What Tax Bracket Am I In?
How the Australian resident tax brackets work, which one your income actually lands in, and why your marginal bracket is not the rate you pay on your whole salary.
Which bracket, exactly?
"What tax bracket am I in" has a precise answer and a useful one, and they are not quite the same sentence. The precise answer is: the bracket your last dollar falls in. That is your marginal bracket, and it is the rate that applies to the next dollar you earn — a pay rise, some overtime, a second job.
The useful answer is that you are in all the brackets beneath it as well. Australia taxes residents on a marginal scale, which means your income is cut into bands and each band is taxed at its own rate. Being "in the 30% bracket" does not mean 30% of your salary goes to the ATO. It means the slice of your income inside that band is taxed at that rate, and everything below it is taxed at the lower rates that apply to those slices.
The resident brackets for the current financial year
| Taxable income | Rate on this band |
|---|---|
| Up to $18,200 | Nil |
| $18,200 to $45,000 | 15% |
| $45,000 to $135,000 | 30% |
| $135,000 to $190,000 | 37% |
| Above $190,000 | 45% |
To place yourself, find the row your taxable income falls in. That is the bracket you are in, and its rate is your marginal rate. The full scale, including how the Medicare levy and the offsets sit around it, is set out on the income tax rates page.
Taxable income, not the number on your contract
The figure the table is read against is your taxable income, which is not always the salary in your employment contract. Deductions you are entitled to claim reduce it; other assessable income adds to it. Someone whose contract sits just above a threshold can be under it once deductions are counted, and someone with income from more than a single source can be above a threshold they never crossed on their main payslip.
This matters most at the edges. If you are close to a boundary, the bracket you are "in" is decided by your assessed taxable income for the whole financial year, not by any one pay cycle.
A higher bracket never leaves you worse off
The most persistent worry about brackets is that crossing into a higher one could reduce your take-home pay. Under a marginal system it cannot. Only the income above a threshold is taxed at the higher rate, so the dollar that takes you over a boundary is taxed more than the dollar before it — and every dollar you already had is taxed exactly as it was.
This is also why the tax-free threshold is not an all-or-nothing entitlement. The first $18,200 of a resident's taxable income is untaxed no matter how much is earned above it, so a high earner and a low earner get exactly the same nil band.
Your marginal rate is not your average rate
Your marginal rate is the rate on your last dollar. Your average rate — the share of your whole income that ends up as tax — is always lower, because the lower bands are pulling it down. Someone whose top slice is taxed at 37% pays a good deal less than 37% of their salary overall.
Both numbers are useful and they answer different questions. The marginal rate answers "what happens if I earn more?". The average rate answers "what do I actually take home?", and that is what a take-home pay calculator is for.
Two things the bracket table leaves out
The bracket table is the income tax scale and nothing else, so two adjustments sit outside it.
The Medicare levy is charged on top, at 2% of taxable income, and it is not part of any bracket. Lower incomes pay a reduced levy or none at all through a shade-in, and there is a separate surcharge for higher incomes without private hospital cover.
The low income tax offset works the other way, reducing tax payable rather than income. It is worth up to $700 and it tapers away as income rises, cutting out entirely at $66,667. Because it reduces the tax rather than the income, it does not move you between brackets — it changes what the bracket costs you.
So which bracket am I in?
Find your taxable income in the table above, and the row it falls in is your bracket. Then, if what you actually wanted to know was how much lands in your account, put your gross salary into the take-home pay calculator — it applies the whole scale, the levy and the offset together, which is something no single bracket can tell you on its own.
A note on sourcing
Every rate and threshold in this post is read from the rate payload this site's calculator uses, which cites the ATO's published resident rates for the current financial year. Nothing here is typed in by hand, so the table above and the calculator cannot disagree.
The scale shown is the resident scale. Foreign residents and working holiday makers are taxed on different scales that this site does not model, and none of these figures has been through this site's final reviewer sign-off — for a binding amount, the ATO is the authority.