There are two things you cannot escape in life – and one of them is taxes.
If you are earning an income, either in Australia or overseas, you are liable to pay income tax to the government.
How much tax you pay depends on a range of factors, including earnings, eligible deductions, and exemptions.
To make things easier, we’ve outlined the current tax rates for each income bracket, depending on your circumstances.
What is taxable income?
Taxable income is the amount of income earned during a financial year (July 1 to June 30), minus any eligible deductions.
Income refers to all earnings, including salaries and wages, tips, allowances such as car or travel, dividend and income from investments, sales commissions, pensions, and rent.
Some government pensions and education payments are exempt from tax.
The Australian Taxation Office (ATO) has strict rules governing allowable deductions and requires evidence for all claims.
Tax brackets 2021: Residents
Australian residents are generally taxed on their worldwide income.
These are the resident tax rates for 2021-22:
| Taxable income |
Tax on this income |
| 0 – $18,200 |
Nil |
| $18,201 – $45,000 |
19 cents for each $1 over $18,200 |
| $45,001 – $120,000 |
$5,092 plus 32.5 cents for each $1 over $45,000 |
| $120,001 – $180,000 |
$29,467 plus 37 cents for each $1 over $120,000 |
| $180,001 and over |
$51,667 plus 45 cents for each $1 over $180,000 |
These rates don’t include the Medicare levy, which is a 2 per cent levy on your taxable income paid in addition to your tax.
This money is used to help fund the cost of Australia’s public health system.
Depending on your circumstances, you may be eligible for a reduction or exemption on this levy.
Tax brackets 2021: Foreign residents
The ATO taxes foreign residents only on their Australian income, such as money they earn working in this country.
These are the foreign resident tax rates for 2021-22:
| Taxable income |
Tax on this income |
| 0 – $120,000 |
32.5 cents for each $1 |
| $120,001 – $180,000 |
$39,000 plus 37 cents for each $1 over $120,000 |
| $180,001 and over |
$61,200 plus 45 cents for each $1 over $180,000 |
Tax brackets 2021: Children
Children under 18 years old are taxed at a higher rate than adults on some of their income.
For example, unearned income such as investment income attracts a higher tax rate.
This rule was introduced to discourage adults from diverting income to their children.
However, under-18s pay the same individual income tax rates as adults for all income received as ‘excepted person’.
This may apply if they have finished full-time study, have a disability, or are entitled to a double orphan pension.
‘Excepted income’ includes wages and salary, Centrelink payments, and income from deceased estates.
More information about this is available on the ATO website.
Tax brackets 2021: Working holiday makers
Working holiday makers are people working in Australia under the 417 or 462 subclass visas.
These are the 2021-22 tax rates for working holiday makers:
| Taxable income |
Tax on this income |
| 0 – $45,000 |
15 per cent |
| $45,001 – $120,000 |
$6,750 plus 32.5 cents for each $1 over $45,000 |
| $120,001 – $180,000 |
$31,125 plus 37 cents for each $1 over $120,000 |
| $180,001 and over |
$53,325 plus 45 cents for each $1 over $180,000 |
These rates apply to working holiday maker income regardless of the person’s residency.
How to estimate your tax rates for 2021
The ATO has a number of simple calculators to help you work out your tax obligations.
The income tax estimator gives an estimate of the amount of your tax refund or debt, taking into account the Medicare levy, higher education loan scheme, and tax offsets and credits.
To find out how much tax your employer should be withholding, use the ATO’s tax withheld calculator.
Talk to the tax experts at LDB Group
LDB Group’s team of financial experts can help you understand your tax obligations and make the most of your opportunities.
To find out more, contact us by phoning (03) 9875 2900 or sending us details via the contact form below.
