![]() For Australian residents the tax-free threshold is currently $18,200, meaning the first $18,200 of your income is tax free, but you are taxed progressively on income above that amount. The tax-free threshold refers to how much you can earn in financial year before you are liable to pay tax. Note that this does not include offsets such as LITO and LMITO, or the Medicare levy. This totals $6,717 in tax – which amounts to an overall tax rate of approximately 13% on your total income of $50,000. ![]() Then the amount earned between $45,001 and $50,000 is taxed at 32.5%.Then the amount earned between $18,201 and $45,000 is taxed at 19%.However, your whole income is not taxed at 32.5% – just the amount over $45,001 – which in this case is $4,999. Rather, once your income reaches a higher tax bracket, only the amount of income above that threshold is taxed at the higher rate.įor example, if you earn $50,000 you are in the 32.5% tax bracket, which applies to income between $45,001 and $120,000. A common misunderstanding is that once your income hits a tax bracket, your whole income is taxed at that rate.
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