What Are the Australia Income Tax Rates and Brackets?

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Just because you’re living abroad doesn’t exempt you from paying income tax in Australia. Australians living overseas still have tax obligations back home. Without proper planning, you could end up paying income tax in both Australia and your new country of residence.

Understanding the Australian income tax system is crucial, no matter where you currently reside. This guide explains everything Australians living overseas need to know about the Australian income tax rates and brackets, including: 

  • What is my individual tax rate?
  • How do I know if I’m an Australian tax resident?
  • How do I pay capital gains tax?
  • How do I minimise tax payments?
  • How do I lodge a tax return?

Understanding the Australian Income Tax System

The Australian tax system is relatively simple. You pay income tax on three main streams of revenue:

  • Your earnings – wages from your job and investment income
  • Your business earnings – you pay corporate income taxes on profits from your business
  • Your capital gains – if you raise revenue from selling an asset, such as a property

There are several tax rate thresholds applied to the individual taxpayers’ total tax revenue. If you’re an Australian tax resident, you pay income tax on all your earnings earned worldwide.

There are different marginal tax rates applied based on your residency status. Australian residents have a distinct set of rates and thresholds, while foreign residents have a separate structure.

The taxable income thresholds determine which marginal tax rate applies to each portion of your income. So the more you earn, the higher the applicable tax rate is on those additional earnings. Understanding the marginal tax system and the relevant tax brackets is key to making informed tax decisions as a resident or non-resident.

How Is Income Tax Calculated?

To calculate your income tax, you need to add your assessable income. This includes all your earnings from around the world – unless you’re a non-resident, in which case you only declare Australian income.

Say you earn $80,000 in employment income, $30,000 from a rental property, and $10,000 capital gain from selling shares – your total assessable income is $120,000. Before applying the income tax rates, you must deduct any income-related expenses. We’ll explain allowable deductions later. For now, let’s say you have $15,000 in deductible expenses.

Your total taxable income is $105,000. This would place you in the fourth tax bracket, paying a total of $24,592.

To calculate your taxable income, follow this formula:

  1. Add together your total earnings
  2. Subtract deductions
  3. Apply tax rates
  4. Minus tax offsets
  5. Add Medicare levy (if applicable)

Note: The Australian Taxation Office’s tax calculator does not include the Medicare levy.

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Personal Income Tax Rates and Brackets in Australia for 2023–24

The following table is for Australian permanent residents, detailing income tax rates and brackets.

Income Threholds Tax Rate Tax Payable for This Income Bracket
$0 – $18,200
0%
No tax payable
$18,201 – $45,000
19%
19 cents for every dollar over $18,200
$45,001 – $120,000
32.5%
$5,092 plus 32.5 cents for every dollar over $45,000
$120,001 – $180,000
37%
$29,467 plus 37 cents for every dollar over $120,000
$180,001 and over
45%
$54,097 plus 45 cents for every dollar over $180,000

Your tax bracket consists of your total earnings after tax deductions. On top of this sum, you have to pay a 2% Medicare levy. Moreover, if you earn above $90,001, you will have to pay an additional Medicare levy Surcharge – unless you have private health insurance.

Remember that the Australian Taxation Office may introduce tax cuts or rises for any new financial year.

Non-Resident Income Tax Rates and Brackets for 2023–24

Unfortunately, if you’re not an Australian tax resident, you must pay higher income taxes. This hits low-income earners the most. 

As you can see from the table above, foreign residents earning $45,001 and above pay the same tax rate as Australian residents – although they still pay more as they do not have the tax-free threshold.

On the other hand, a foreign resident earning only $30,000 a year in Australia must pay 32%. An Australian resident making the same would only have to pay 19% on $11,200. However, if you live abroad and are still an Australian tax resident, you must pay income tax on your foreign income.

New Australian Income Tax Brackets For 2024–25 Onwards

Personal Income Tax Changes (Australian residents)

In the 2024-25 Australian Federal Budget, the government has announced significant changes to personal income tax rates and brackets. These reforms are designed to provide financial relief to low and middle-income earners while ensuring that higher-income earners contribute proportionately to the national economy.

The new tax brackets and rates for Australian residents, effective from July 1, 2024, are as follows:

Taxable Income Updated Rates from 1 July 2024
Up to $18,200
0%
$18,201 - $45,000
16%
$45,001 - $135,000
30%
$135,000 - $190,000
37%
$190,001+
45%

The most notable change is the reduction of the marginal tax rate from 32.5% to 30% for income between $45,001 and $120,000. This adjustment is expected to benefit a substantial portion of the Australian workforce, including many professionals, skilled workers, and small business owners.

The government estimates that these changes will result in over 10 million Australians receiving a tax cut. For example, an individual earning $60,000 per year will save approximately $1,080 in taxes annually under the new rates.

Additionally, the Low and Middle Income Tax Offset (LMITO) will be phased out as these new tax rates come into effect. The government argues that the new tax brackets provide more structural and long-term relief compared to the temporary nature of the LMITO.

These changes are part of a broader economic strategy to stimulate consumer spending, support local businesses, and encourage economic recovery in the wake of global challenges. However, some critics argue that the highest earners should face higher tax rates to further reduce income inequality.

As an Australian expat, managing taxes on foreign income can be complicated. Get personalised advice from our tax advisors at Odin Tax.

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How Do I Know if I'm an Australian Tax Resident?

An Australian tax resident is not the same as an Australian resident. If you were born in Australia, you are always an Australian citizen, no matter where you live now. However, if you move abroad and cut all financial ties with Australia, you’re a non-resident for tax purposes.

And the opposite is true. If you were born in another country and moved to Australia as a foreigner, you’re not necessarily a permanent resident (although you can apply). However, if you earn money in Australia – even just for six months – you count as a tax resident.

Tax residents must pay tax on all their income worldwide. Be careful; you could fall into a double taxation trap if you also pay taxes in another country. Non-residents only pay income tax on any money earned in Australia.

So how do you know if you’re a tax resident or not? ATO provides four tests – if you pass any one of these, you’re a tax resident. Generally speaking, you’re a tax resident if

  • You have always lived in Australia and continue to do so
  • You have lived and worked in Australia for more than six months
  • You have studied as an international student for more than six months

If you move away from Australia with no intention to return – for example, an Aussie expat you have to prove to ATO that you should no longer count as a tax resident.

How Much Tax Do I Pay as a Temporary Resident?

A temporary resident is a foreign national living in Australia for an agreed period without full citizenship. For example, expats from other countries residing in Oz could be temporary residents. The above rules apply to temporary residents too: you are an Australian tax resident if you live and work in Australia for more than six months.

Generally speaking, you must have lived and worked in the same place. If you’re travelling through Australia for six months or more, working multiple jobs, you might have to pay working holiday maker tax rates. But you won’t count as a tax resident – therefore, you won’t have to pay income tax on foreign earnings.

How Does Capital Gains Tax Fit In?

As we mentioned, you add any capital gains to your total income. Capital gains occur when you sell an asset, such as property or shares. It is generally a lump sum payment and usually pushes taxpayers into the higher income thresholds. Despite talk of capital gains tax, it is not a separate tax.

When you lodge your tax return, you must include all your income, including capital gains. Even if you have already paid payroll taxes on your employment earnings, you must include the salary as well. The ATO will calculate the company income tax you have already paid and deduct it from the capital gains tax payable.

Remember to deduct expenses from your capital gains. If you sell a property for $800,000, this isn’t your capital gain. If you paid $600,000 for the property five years ago, you have only made a capital gain of $200,000.

How are Capital Gains Taxed?

As we mentioned, you add any capital gains to your total income. Capital gains occur when you sell an asset, such as property or shares. It is generally a lump sum payment and usually pushes taxpayers into the higher income thresholds. Despite talk of capital gains tax, it is not a separate tax.

When you lodge your tax return, you must include all your income, including capital gains. Even if you have already paid payroll taxes on your employment earnings, you must include the salary as well. The ATO will calculate the company income tax you have already paid and deduct it from the capital gains tax payable.

Remember to deduct expenses from your capital gains. If you sell a property for $800,000, this isn’t your capital gain. If you paid $600,000 for the property five years ago, you have only made a capital gain of $200,000.

What About the Medicare Levy?

Foreign residents don’t have to pay the Medicare Levy. After all, if you’re not in the country, there is little practical use in paying for a medical service you cannot use. All Australian tax residents must pay a 2% Medicare Levy on top of the taxable income tax.

High-income earners must also pay a Medicare Levy Surcharge. The only way to avoid paying the surcharge is to have private health insurance or private patient hospital coverage. The below table outlines the surcharge income thresholds.

Medicare Levy Surcharge Tier Income Thresholds for Individuals Family Threshold Rate of surcharge
Tier 0
Up to $93,000
Up to $186,000
0%
Tier 1
$93,001 – $108,000
$186,001 – $216,000
1%
Tier 2
$108,001 – $144,000
$216,001 – $288,000
1.25%
Tier 3
$144,001 and over
$288,001 and over
1.5%

How Do I Minimise Taxable Income?

The question on every taxpayers’ lips is: how do I pay less? Fortunately, you can take a few steps to ensure you only pay what you have to.

Firstly, make sure you keep diligent notes and evidence of all your expenses. Whether it’s every receipt for work-related travel costs or proof of property maintenance fees, detailed records will help you lodge your tax return. Additionally, keeping evidence will help you prove your expenses to ATO.

Secondly, if you own an investment property, determine whether it’s an excellent idea to negatively gear. Essentially, this means you make a loss on your property income. However, it’s a popular investment strategy to reduce taxable income. Australian residents and non-residents alike can use negative gearing.

Thirdly, consider whether you’re eligible for any tax offsets. Most foreign tax residents don’t qualify for offsets – however, it’s worth checking if you are a tax resident.

Finally, speak to our tax advisor at Odin Tax about your tax affairs.

What Deductions Are You Allowed on Taxable Income?

There’s often a lot of confusion about allowable deductions. The basic rule is you cannot deduct private expenses. You can subtract any costs that directly correlate to earning an income.

If an expense is for both private and business use, you can only deduct a proportion of it. For example, if you rent out a room in a property you live in, you can only deduct expenses for the space and facilities your tenant pays for.

So, what are the allowable deductions?

Work-Related Expenses

If you work in Australia, you’ll pay income tax on your salary. Typically, unless you’re self-employed, your employer will pay your income tax before giving you your salary. However, if you earn any other sources of income – either from shares, investment properties, or selling an asset – you need to complete a tax return.

Even if you don’t earn any other sources of income, it’s still sensible to lodge a return with your tax deductions as ATO might owe you a tax refund.

Remember, you can only deduct expenses that your workplace has not already reimbursed.

Work-related tax deductions include:

  • Company motor vehicle and car expenses (the purchase and running cost)
  • Travel expenses
  • Clothing, laundry and dry-cleaning expenses
  • Self-education expenses
  • Working from home expenses
  • Tools and equipment
  • Union fees and subscriptions to an association

Remember that the above categories must be directly related to earning an income.

Investment Income Deductions

If you have any kind of personal investment, you need to lodge a tax return to pay your taxes. Below are the deductions you can make for your investments – whether it’s property or dividend income.

  • Account-keeping fees
  • Ongoing property management fees
  • Paying for investment advice (for dividends and shares only)
  • Interest and borrowing expenses for your home loan
  • Advertising for tenants
  • Council rates
  • Land tax
  • Strata fees
  • Depreciation
  • Repairs and pest control
  • Insurance
  • Legal expenses

Note: the property must be rented or genuinely available for rent. If ATO discovers that you have not made your best effort to rent out your property, they will not allow you to deduct expenses for an empty home.

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What Are Tax Offsets?

Unlike deductions, which lower taxable income, tax offsets reduce the tax rate. Most offsets are only available to Australian residents. ATO automatically applies Tax offsets – you don’t need to tick anything on your tax return.

Low-Income Tax Offset

The government recently announced a change in low-income tax offset, increasing from $445 to $700 in the last financial year.

  • Low income earners with a taxable income less than $37,500 get an offset of $700.
  • If you earn between $37,501 and $45,000, you get $700 offset, minus 5 cents for every $1 above $37,500
  • If you earn between $45,001 and $66,667, you get $325 offset, minus 1.5 cents for every $1 above $45,000

Low and Middle-Income Tax Offset

The low and middle-income tax offset (LMITO) is no longer available since it ended on 30 June 2022. If you earn up to $66,667, you can now only qualify for the low-income tax offset.

Seniors and Pensioners Tax Offset

Seniors and pensioners tax offset (SAPTO) is available for senior Australians. For individual taxpayers, your income must be less than $32,279. The total must be less than $57,948 for combined taxpayers. The maximum offset is $2,230 for one person or $3,204 combined.

To qualify, you must be the Age Pension age – which is currently 66 years and six months. From the 1st of July 2023, it will increase to 67. 

Claiming a Foreign Income Tax Offset

If you’re a temporary resident in Australia or an expat abroad, you may have paid two lots of income tax – in Australia and a foreign country. You might be able to claim a tax offset to provide relief on double taxation. For example, this applies if you pay income tax in your new country and Australia.

To claim foreign income tax offset, you must abide by the following:

  • Provide evidence for paying foreign income tax
  • Include the income or capital gain that you paid foreign income tax on in your Australian tax return

Unfortunately, you can only claim tax offsets after paying both lots of tax – not before.

What if I'm Owed a Tax Refund?

ATO will assess how much tax you owe when you complete your tax return. If you don’t have any tax payable, you don’t need to do anything. In some instances, ATO might owe you a tax refund. They automatically pay the refund to you.

Refunds are significant if you’re not an Australian permanent citizen. For example, if you only live and work in Australia for eight months, you’re obliged to submit a tax return. However, you might not owe any tax.

Here are the potential reasons for a refund:

  • Superannuation payments for non-residents
  • Working holiday tax rebates
  • International student tax rebates
  • If you qualify for a tax offset

Lodging a Tax Return: Step by Step

All Australian tax residents must lodge a tax return even if they live overseas. Fortunately, it’s very straightforward. Just make sure you submit your tax return between the 1st of July and the 31st of October of the following tax year.

  1. If you don’t already have one, you need to create a myGov account.
  2. Update your myGov account setting to let you sign in from overseas.
  3. Ensure you have an Australian bank account if you receive any refunds.
  4. Input all your assessable income and any deductions.
  5. Indicate whether you are a tax resident or non-resident – if you were only a tax resident for part of the year, you still need to declare it.
  6. Submit it to ATO online.

If you would prefer not to use the online system, you can also

  • Lodge your tax return with a registered tax agent
  • Lodge a paper tax return
  • Lodge it before leaving Australia
  • Or ask a friend or family member to lodge it on your behalf. You will need to apply for power of attorney if you choose this path.

Case Study: Expat in Singapore

Ben has lived in Singapore for ten years. He still has a property in Australia, so he must lodge a tax return for his Australian income. However, Ben is not an Australian tax resident – therefore, he doesn’t have to pay personal income tax on his Singapore earnings. Although, he also doesn’t qualify for any tax offsets. He must declare his earnings from his Australian property.

Ben rents out his rental property for $570 a week. Yet, he also pays $100 a week in property maintenance and other fees. He also pays an average of $400 a month in home loan interest repayments. In a typical tax return, Ben declares $29,640 net income and $26,000 deductions.

In total, his taxable income is $3,640. He’s in the lowest tax bracket. However, because is a foreign investor, he cannot claim the tax-free threshold or the low-income tax offset. He must pay $1,183.

Let’s look at the same example, but if Ben were still an Australian tax resident – would he pay less tax total?

Ben earns AU$170,000 in Singapore. Ben’s total taxable income is $199,640. He has the same $26,000 deductions in Australia and $5,000 work-related deductions in Singapore. The ATO taxes Ben on $168,640. With resident tax rates, he pays $47,463.80 in tax. While Ben is on the lower tax rate, he pays significantly more tax.

Moreover, Australian tax rates are higher than Singapore – where he only pays 18% rather than 37.5% on the same income. Ben could claim a foreign income tax offset if he pays double tax.

Final Words on Australian Tax Rates and Brackets

Australian tax rates are some of the highest globally, particularly if you’re a foreign resident earning an income in Australia. However, as an expat, it’s usually in your best interest to cease tax residency in Australia to avoid double taxation.

A few tax offsets reduce the tax burden, but these are usually only available for tax residents. If you’re moving or already live overseas, ensure you understand your tax obligations.

Managing taxes on foreign income as an Australian expat can be complex. Our expert tax advisors at Odin Tax specialise in expat tax issues and can provide personalised guidance tailored to your unique situation. Book a consultation with our tax experts today!

Frequently Asked Questions

As an Australian tax resident, you would pay $9,967 on $60,000. As a non-resident (Aussie expat living abroad), you would have to pay $19,500. Remember to deduct any income-related expenses to reduce your taxable income.

Despite relatively high tax on high-income earners, Australia’s marginal tax rate system is relatively progressive. Low-income earners pay less tax than in many other countries.

Australia’s tax-free threshold is for all income below $18,201. Any income above the threshold is taxed at 19% until $45,000. Above that, you pay 32.5% until $120,000, and so on.

Foreign residents do not get a tax-free threshold. Instead, they have to pay 32% on all income between $0 and $120,000. After that, the marginal tax rate increases at the same rate as for Australian residents.

Add together your total assessable income – profits from rental property, salary, dividend payments, etc. – and subtract any income-related expenses. The total amount left is your taxable income.

The Australian income tax brackets start at $18,201. When you submit your tax return, ATO will calculate your tax bracket for you. Each income threshold pays a higher tax percentage on the money earned above the threshold.

If you’re a non-tax resident in Australia, you must pay 32% tax on income below $120,000. If you earn between $120,001 and $180,000, you must pay 37.5%. And finally, if you earn above $180,000, foreign residents must pay 45% of their taxable income.

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