Australian income tax rates
One of the most important financial aspects of moving to a new country is learning the ins and outs of that country’s tax system. In Australia, the income tax rates and policies may differ from those in your country of origin, and you should know what to expect upon arrival.
In this guide crafted specifically for expats, we will cover the basics of Australian income tax and answer frequently asked questions to prepare you for tax season!
Australian income tax rates
Income tax in Australia is applied to an individual’s personal income for a given fiscal year. These earnings are then taxed on a scale according to how much personal income was earned during the given year. This is known as a “progressive tax system.”
According to the Australian Tax Office (ATO), the country of Australia taxes its residents’ income to fund community services. The ATO lists health care, education, emergency services, roads and train lines, the Australian Defence Force, welfare, and disaster relief as services funded by income tax collection.
It’s important to adhere to federal Australian tax laws, as not doing so can result in financial penalties and even criminal charges. Australia taxes residents, defined as permanent residents of Australia, those who have been in Australia for six or more consecutive months, Australians who have been overseas but do not intend to set up permanent residence overseas, and overseas students who have been in Australia for over six months.
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Australian Income Tax Rates for 2022–23 (Residents)
Below are the Australian income tax rates for the fiscal year 2022-23, according to the Australian Tax Office:
0 – $18,200
$18,201 – $45,000
19 cents per each $1 above $18,200
$45,001 – $120,000
$5,092 and 32.5 cents per each $1 above $45,000
$120,001 – $180,000
$29,467 and 37 cents per each $1 over $120,000
$180,001 and above
$51,667 and 45 cents per each $1 over $180,000
The Australian Tax Office specifies that the above rates do not include a Medicare levy of 2%.
How income tax is calculated in Australia
Income tax is calculated in Australia by assessing taxable income and then multiplying this figure by the tax rate that applies to the assessable income. This results in a figure known as the “tax payable amount.”
What is the tax-free threshold?
The tax-free threshold in Australia is $18,200. After this threshold, all other income is taxable.
Tax offsets and deductions
Tax offsets and deductions are available through the Australian tax system. Offsets and rebates help reduce how much money you need to pay in taxes to the Australian government. Deductions also help to do so by deducting money you paid to earn income from your income total.
What is included in assessable income?
Assessable income in Australia is income that exceeds the tax-free threshold of earnings. There are many examples of assessable income that you must declare to properly file your income taxes with the Australian government.
The ATO lists salary, wages, tips, allowances, interest, dividends, bonuses, overtime, commissions, pensions, and collected rent as assessable income you must declare.
What tax deductions are you allowed?
There are two categories of deductions available in the Australian tax system, the first is work-related expenses, and the other is a general category.
What is taxable income?
Taxable income is defined as the income you have to pay tax on, and this is measured after the allowable deductions are taken from your assessable income.
Are there any tax offsets or rebates available in Australia?
Several tax offsets and deductions are available through the Australian income tax system. These offsets can help reduce the amount of taxes that you owe the Australian government.
How is income tax paid in Australia?
In most cases, income tax is directly deducted from paychecks given to you by your employer. However, self-employed Australian residents must prepare to pay their income tax when filing their annual income taxes.
Are there any deductions available for income tax purposes in Australia?
The Australian government has a comprehensive list of deductions you can claim, which details expenses you might have incurred while earning your income or charitable donations you may have made. Work-related expenses such as setting up work-from-home offices, paying work phone fees, and purchasing necessary equipment can be deducted.
Are non-residents taxed differently in Australia?
Non-resident taxes are treated differently in Australia, and many of the rewards and alleviations that Australian residents enjoy are unavailable for non-residents. Most notably, foreign residents are not eligible for the $18,200 tax-free threshold that residents are.
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