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Jul 10 2013

Income Tax

Income Tax in Australia

2013-2014 Tax Rates for Earners classed as Tax-Resident

Taxable income Tax on this income
0 – $18,200 Nil
$18,201 – $37,000 19c for each $1 over $18,200
$37,001 – $80,000 $3,572 plus 32.5c for each $1 over $37,000
$80,001 – $180,000 $17,547 plus 37c for each $1 over $80,000
$180,001 and over $54,547 plus 45c for each $1 over $180,000

Tax File Numbers

Every income earner in Australia should have a tax reference number, called a Tax File Number, and when this is quoted to Employees and Banks (for interest payments), etc., tax is deducted from income at the current rates.

If a Tax File Number (TFN) is not quoted, then tax is deducted at the maximum rate.

You can apply for a tax file number (TFN) online only if you are currently in Australia and you have:

  • a valid permanent migrant visa, or
  • a valid visa with work rights, or
  • a valid overseas student visa, or
  • a valid visa allowing you to stay in Australia indefinitely.

Tax Return

Every taxpayer must complete an Annual Tax Return, and this calculates any differences in tax over or under paid.

Most people need to submit their Tax return by the last day of October each year, but there are extensions for those who lodge via a Tax Agent.

Some Non-Tax payers should also complete an annual Tax Return, as they may be entitled to a rebate, even without paying anything.

Most Australians end up paying more tax, during the year, than they should, due to various allowances being only claimable at the end of the year, such as Sun Screen protection for outside workers, overtime meal allowance, and various other allowances, and they end up receiving a Tax Rebate shortly after submitting the Annual Tax Return. (This is often within 14 days).

The Education Tax Refund has been amended and is no longer claimable, as it is paid automatically.

The Low Income Tax Rebate is being abolished.

Average Tax Refunds in Australia

In 2006-07, 80% of Australia Tax payers received a refund of tax at the end of the year. The average refund was $1,998. The number of tax refunds given was 9.9 million, out of the 11.8 million taxpayers.

The expected average refund for 2008-09 has recently been quoted as $2,351, although about half of all taxpayers expect to get back under $1,000.

More than half of all Australians use a Tax Agent to prepare their tax returns.

Australian Tax Rates for previous years:

Tax Rates for the year 2012-2013

Taxable Income Tax on this income
0 – $18,200 Nil
$18,201 – $37,000 19c for each $1 over $18,200
$37,001 – $80,000 $3,572 plus 32.5c for each $1 over $37,000
$80,001 – $180,000 $17,547 plus $37c for each $1 over $80,000
$180,001 and over $54,547 plus 45c for each $1 over $180,000

In the 2012-2013 tax year the tax free threshold was increased to $18,200, but the first tax rate was also increased from 15% to 19%

  • Tax on $35,000 in 2011-12 was $4,350, less the LITO of $1,300 resulting in $3,050 tax payable
  • Tax on $35,000 in 2012-13 was $3,192, less the LITO of $445 resulting in $2,747 tax payable (saving $303 for the year)

LITO = Low Income Tax Offset  www.britzinoz.com/low-income-tax-offset

Tax Rates for the year 2011-2012

Taxable income Tax on this income
0 – $6,000 Nil
$6,001 – $37,000 15c for each $1 over $6,000
$37,001 – $80,000 $4,650 plus 30c for each $1 over $37,000
$80,001 – $180,000 $17,550 plus 37c for each $1 over $80,000
$180,001 and over $54,550 plus 45c for each $1 over $180,000

Tax Rates for the year 2010-2011

Taxable income Tax on this income
$0 to $6,000 Nil
$6,001 to $37,000 15c for each $1 over $6,000
$37,001 to $80,000 $4,650 plus 30c for each $1 over $37,000
$80,001 to $180,000 $17,550 plus 37c for each $1 over $80,000
Over $180,000 $54,550 plus 45c for each $1 over $180,000

Source: 2009/2010 Budget

* Low income earners under $16,000 will pay no tax, due to the Low Income Tax Offset.

The above rates DO NOT include the 1.5% Medicare levy

Tax rates

Tax Rates for the year 2009/2010

Taxable income Tax on this income
$0 to $6,000 Nil
$6,001 to $35,000 15c for each $1 over $6,000
$35,001 to $80,000 $4,350 plus 30c for each $1 over $35,000
$80,001 to $180,000 $17,850 plus 38c for each $1 over $80,000
Over $180,000 $55,850 plus 45c for each $1 over $180,000

Source: 2009/2010 Budget

* Low income earners under $15,000 will pay no tax, due to the Low Income Tax Offset.

The above rates DO NOT include the 1.5% Medicare levy

Tax Rates for the year 2008/2009

Taxable income Tax on this income
$0 to $6,000 Nil
$6,001 to $34,000 15c for each $1 over $6,000
$34,001 to $80,000 $4,200 plus 30c for each $1 over $34,000
$80,001 to $180,000 $18,000 plus 40c for each $1 over $80,000
Over $180,000 $58,000 plus 45c for each $1 over $180,000

* Low income earners under $14,000 will pay no tax, due to the Low Income Tax Offset.

The above rates DO NOT include the 1.5% Medicare levy

Previous Years tax rates can be seen here: www.britzinoz.com/historic-australian-tax-rates

In the first year of residency, you only receive a pro rata amount of the Tax Free Threshold.

The Low Income Tax Offset will be increased from $1,200 to $1,350 from 1 July 2009, and up to $1,500 in July 2010. This means that those eligible for the full Low Income Tax Offset will not incur a net income tax liability until their annual income exceeds $15,000, in the 2009/10 year and $16,000 in the 2010/11 year.

Employers deduct tax in a different way to the UK system, and this often gives rise to a tax refund at the end of the year.

The reason for this is that the Australian Tax Office has adopted a simpler system of allowing 1/12 of the annual threshold for every month, (or 1/52 if paid weekly).

This means that if someone does not work every week of the year, they temporarily miss out on that weeks threshold allowance, until the end of the year.

The UK system works on a cumulative basis, and calculates tax pretty accurately every week/month.

An example of the effect of this for someone who only works here for 6 months would be:

    Based on a $120,000 annual salary, that would be $10,000 per month…

Gross Tax Calculated at:

  • First $500 tax free
  • Next $2,333 at 15% = $350
  • Next $3,833 at 30% = $1,150
  • Next $3,334 at 40% = $1,333

Total tax = $2,833 per month or $16,998 for that period of 6 months.

However, at the end of the year, the correct figures for a gross wage of $60,000 would be:

  • $3,000 tax free
  • $14,000 at 15% = $2,100
  • $46,000 at 30% = $13,800

Total Tax Due $15,900

A Tax Refund of the difference, $1,098 would be paid after the tax return is submitted.

This figure would often be higher, after other tax allowances are also taken into effect.

Tax Deductions 2008-09

There are many different deductions that can be made against your taxable income in Australia, and these can include Sunscreen and Sunglasses for some occupations.

Other more common deductions are use of car for work related purposes, and this can sometimes be claimed on a mileage basis of 58c per km for a vehicle up to 1600cc, 69c for 1600 to 2600cc, and 70c for over 2600cc.

2009-10 mileage basis rates are:

  • 63c per km for a vehicle up to 1600cc,
  • 74c for 1600 to 2600cc,
  • 75c for over 2600cc

Meal Allowances and Overnight accommodation allowances can also be claimed, and these can be viewed at: PDF file ato.gov.au

Note that some travel costs cannot be claimed, and in particular, you cannot claim the cost of normal trips between home and work as that travel is private.

You cannot claim it even if:

  • you did minor tasks – for example, picking up the mail on the way to work or home
  • you had to travel between home and work more than once a day
  • you were on call – for example, you were on standby duty and your employer contacted you at home to come into work
  • there was no public transport near where you worked
  • you worked outside normal business hours – for example, shift work or overtime, or
  • your home was a place of business and you travelled directly to a place of employment

The above information is available from the Australian Tax Office webpage at:

Medicare Levy

In a similar way to the UK “National Insurance Contributions”, the Australian system has a Medicare Levy charged to most taxpayers, to go towards the costs of the Australian Medical System.

The amount payable is however very different to the UK.

The UK rate is 11% for the employee on the amount earned between the lower and upper limits.

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