Understanding Income Tax Brackets in Australia

Income tax brackets determine how much tax you pay on your taxable income. Each bracket applies a specific tax rate to the portion of your income within that range.

2023–2024 Financial Year:

In addition to income tax, most Australians pay a 2% Medicare Levy, which helps fund public healthcare. Higher-income earners without private health insurance may also be subject to the Medicare Levy Surcharge.

2024–2025 Financial Year:

These changes, effective from 1 July 2024, include:

• Reduction of the 19% tax rate to 16%
• Reduction of the 32.5% tax rate to 30%
• Increase in the threshold for the 37% tax rate from $120,000 to $135,000
• Increase in the threshold for the 45% tax rate from $180,000 to $190,000

FAQs

What is the tax-free threshold?

A: The tax-free threshold is the amount of income you can earn without paying any tax, currently set at $18,200. Learn more about the tax-free threshold

How do tax brackets work with deductions?

A: Deductions lower your taxable income, potentially reducing the portion of your income that falls into higher tax brackets. Explore deductions in our work-related expenses guide