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Home / How super works / Super and tax / Income tax

Income tax

Income tax

The Australian income tax system for individuals is based on marginal tax rates and income thresholds. The higher a person’s taxable income in a financial year (July 1 to June 30), the more tax they pay.

In addition, most Australians pay a Medicare levy of 2% of their taxable income. Those earning higher taxable income amounts are also liable for an additional Medicare levy surcharge of 1 to 1.5%.

A person’s taxable income sources can include:

  • employment income,
  • super pensions and annuities (if they aren’t tax-free),
  • some government benefits,
  • investment income,
  • business, partnership and trust income,
  • foreign income, and
  • crowdfunding income.

An individual can reduce their taxable income by claiming tax deductions. Common tax deductions include:

  • work-related expenses,
  • the cost of managing tax affairs,
  • gifts and donations,
  • interest, dividend and other investment income deductions, and
  • personal super contributions.

Individuals can also reduce their tax payable if they are eligible for tax offsets, such as:

  • the Seniors and Pensioners Tax Offset (SAPTO),
  • the Low Income Tax Offset (LITO), and
  • the Low and Middle Income Earners Tax Offset (LMITO).

It’s important to understand that unlike tax deductions, tax offsets can only be used to reduce the amount of tax payable, they can’t be used to generate a tax refund from the Australian Taxation Office (ATO). Any unused tax offset is non-refundable.

Set out below are the latest articles that relate to income tax.

Australian income tax brackets and rates for 2021 and 2022

Australian income tax brackets and rates for 2021 and 2022

March 29, 2022

The amount of tax you pay will depend on your assessable income less a host of tax deductions and offsets. Here are the latest rates and thresholds.

Income tax calculator (2021-22 financial year)

Income tax calculator (2021-22 financial year)

October 18, 2021

Our income tax calculator will show you what offsets you may be eligible for, as well as your marginal tax rate and how much income tax you effectively pay.

Guide to the Low and Middle Income Tax Offset (LMITO)

Guide to the Low and Middle Income Tax Offset (LMITO)

October 18, 2021

LMITO is here for another year, saving taxpayers up to $1,080, so catch it if you can.

PremiumHow does SAPTO work? (Senior Australians and Pensioners Tax Offset)

How does SAPTO work? (Senior Australians and Pensioners Tax Offset)

October 18, 2021

SAPTO can help retirees reduce their tax bill but working out whether you are eligible and for how much is far from straightforward.

Guide to the Low Income Tax Offset (LITO)

Guide to the Low Income Tax Offset (LITO)

October 18, 2021

Low-income earners may be eligible to reduce their tax bill by as much as $700, without lifting a finger. Check our guide to who’s eligible and for how much.

Personal income tax cuts (2018–2025): What it means for you

Personal income tax cuts (2018–2025): What it means for you

October 18, 2021

The majority of Australians are already enjoying tax cuts and increased financial support in the form of tax offsets, with more to come.

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