Australian income tax brackets are used to determine the amount of tax an individual will be required to pay to the Australian Tax Office (ATO) each financial year. If you earn money while residing in Australia, you will be required to include this amount in your end-of-year tax return.
- Residents working in Australia
- Residents earning money from overseas
- Foreign workers residing in Australia
Even if you don’t earn a cent from earnings in Australia, but earn money from overseas, you may have to pay Australian taxes based on your residency status.
Australian Tax Brackets
The amount of tax you’ll pay is directly related to your income. The ATO uses a sliding scale to determine how much you’ll pay, and Australian residents will be required to pay tax on any amount above $18,200. Any amount earning below this is included in the ATO’s tax-free threshold.
In the table below, you can see how different income tax brackets are assessed at increasing rates of tax.
Income Tax Brackets 2020
|Income Bracket||Tax on Income|
|0 to $18,200||$0|
|$18,201 to $37,000||$0.19 per $1 over $18,200|
|$37,001 to $90,000||$3,572 + $0.325 per $1 over $37,000|
|$90,001 to $180,000||$20,797 + $0.37 per $1 over $90,000|
|$180,001+||$54,097 + $0.45 per $1 over $180,000|
How much tax will you pay?
Your income tax bracket is a good starting point for determining the amount of tax you’ll pay. However, there are other factors which can potentially reduce this amount. You can use the PAYG Calculator to estimate:
- How much Australian income tax you are paying
- Your total taxable income
- Your take home salary
- Your medicare payments
- Your marginal tax rate
- Whether you have made any capital gains or losses
Unless you are a contractor, you’ll pay Australian tax throughout the year. Your employer will deduct your tax from each pay packet and send it straight to the Australian Tax Office (ATO) on your behalf.
If you have paid too much tax during the financial year, you could be due a refund. Use our tax refund estimator tool to see how much you can get back.
The tax-free threshold is applied to the first $18,200 of income for Australian residents. Even if you make $200,000 or more, the first $18,200 is tax free. This also means that if you earn less $18,200, you will pay no tax.
This is a core part of a popular savings strategy for many Australians, who use the tax-free threshold to guarantee a large, lump sum payment at the end of the year. You can learn more about this unique budgeting strategy in our tax-free threshold guide.
The tax-free threshold does not apply to overseas workers in Australia on a temporary visa.
Will you ever earn less in a higher tax bracket?
A common misconception when people first begin working is that moving to a higher tax bracket will mean they pay more tax - and therefore take home less money. As Australian tax brackets work on a sliding scale, you’ll only pay more in tax on the amount within each bracket.
Australian Tax Brackets Example
Now let’s look at how tax brackets work in the table below. We’ll use an example of an Australian resident earning $37,001. You can see how each portion of the total income ($37,001) is taxed at an individual rate:
|Tax Bracket||Income within bracket||Tax on income|
|$0 to $18,200||$18,200||$0|
|$18,201 to $37,000||$18,800||$3,752|
|$37,001 to $90,000||$1.00||$0.325|
As you can see, although you’ll pay a higher percentage of tax once you move into another bracket, that higher percentage will only apply to the income that falls within that higher bracket.
- In the example above, the total tax you will pay is $3,752.33
- If your income was $37,000, the total tax will be $3,752.00
You won’t pay any more tax on the income you were already earning.
Tax Brackets for Non-Residents
Foreign residents who receive income from any source within Australia will need to pay tax on that amount. You will need to complete a tax return and include any income earned from:
- Capital Gains
- Rental Income
The ATO will consider a number of factors when determining your residency status for tax purposes, including:
- The length of time you lived in Australia within the tax year
- The length of time you have resided overseas
- Your involvement with businesses within Australia
- Where your family resides
- Where your assets are located
You can find the full criteria for tax residency on the ATO website.
Non-Resident Tax Brackets (Foreign Residents)
|Income Bracket||Tax on Income|
|$0 – $90,000||$0.325 per $1 up to $90,000|
|$90,001 – $180,000||$29,250 + $0.37 per $1 over $90,000|
|$180,001 and over||$62,550 + $0.45 per $1 over $180,000|
Tax Brackets for Working Holiday Visas
If you are visiting Australia on a Working Holiday visa, you will pay tax differently to residents and foreign residents. Working holiday visas are sub-class:
- 417 (Working Holiday)
- 462 (Work and Holiday)
417 and 462 Visa Tax Brackets (Working Holiday)
|Taxable income||Tax on income|
|$0 – $37,000||$0.15 for each $1 up to $37,000|
|$37,001 – $90,000||$5,550 plus $0.325 for each $1 over $37,000|
|$90,001 – $180,000||$22,775 plus $0.37 for each $1 over $90,000|
|$180,001 and over||$56,075 plus $0.45 for each $1 over $180,000|
If you are in the wrong tax bracket
If you are in the wrong tax bracket and are paying too much tax, you can receive a refund from the ATO when submitting your tax return. However, keep in mind that you will need to pay tax on all taxable income and not just your wages or salary. This is calculated using your:
- Assessable Income
- Exempt Income
- Eligible Deductions
As much as we might not want to, we all have to pay tax. In Australia, income tax brackets are fairly simple, and are a good indicator of the amount of tax you will need to pay. However, there are many ways you can reduce the amount of tax you pay, either through deductions, tax-free threshold savings strategies, and certain tax offsets you may be eligible for.
Australian Income Tax Brackets FAQ
Which tax bracket am I in?
You can see which tax bracket you are in by assessing your residency status for tax purposes, and then calculating your taxable income. Residents and non-residents are taxed at different rates, each with their own unique sliding scales.
How can I pay no tax?
If you earn more than $18,200 as a working Australian resident, you will need to pay tax to the ATO. However, if you earn less than $18,200 - the tax-free threshold - you will not need to pay any tax at all.
Have the tax brackets changed?
The tax rates and brackets for the 2019/2020 year have not changed since the previous year (2018/2019). This applies to all residents, non-residents and working holiday visa holders. The tax brackets for each year are listed on the ATO website.
What is my tax bracket if I live overseas?
If you live overseas, you will need to test your income using the residency tax status tests provided by the ATO. There are a number of factors which determine whether you qualify as a foreign resident, including your time in Australia, total time overseas, and where you predominantly conduct your business.