Income tax (rates / brackets)

Australia's income tax system operates on a progressive bracket structure where residents pay tax on assessable income at rates determined by their annual earnings. The current financial year (2024–25) establishes five main tax brackets: individuals earning up to AUD 18,200 pay no tax; those earning AUD 18,201 to AUD 45,000 pay 19 percent; income between AUD 45,001 and AUD 120,000 is taxed at 32.5 percent; earnings from AUD 120,001 to AUD 180,000 face a 37 percent rate; and income exceeding AUD 180,000 is taxed at 45 percent. Additionally, a Medicare levy of 2 percent applies to most taxpayers, with certain exemptions and reductions available.

The Australian Taxation Office (ATO) administers income tax under the Income Tax Assessment Act 1997 (Cth). Tax brackets are indexed annually on 1 July to account for inflation, with adjustments made to the thresholds rather than the rates themselves in most cases.

From 1 July 2024, the government implemented stage three tax cuts, which reduced the top marginal rate from 47 percent to 45 percent and restructured lower brackets to provide relief across income levels. This change significantly altered the tax position for higher earners and middle-income workers.

Employers must withhold tax from employee wages according to ATO-provided tax tables and remit these amounts to the ATO. Payroll teams should maintain current tax file number declarations from employees and apply the correct withholding rates based on individual circumstances. Annual reconciliation occurs through the tax return process, where individuals declare total income and claim applicable deductions and offsets.