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, funding Australia's public health system.

The Australian Taxation Office (ATO), established under the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997, administers these rates and brackets. The ATO adjusts tax-free thresholds and bracket boundaries annually for inflation, typically from 1 July each year.

From 1 July 2024, the government implemented stage three tax cuts, reducing the top marginal rate from 47 percent to 45 percent and flattening the middle brackets to create a single 37 percent rate for income between AUD 120,001 and AUD 180,000. These changes simplified the tax structure for higher earners.

Employers and payroll teams must withhold tax from employee wages according to ATO tax tables, which are updated annually. Accurate withholding depends on employees' tax file numbers and declared tax offsets. Annual reconciliation occurs through tax returns, where individuals report total income and claim deductions to settle their final tax liability.