means if you earned $60,000 per year, your tax would be calculated like this:

Taxable income

Tax rate

Tax payable

$18,200

x nil

= $0

$26,800 (income between $18,200 and $45,000)

x 19c

= $5,092

$15,000 (income between $45,000 and $60,000)

x 32.5c

= $4,875

$60,000

 

$9,967


These rates do not include the Medicare levy.

If you're a foreign resident, a working holiday maker, or under age 18, see your individual income tax rates on the ATO website.

Medicare levy and surcharge

Most people pay a Medicare levy, which is 2% of your taxable income. The levy is charged as part of your yearly income tax assessment.

If you're on a low income, your levy may be reduced, or you may not have to pay it at all. If you're on a higher income, you may have also to pay a Medicare levy surcharge of between 1.0 and 1.5% of your taxable income. It depends on the level of private health insurance you have and how much you earn.

See Medicare levy on the ATO website for details.

Your taxable income

Your taxable income is the income you must pay tax on, minus your tax deductions and offsets.

Income that is taxable

Income that you must pay tax on includes money from:

The ATO has more information on Income you must declare in your tax return.

Income that is not taxable

You will not have to pay tax on:

The ATO has more details on amounts not included as income.

Reducing the tax you pay

You may be able to reduce the amount of tax you pay if:

Tax deductions

Tax deductions reduce your taxable income before the tax is calculated.

Common tax deductions include:

See deductions you can claim on the ATO website for details.

Tax offsets

Tax offsets, also known as rebates, directly reduce the amount of tax payable. They are applied after the tax has been calculated.

Common tax offsets include offsets for:

See offsets and rebates on the ATO website for more information.

Salary packaging

Salary packaging is when you 'package' your income into salary and benefits. For example, you may arrange to receive less salary in exchange for superannuation or car payments.

If you reduce your salary in this way, you can reduce your taxable income. See salary packaging.

Where to get help with tax

Individual income tax can be complex, and everyone's situation is different.

If you want to get professional advice, think about choosing an accountant to help manage your tax and lodge your tax return.

You can also ask general questions about tax through the ATO Community.

See lodging your tax return on the ATO website for information about preparing your annual return.