You usually have to pay tax when you earn money from employment, pensions, government payments, investments, and foreign income.
The amount you pay depends on:
- how much you earn, and
- any deductions you can claim or offsets you're entitled to
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 through ATO online services, accessed via your myGov account, 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. It does not include the Medicare levy of 2%.
Tax rates 2022-23 (There are no changes to the income tax rates for 2023-24.)
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 during the 2022-23 tax 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 |
This calculation does not include the 2% 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 also have 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 and your spouse earns (if you have one).
See Medicare levy on the ATO website for details.
Work out what your take-home pay will be after tax and the Medicare levy.
Your taxable income
Your taxable income is the income you must pay tax on. It includes your income, less your tax deductions.
Income that is taxable
Income that you must pay tax on includes money from:
- employment
- pensions and annuities
- most government payments
- investments
- capital gains
- some grants and payments
- income from trusts, partnerships or businesses
- foreign income
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:
- lottery winnings and other prizes
- some government grants and payments
- child support
- the tax-free portion of your redundancy payment
- government super co-contributions
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:
- you're entitled to tax deductions or offsets, or
- you choose to salary package (salary sacrifice)
Tax deductions
Tax deductions can help to reduce your taxable income.
Common tax deductions include:
- work-related expenses
- union fees
- charitable donations
- the cost of managing your tax affairs (for example, paying an accountant)
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:
- low-income and middle-income earners
- caring for an invalid relative
- seniors and pensioners
- the taxable portion of a superannuation income stream
See the ATO website for more information about tax offsets.
Salary packaging
Salary packaging is when you 'package' your income into salary and benefits. It is sometimes known as 'salary sacrificing'. 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. The items or services you get through salary packaging cannot be claimed as a deduction. 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.
ATO's Tax Help program
If you earn $60,000 or less you may be eligible for the ATO's Tax Help program. Tax Help is a free and confidential service that runs from July to October each year. The ATO's trained volunteers help people lodge their tax returns online, by phone, or in person at a Tax Help centre located around Australia.
National Tax Clinic program
If you are not eligible for Tax Help or need help with your returns from previous years, you may be able to access free advice and support through the National Tax Clinic program. The program is a government-funded initiative to help those who may not be able to afford professional tax advice. You can find your nearest tax clinic on the ATO website.