Tax 2024: How to figure out your tax bracket

As the new financial year approaches, significant adjustments to tax brackets are set to take effect with the implementation of Stage 3 tax cuts from July 1. These changes will impact the tax liabilities of millions of Australian taxpayers.

Understanding your tax bracket is crucial, as it determines the percentage of tax you pay on your income. Lower income earners pay fewer cents per dollar to the tax office.

Currently, there are five tax brackets for Australian residents. Individuals earning $18,200 or less annually are exempt from income tax, benefiting from the tax-free threshold. For incomes between $18,201 and $45,000, a 19 cent tax rate applies to every dollar earned over $18,200. Tax rates increase progressively for higher income brackets, reaching 45 cents per dollar for earnings over $180,000.

From July 1, the Stage 3 tax cuts will introduce adjustments to tax rates and thresholds. The 19 per cent tax rate will decrease to 16 per cent, while the 32.5 per cent rate will drop to 30 per cent. Additionally, the thresholds for the 37 and 45 per cent tax rates will be raised.

Under the new tax brackets:

  • Incomes up to $18,200 remain tax-free.
  • Earnings between $18,201 and $45,000 will be taxed at a rate of 16 cents per dollar over $18,200.
  • For incomes ranging from $45,001 to $135,000, a tax of $4,288 plus 30 cents per dollar earned over $45,000 will apply.
  • Individuals earning between $135,001 and $190,000 will face a tax of $31,288 plus 37 cents for every dollar above $135,000.
  • Those earning $190,001 and above will be taxed $51,638 plus 45 cents for each dollar over $190,000.

It’s important to note that different rules apply to foreign residents and individuals on working visas. For personalized assistance with tax calculations, the Australian Taxation Office (ATO) provides useful tools such as the income tax calculator and simple tax calculator. The income tax calculator offers a comprehensive analysis, including considerations like the Medicare levy surcharge and applicable tax offsets, which are not reflected in the figures provided above.

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