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Tax 2023: How to figure out your tax bracket

Your tax bracket determines the number of cents per dollar you pay in taxes.

Australian money. Tax time reminder on calendar. Tax bracket concept.
Your tax bracket determines how much tax you pay on your income. (Source: Getty)

With less than one month until tax time, now could be a good time to take a closer look at your taxes and make sure you are across how they are calculated.

Your tax bracket determines your tax rate and how many cents per dollar you pay in taxes. The higher your taxable income, the more cents per dollar you generally have to pay.

There are different tax brackets depending on whether you are an Australian resident, foreign resident or on a working visa. Here’s a breakdown.

If you are an Australian resident

There are currently five tax brackets for Australian residents.

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If you earn $18,200 or less per year, you won’t have to pay tax on your income. This is known as the tax-free threshold.

If you earn between $18,201 and $45,000, you will be taxed 19 cents for every dollar you earn over $18,200. So if you earn $20,000 a year, the first $18,200 is tax free and you are taxed 19 cents for every dollar on $1,800.

If you earn between $45,001 and $120,000, you will be taxed $5,092 plus 32.5 cents for every dollar you earn over $45,000.

If you earn between $120,001 and $180,000, you will be taxed $29,467 plus 37 cents for each dollar you earn over $120,000.

Lastly, if you earn $180,001 and over, you will be taxed $51,667 plus 45 cents for each dollar you earn over $180,000.

If you are a foreign resident

For foreign residents, one major difference is there are only three tax brackets that apply.

If you earn $120,000 or less per year, you will be taxed 32.5 cents for every dollar you earn.

If you earn between $120,001 and $180,000, you will be taxed $39,000 plus 37 cents for every dollar you earn over $120,000.

If you earn $180,001 and over, you will be taxed $61,200 plus 45 cents for every dollar you earn over $180,000.

If you are on a working visa

Again, there are slightly different rules for those in Australia on a working visa.

If you earn $45,000 or less per year, you will be taxed at a flat rate of 15 per cent.

If you earn between $45,001 and $120,000, you will be taxed $6,750 plus 32.5 cents for every dollar you earn over $45,000.

If you earn between $120,001 and $180,000, you will be taxed $31,125 plus 37 cents for every dollar you earn over $120,000.

If you earn $180,001 and over, you will be taxed $53,325 plus 45 cents for every dollar over $180,000.

When are the tax brackets changing?

The tax brackets are due to change in July 2024, when the legislated stage three tax cuts come into effect.

The changes will mean everyone who earns between $45,001 and $200,000 will pay the same marginal tax rate of 30 per cent.

The changes will also remove the 37 per cent tax bracket, lower the 32.5 per cent bracket to 30 per cent, and lift the threshold for the top 45 per cent bracket from $180,001 to $200,001.

From July 2024, the new tax rates will be:

  • Up to $18,200 - no tax

  • $18,201 - $45,000 - 19 per cent

  • $45,001 - $200,000 - 30 per cent

  • $200,001 and over - 45 per cent

If you need more help figuring out your tax, you can use the ATO’s income tax calculator and simple tax calculator.

The income tax calculator is more comprehensive and includes things like your Medicare levy surcharge and any tax offsets that may apply, which have not been included in the figures above.

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