Knowing how much tax you pay in Australia is critical for efficiently managing your finances and avoiding unexpected liabilities. With a progressive tax structure, shifting income bands, and other components such as the Medicare levy, calculating your actual tax can be difficult. This guide simplifies everything by breaking down tax rates, thresholds, and real-life examples to help you accurately estimate your obligations. Whether you are an employee, an investor, or a business owner, understanding how taxes work allows you to plan more effectively and make sound financial decisions.
How Tax Works in Australia
Australia uses a progressive tax system, which means the more you earn, the more tax you pay on the extra income you make, not on your full income.
According to the Australian Taxation Office (ATO), your tax is calculated each year based on income earned between 1 July and 30 June. If you lodge your own tax return, you must submit it by 31 October. Registered tax agents may provide extended deadlines.
Key Concepts:
- Taxable income = Total income – deductions
- Marginal tax rates apply to income brackets
- Residency status affects your tax rates
- Most individuals also pay a Medicare levy (2%)
- PAYG withholding: Tax is deducted from your salary throughout the year by your employer, so you don’t pay your full tax bill at the end.
When you combine income, deductions, and levies, the overall calculation can become complex, particularly for individuals with multiple income sources or growing businesses. In such cases, many taxpayers choose to use outsourced tax services to manage compliance, reduce errors, and ensure they are claiming the correct deductions.
What Is the Tax-Free Threshold in Australia?
In Australia, the tax-free threshold is the portion of your income that is not taxed. For the 2025–26 financial year, this amount is set at $18,200.
How It Works
- You pay no tax on income up to $18,200
- Only the amount above this limit is taxed at applicable rates
The tax-free threshold is available only to Australian tax residents and does not apply to non-residents. It also serves as the foundation for calculating your total income tax, as all tax calculations begin after this threshold is applied.
For a deeper breakdown of income brackets and thresholds, explore our Current Tax Thresholds Guide for the latest updates.
Australian Income Tax Rates (2025–26)
Australia uses a progressive tax system, which means different parts of your income are taxed at different rates. The table below shows how much tax applies at each income level for Australian residents.
Taxable Income (AUD) | Tax Rate |
$0 – $18,200 | 0% |
$18,201 – $45,000 | 16% |
$45,001 – $135,000 | 30% |
$135,001 – $190,000 | 37% |
$190,001+ | 45% |
Most people will also pay a 2% Medicare levy on top of this. Higher-income earners without private hospital cover may pay an additional Medicare Levy Surcharge (MLS) of 1%–1.5% on top of the standard Medicare levy, depending on income.
Real Examples: How Much Tax Do I Pay in Australia?
Let’s look at practical examples so you can see how much tax you might actually pay based on your income.
| Component | $60,000 Income | $100,000 Income | $150,000 Income |
| Tax on first $18,200 | $0 | $0 | $0 |
| Tax on $18,201–$45,000 | $4,288 | $4,288 | $4,288 |
| Tax on remaining income | $4,500 | $16,500 | $27,000 |
| Additional higher bracket tax | — | — | $5,550 |
| Total Income Tax | $8,788 | $20,788 | $36,838 |
| Medicare Levy (2%) | $1,200 | $2,000 | $3,000 |
| Total Payable | $9,988 | $22,788 | $39,838 |
How Much Tax Does a Small Business Pay in Australia?
The tax you pay depends on your business structure.
Company Tax Rates
Income Category | Rate (%) |
Base rate entities | 25% |
Otherwise (all other companies) | 30% |
Sole Traders
A sole trader business is not taxed separately as a company. Instead, all business income is treated as the owner’s personal income and taxed using individual income tax rates.
Partnerships
A partnership does not usually pay income tax as a separate entity. Instead, the partnership’s profits are divided between the partners according to the partnership agreement, and each partner pays tax on their share of the income at their individual tax rates.
To understand corporate taxation in detail, refer to our guide on Company Tax Rates in Australia, which explains eligibility criteria and applicable rates for different business structures.
How Much Tax Do You Pay on Shares in Australia?
If you invest in shares, tax applies in two main ways:
1. Capital Gains Tax (CGT)
- Applies when you sell shares at a profit
- 50% discount if held for more than 12 months
- May include franking credits (tax already paid by the company)
2. Dividends
Factors That Affect and Reduce Your Tax in Australia
Your total tax payable is not determined by income alone. Several factors influence how much tax you pay and how much you can legally reduce it.
Factors That Affect Your Tax
These determine your base tax liability:
- Income level – Higher income pushes you into higher tax brackets
- Residency status – Australian residents and non-residents are taxed differently
- Income type – Salary, business income, and investment income are taxed differently
- Medicare levy obligations – Most taxpayers pay an additional 2%
Factors That Reduce Your Tax
These help lower your final tax bill:
- Work-related deductions (e.g. travel, equipment, uniforms)
- Home office expenses
- Depreciation of assets (for business or investment use)
- Charitable donations to registered organisations
- Superannuation contributions (within concessional limits)
- Tax offsets and rebates
Low Income Tax Offset (LITO): Eligible individuals can receive a tax offset of up to $700, depending on their income. This reduces the amount of tax payable, with the benefit decreasing as income increases and phasing out at higher income levels. LITO is applied automatically when you lodge your tax return, so no separate claim is required.
Practical Ways to Reduce Your Tax Legally
Here are actionable strategies used by individuals and businesses:
For individuals:
- Keep records of all work-related expenses
- Maximise super contributions (within limits)
- Claim home office deductions correctly
For businesses:
- Choose the right structure (company vs sole trader)
- Time income and expenses strategically
- Use asset depreciation rules
Getting this right isn’t always straightforward, especially when income comes from multiple sources or financial records are not consistently maintained. In such situations, many individuals and businesses turn to accounting outsourcing to improve record-keeping, ensure compliance, and identify legitimate opportunities to reduce tax liabilities without unnecessary risk.
Conclusion
Understanding how much tax you pay in Australia is essential for both individuals and businesses. While tax rates are fixed, your actual liability depends on how well you manage deductions, structure income, and plan ahead.
With the right approach, you can stay compliant, avoid overpaying, and make informed financial decisions.
If you’re unsure how much tax you should be paying, or want to reduce your tax legally, getting expert advice can make a real difference. Explore our Australian tax services or speak with our team for personalised guidance.
FAQs
How much tax do you pay in Australia on $70,000?
Without tax offsets, the tax on $70,000 is approximately $13,717 plus $1,400 Medicare levy, totalling around $15,117. With offsets such as the Low Income Tax Offset (LITO), the actual amount payable may be lower depending on your eligibility.
How much tax will I pay Australia if I earn $100k?
On a $100,000 income, you’ll usually pay about $22,000–$24,000 in tax, including Medicare levy, depending on your claims and deductions.
How much do you get taxed in Australia overall?
Tax rates in Australia range from 0% to 45%, plus a 2% Medicare levy. You’re taxed progressively, not at a single flat rate.
How much tax does a small business pay in Australia?
Companies pay 25% or 30% tax, while sole traders and partnerships are taxed at individual income tax rates.
How much tax do you pay on shares in Australia?
You may pay capital gains tax (CGT) when selling shares and tax on dividends, often reduced by franking credits and CGT discounts.