Yahoo Finance Tax 2024: How to figure out your tax bracket
New tax rates and thresholds will be kicking in from July 1 and this will impact how much tax you will pay.
The new financial year is nearly upon us and that means major changes to your tax bracket are about to kick in. That’s thanks to the Stage 3 tax cuts coming into effect from July 1.
Your tax bracket determines how many cents per dollar you pay in taxes. The lower your income, the less cents per dollar you have to pay the tax office.
From July 1, all 13.6 million taxpayers who earn above the tax-free threshold - which is currently $18,200 - will be getting a tax cut.
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To help you work out how much tax you can expect to pay, here’s a breakdown of the tax brackets for both the current 2023-24 financial year and the upcoming 2024-25 financial year.
Current tax brackets
There are currently five tax brackets for Australian residents.
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 $40,000 a year, the first $18,200 is tax free and you are taxed 19 cents for every dollar on $21,800.
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.
Tax brackets from July 1
The Stage 3 tax cuts will cut the 19 per cent tax rate to 16 per cent, cut the 32.5 per cent rate to 30 per cent, and increase the thresholds for the 37 and 45 per cent tax rates.
Here’s what the new tax rates will be.
If you earn $18,200 or less per year, you won’t have to pay tax on your income.
If you earn between $18,201 and $45,000, you will be taxed 16 cents for every dollar you earn over $18,200.
If you earn between $45,001 and $135,000, you will be taxed $4,288 plus 30 cents for every dollar you earn over $45,000.
If you earn between $135,001 and $190,000, you will be taxed $31,288 plus 37 cents for each dollar you earn over $135,000.
Lastly, if you earn $190,001 and over, you will be taxed $51,638 plus 45 cents for each dollar you earn over $190,000.
Different rules apply to foreign residents and those who are on a working visa. 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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