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15% or 45%: How much tax will you pay?

·3-min read
Tax form and woman holding money
Tax brackets for foreign residents and visa holders work slightly differently. (Source: Getty)

In Australia, when it comes to tax, it’s pretty simple. The more money you make, the more tax you pay.

This is what’s called a progressive tax system, where taxpayers are charged different rates depending on which ‘tax bracket’ they fall into.

The tax bracket is based on your taxable income, which includes wages from your job, profits from your business and returns on investments.

Here’s how tax brackets work in 2021-22 (not including the Medicare levy of 2 per cent).

Australian residents

$0 - $18,200

If you earn under $18,200 a year, you won’t pay tax on your income because you’re sitting below the tax free threshold.

No one is charged tax on this amount, although every cent you make after $18,200 will be taxable.

$18,201 – $45,000

If you sit within the $18,201-$45,000 tax bracket, you’ll be taxed 19 cents for every $1 over $18.200.

So, for example, if you earned $20,000 a year, you would only have to pay that rate of tax on $1,800.

$45,001 – $120,000

If you earn between $45,001 and $120,000 a year, you’ll pay $5,092 plus 32.50 cents for each $1 over $45,000.

That means if you earn $55,000 a year, you will be taxed $9,422.

$120,001 – $180,000

If you’re bringing home anywhere between $120,001-$180,000, then you’ll need to pay $29,467 plus 37 cents for each $1 over $120,000.

$180,001 and over

People earning more than $180,001 will pay $51,667 as well as 45 cents for each $1 over $180,000.

Someone earning $200,000 would end up paying $63,097 in taxes each year.

Foreign residents

If you are a foreign resident, you will be taxed differently.

0 – $120,000

If you earn less than $120,000. You’ll pay 32.5 cents for each $1 you make.

$120,001 – $180,000

Foreign residents earning between $120,001 and $180,000 will need to pay a flat rate of $39,000 as well as 37 cents for every $1 over $120,000.

$180,001 and over

In this tax bracket, you’ll be paying $61,200 plus 45 cents for each $1 over $180,000.

Working holiday maker

If you’re backpacking around Australia on a working holiday visa, you will be charged different tax rates than residents and foreign residents.

0 – $45,000

You’ll be paying 15 per cent of whatever you earn under $45,000.

$45,001 – $120,000

You’ll be charged a $6,750 flat rate and then 32.5 cents for every $1 over $45,000 in this bracket.

$120,001 - $180,000

If you earn between $120,001 and $180,000, you’ll pay a flat rate of $31,125 plus 37 cents for every $1 over $120,000.

$180,001 and over

In the highest tax bracket for visa holders, you’ll be charged $53,325 plus 45 cents for every $1 over $180,000.

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