MoneySmart
(ASIC)
Income tax is money paid to the government from the money you earn. It is usually paid throughout the year as you earn the income. For example, if you work for an employer, your employer will deduct tax from each pay and send it to the Australian Taxation Office (ATO) on your behalf.
Your marginal tax rate
The amount of tax you pay will depend on how much you earn. Australia uses a sliding scale of tax. The highest rate of tax you will pay is known as your marginal tax rate.
Marginal tax rates for 2018-19
| Taxable income | Tax on this income |
|---|---|
| $0 – $18,200 | Nil |
| $18,201 – $37,000 | 19c for every dollar over $18,200 |
| $37,001 – $90,000 | $3,572 + 32.5c for every dollar over $37,000 |
| $90,001 – $180,000 | $20,797 + 37c for every dollar over $90,000 |
| $180,001 and over | $54,097 + 45c for every dollar over $180,000 |
This means that if you earned $60,000 per year, your tax would be calculated like this:
| Taxable income | Tax payable | |
|---|---|---|
| $18,200 | x nil | = $0 |
| $18,800 ($37,000 – $18,200) | x 19c | = $3,572 |
| $23,000 ($60,000 – $37,000) | x 32.5c | = $7,475 |
| $60,000 | $11,047 |
The tables above only apply to Australian residents who are 18 and over and does not include the Medicare levy. Foreign residents and the investment income of children are taxed at different rates. See the ATO’s web pages on income of minors and foreign employment income.
Work out how much tax you will pay this year and what your marginal tax rate is.
