Income tax in Australia is imposed by the federal government on the taxable income of individuals and corporations. State governments have not imposed income taxes since World War II. On individuals, income tax is levied at progressive rates, and at one of two rates for corporations. The income of partnerships and trusts is not taxed directly, but is taxed on its distribution to the partners or beneficiaries. Income tax is the most important source of revenue for government within the Australian taxation system. Income tax is collected on behalf of the federal government by the Australian Taxation Office.
The two statutes under which income tax is calculated are the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997; the former is gradually being re-written into the latter. Taxable income is the difference between assessable income and allowable deductions. There are three main types of assessable income for individual taxpayers: personal earnings (such as salary and wages), business income and capital gains. Taxable income of individuals is taxed at progressive rates from 0 to 45%, plus a Medicare levy of 2%, while income derived by companies is taxed at either 30% or 25% depending on annual turnover, but is subject to dividend imputation. Generally, capital gains are only subject to tax at the time the gain is realised and are reduced by 50% if the capital asset sold was held for more than one year.
In Australia the financial year runs from 1 July to 30 June of the following year.
History
The first income tax in Australia was imposed in 1884 by South Australia with a general tax on income.
Federal income tax was first introduced in 1915, as a wartime measure to help fund Australia's war effort in the First World War. Between 1915 and 1942, income taxes were levied by both State governments and the federal government. In 1942, to help fund World War II, the federal government took over the raising of all income tax, to the exclusion of the States. The loss of the states' ability to raise revenue by income taxation was offset by federal government grants to the states and, later, the devolution of the power to levy payroll taxes to the states in 1971.
In 1951, the top marginal tax rate for incomes above £10,000 (equivalent to $425,000 today) was 75 per cent. From 1955 until the mid-1980s the top marginal tax rate was 67 per cent.
Historical personal income tax rates and brackets The following historical personal income tax rates and brackets since 1983 are sourced from the ATO. These rates do not include the Medicare levy. Income tax brackets in Australia are not typically indexed against inflation.
Taxable income Tax on this income Effective tax rate$1 – $4,594Nil0%$4,595 – $19,49930c for each $1 over $4,5950 – 22.93%$19,500 – $35,787$4,471.50 plus 46c for each $1 over $19,50022.93 – 33.43%$35,788 and over$11,963.98 plus 60c for each $1 over $35,78833.43 – less than 60%
Taxable income Tax on this income Effective tax rate$1 – $4,594Nil0%$4,595 – $12,49926.67 cents for each $1 over $4,5950 – 16.87%$12,500 – $19,499$2,108.26 plus 30 cents for each $1 over $12,50016.87 – 21.58%$19,500 – $27,999$4,208.26 plus 46 cents for each $1 over $19,50021.58 – 28.99%$28,000 – $34,999$8,118.26 plus 47.33 cents for each $1 over $28,00028.99 – 32.66%$35,000 – $35,787$11,431.36 plus 55.33 cents for each $1 over $35,00032.66 – 33.16%$35,788 and over$11,867.36 plus 60 cents for each $1 over $35,78833.16 – less than 60%
Taxable income Tax on this income Effective tax rate$1 – $4,594Nil0%$4,595 – $12,49925 cents for each $1 over $4,5950 – 15.81%$12,500 – $19,499$1,976.26 plus 30 cents for each $1 over $12,50015.81 – 20.90%$19,500 – $27,999$4,076.25 plus 46 cents for each $1 over $19,50020.90 – 28.52%$28,000 – $34,999$7,986.25 plus 48 cents for each $1 over $28,00028.52 – 32.42%$35,000 and over$11,346.25 plus 60 cents for each $1 over $35,00032.42 – less than 60%
Taxable income Tax on this income Effective tax rate$1 – $4,889Nil0%$4,890 – $12,49924.42 cents for each $1 over $4,8900 – 14.87%$12,500 – $12,599$1,858.36 plus 26.50 cents for each $1 over $12,50014.87 – 14.96%$12,600 – $19,499$1,884.86 plus 29.42 cents for each $1 over $12,60014.96 – 20.08%$19,500 – $27,999$3,914.84 plus 44.25 cents for each $1 over $19,50020.08 – 27.41%$28,000 – $34,999$7,676.09 plus 46.83 cents for each $1 over $28,00027.41 – 31.30%$35,000 and over$10,954.19 plus 57.08 cents for each $1 over $35,00031.30 – less than 57.08%
Taxable income Tax on this income Effective tax rate$1 – $5,100Nil0%$5,101 – $12,60024 cents for each $1 over $5,1000 – 14.28%$12,601 – $19,500$1,800 plus 29 cents for each $1 over $12,60014.28 – 19.49%$19,501 – $35,000$3,801 plus 40 cents for each $1 over $19,50019.49 – 28.57%$35,001 and over$10,001 plus 49 cents for each $1 over $35,00028.57 – less than 49%
Taxable income Tax on this income Effective tax rate$1 – $5,100Nil0%$5,101 – $12,60024 cents for each $1 over $5,1000 – 14.28%$12,601 – $19,500$1,800 plus 29 cents for each $1 over $12,60014.28 – 19.49%$19,501 – $35,000$3,801 plus 40 cents for each $1 over $19,50019.49 – 28.57%$35,001 and over$10,001 plus 49 cents for each $1 over $35,00028.57 – less than 49%
Taxable income Tax on this income Effective tax rate$1 – $5,099Nil0%$5,100 – $17,64921 cents for each $1 over $5,1000 – 14.93%$17,650 – $20,599$2,635.50 plus 29 cents for each $1 over $17,65014.93 – 16.95%$20,600 – $34,999$3,491 plus 39 cents for each $1 over $20,60016.95 – 26.02%$35,000 – $49,999$9,107 plus 47 cents for each $1 over $35,00026.02 – 32.31%$50,000 and over$16,157 plus 48 cents for each $1 over $50,00032.31 – less than 48%
Taxable income Tax on this income Effective tax rate$1 – $5,249Nil0%$5,250 – $17,64920.5 cents for each $1 over $5,2500 – 14.40%$17,650 – $20,599$2,542 plus 24.5 cents for each $1 over $17,65014.40 – 15.85%$20,600 – $20,699$3,264.75 plus 29.5 cents for each $1 over $20,60015.85 – 15.91%$20,700 – $34,999$3,294.25 plus 38.5 cents for each $1 over $20,70015.91 – 25.14%$35,000 – 35,999$8,799.75 plus 42.5 cents for each $1 over $35,00025.14 – 25.62%$36,000 – 49,999$9,224.75 plus 46.5 cents for each $1 over $36,00025.62 – 31.47%$50,000 and over$15,734.75 plus 47 cents for each $1 over $50,00031.47 – less than 47%
Taxable income Tax on this income Effective tax rate$1 – $5,400Nil0%$5,401 – $20,70020 cents for each $1 over $5,4000 – 14.78%$20,701 – $36,000$3,060 plus 38 cents for each $1 over $20,70014.78 – 24.65%$36,001 – $50,000$8,874 plus 46 cents for each $1 over $36,00024.65 – 30.63%$50,000 and over$15,314 plus 47 cents for each $1 over $50,00030.63 – less than 47%
Taxable income Tax on this income Effective tax rate$1 – $5,400Nil0%$5,401 – $20,70020 cents for each $1 over $5,4000 – 14.78%$20,701 – $36,000$3,060 plus 38 cents for each $1 over $20,70014.78 – 24.65%$36,001 – $50,000$8,874 plus 46 cents for each $1 over $36,00024.65 – 30.63%$50,000 and over$15,314 plus 47 cents for each $1 over $50,00030.63 – less than 47%
Taxable income Tax on this income Effective tax rate$1 – $5,400Nil0%$5,401 – $20,70020 cents for each $1 over $5,4000 – 14.78%$20,701 – $36,000$3,060 plus 35.5 cents for each $1 over $20,70014.78 – 23.59%$36,001 – $38,000$8,491.50 plus 38.5 cents for each $1 over $36,00023.59 – 24.37%$38,001 – $50,000$9,261.50 plus 44.125 cents for each $1 over $38,00024.37 – 29.11%$50,001 and over$14,556.50 plus 47 cents for each $1 over $50,00029.11 – less than 47%
Taxable income Tax on this income Effective tax rate$1 – $5,400Nil0%$5,401 – $20,70020 cents for each $1 over $5,4000 – 14.78%$20,701 – $38,000$3,060 plus 34 cents for each $1 over $20,70014.78 – 23.53%$38,001 – $50,000$8,942 plus 43 cents for each $1 over $38,00023.53 – 28.20%$50,001 and over$14,102 plus 47 cents for each $1 over $50,00028.20 – less than 47%
Taxable income Tax on this income Effective tax rate$1 – $5,400Nil0%$5,401 – $20,70020 cents for each $1 over $5,4000 – 14.78%$20,701 – $38,000$3,060 plus 34 cents for each $1 over $20,70014.78 – 23.53%$38,001 – $50,000$8,942 plus 43 cents for each $1 over $38,00023.53 – 28.20%$50,001 and over$14,102 plus 47 cents for each $1 over $50,00028.20 – less than 47%
Taxable income Tax on this income Effective tax rate$1 – $5,400Nil0%$5,401 – $20,70020 cents for each $1 over $5,4000 – 14.78%$20,701 – $38,000$3,060 plus 34 cents for each $1 over $20,70014.78 – 23.53%$38,001 – $50,000$8,942 plus 43 cents for each $1 over $38,00023.53 – 28.20%$50,001 and over$14,102 plus 47 cents for each $1 over $50,00028.20 – less than 47%
Taxable income Tax on this income Effective tax rate$1 – $5,400Nil0%$5,401 – $20,70020 cents for each $1 over $5,4000 – 14.78%$20,701 – $38,000$3,060 plus 34 cents for each $1 over $20,70014.78 – 23.53%$38,001 – $50,000$8,942 plus 43 cents for each $1 over $38,00023.53 – 28.20%$50,001 and over$14,102 plus 47 cents for each $1 over $50,00028.20 – less than 47%
Taxable income Tax on this income Effective tax rate$1 – $5,400Nil0%$5,401 – $20,70020 cents for each $1 over $5,4000 – 14.78%$20,701 – $38,000$3,060 plus 34 cents for each $1 over $20,70014.78 – 23.53%$38,001 – $50,000$8,942 plus 43 cents for each $1 over $38,00023.53 – 28.20%$50,001 and over$14,102 plus 47 cents for each $1 over $50,00028.20 – less than 47%
Taxable income Tax on this income Effective tax rate$1 – $5,400Nil0%$5,401 – $20,70020 cents for each $1 over $5,4000 – 14.78%$20,701 – $38,000$3,060 plus 34 cents for each $1 over $20,70014.78 – 23.53%$38,001 – $50,000$8,942 plus 43 cents for each $1 over $38,00023.53 – 28.20%$50,001 and over$14,102 plus 47 cents for each $1 over $50,00028.20 – less than 47%
Taxable income Tax on this income Effective tax rate$1 – $6,000Nil0%$6,001 – $20,00017 cents for each $1 over $6,0000 – 11.9%$20,001 – $50,000$2,380 plus 30 cents for each $1 over $20,00011.9 – 22.76%$50,001 – $60,000$11,380 plus 42 cents for each $1 over $50,00022.76 – 25.97%$60,001 and over$15,580 plus 47 cents for each $1 over $60,00025.97 – less than 47%
Taxable income Tax on this income Effective tax rate$1 – $6,000Nil0%$6,001 – $20,00017 cents for each $1 over $6,0000 – 11.9%$20,001 – $50,000$2,380 plus 30 cents for each $1 over $20,00011.9 – 22.76%$50,001 – $60,000$11,380 plus 42 cents for each $1 over $50,00022.76 – 25.97%$60,001 and over$15,580 plus 47 cents for each $1 over $60,00025.97 – less than 47%
Taxable income Tax on this income Effective tax rate$1 – $6,000Nil0%$6,001 – $20,00017 cents for each $1 over $6,0000 – 11.9%$20,001 – $50,000$2,380 plus 30 cents for each $1 over $20,00011.9 – 22.76%$50,001 – $60,000$11,380 plus 42 cents for each $1 over $50,00022.76 – 25.97%$60,001 and over$15,580 plus 47 cents for each $1 over $60,00025.97 – less than 47%
Taxable income Tax on this income Effective tax rate$1 – $6,000Nil0%$6,001 – $21,60017 cents for each $1 over $6,0000 – 12.28%$21,601 – $52,000$2,652 plus 30 cents for each $1 over $21,60012.28 – 22.64%$52,001 – $62,500$11,772 plus 42 cents for each $1 over $52,00022.64 – 25.89%$62,501 and over$16,182 plus 47 cents for each $1 over $62,50025.89 – less than 47%
Taxable income Tax on this income Effective tax rate$1 – $6,000Nil0%$6,001 – $21,60017 cents for each $1 over $6,0000 – 12.28%$21,601 – $58,000$2,652 plus 30 cents for each $1 over $21,60012.28 – 23.4%$58,001 – $70,000$13,572 plus 42 cents for each $1 over $58,00023.4 – 26.59%$70,000 and over$18,612 plus 47 cents for each $1 over $70,00026.59 – less than 47%
Taxable income Tax on this income Effective tax rate$1 – $6,000Nil0%$6,001 – $21,60015c for each $1 over $6,0000 – 10.83%$21,601 – $63,000$2,340 plus 30c for each $1 over $21,60010.83 – 23.43%$63,001 – $95,000$14,760 plus 42c for each $1 over $63,00023.43 – 29.68%$95,000 and over$28,200 plus 47c for each $1 over $95,00029.68 – less than 47%