How is my tax calculated
Australian income tax is levied at progressive tax rates. The lowest bracket is 0%, known as the tax-free rate for individuals on very low incomes. The threshold for this rate is currently $6000. Tax rates increase progressively up to 45% for incomes over $150,000. Refer to the table below for current income brackets:
| Taxable income | Tax on income (2010 - 2011) | Tax rate |
|---|---|---|
| $0 – $6,000 | Nil | 0% |
| $6,001 – $37,000 | 15c for each $1 over $6,000 | 15% |
| $37,001 – $80,000 | $4,350 plus 30c for each $1 over $35,000 | 30% |
| $80,001 – $180,000 | $17,850 plus 37c for each $1 over $80,000 | 38% |
| Over $180,000 | $55,850 plus 45c for each $1 over $180,000 | 45% |
It is important to understand that these brackes are progressive, whereby only the value between the bracket is taxed at the corresponding rate. For example: an income of $10,000 is taxed at (10000 - 6000)*15% = $600
The Low Income Tax Offset to offset is a tax rebate for individuals on low incomes (less than $67,500). In 2010 it is a maximun of $1350, which is reduced at 4% for taxable incomes above $30,000.
On top of the income tax there is also a Medicare levy. See below for more information on the Medicare levy and the Medicare levy surcharge.
Financial year
The Australian financial year is between July 1st and June 30th of the following year. A taxable year is known as a fiscal year and is most commonly referred to by the year that it finishes in (e.g. 1 July 2007 - 30 June 2009 is the 2009 financial year). This departure from the natural calender is in response to higher financial activity during the December-January period that would make book keeping more complicated.
Superannuation
Superannuation is a pension scheme. It has a compulsory element where employers are required by law to pay a proportion of an employee's salary and wages (currently 9%) into a superannuation fund, which can be accessed when the employee retires. Superannuation Guarantee law applies to all working Australians, except those earning less than $450 per month, or aged under 18 or over 70. Individuals can choose to make extra voluntary contributions to their superannuation and receive tax benefits for doing so.
Your salary is often quoted as a 'packaqe' where the figure includes the superannuation contribution. In this case the superannuation contribution must be deducted from you salary as tax is not charged on superannuation. For more information about superannuation and superanuation funds see Simplified Superannuation on the Australian Government website.
Medicare
Medicare is an Australian health care scheme funded by an income tax levy to provide all Australians with access to free or low cost medical care. If you earn more than $100,000 a year (for singles) or $150,000 a year (for couples and families, 2009 fiscal year) and you don't have private hospital cover, you may need to pay the Medicare Levy Surcharge (MLS). This is an additional 1% tax on top of the 1.5% Medicare levy paid by eligible taxpayers. For more information see information on the Medicare levy at the Australian Tax Office website
HECS-HELP debt
HECS-HELP is a government loan for tertiary education that is repaid through the tax system. You must start repaying your debt when your income is above the minimum repayment threshold for compulsory repayment. The repayment thresholds are adjusted each year to reflect any changes in average weekly earnings. For the 2006–07 income year, the minimum threshold was $38,148. For the 2007–08 income year, it is $39,824. Compulsory repayments are made through your income tax assessments.
| Taxable income | Repayment rate (2010 - 2011) |
|---|---|
| Below $44,912 | Nil |
| $44,912–$50,028 | 4.0% |
| $50,029–$55,143 | 4.5% |
| $55,144–$58,041 | 5.0% |
| $58,042–$62,390 | 5.5% |
| $62,391–$67,570 | 6.0% |
| $67,571–$71,126 | 6.5% |
| $71,127–$78,273 | 7.0% |
| $78,274–$83,407 | 7.5% |
| Over $83,408 | 8.0% |