What is taxable income

International Students – Tax Rules and Regulations
March 24, 2023
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What is taxable income

Taxable income in Australia refers to the portion of your total income that is subject to taxation by the Australian government. It is calculated by subtracting any allowable deductions, exemptions or offsets from your total income.

Your total income may include wages and salaries, rental income, business income, investment income, and other sources of income. However, not all types of income are taxable in Australia. For example, certain government benefits, such as the Age Pension and the Disability Support Pension, are not taxable.

Once your taxable income has been calculated, it is used to determine the amount of tax you are required to pay to the Australian Taxation Office (ATO) based on the progressive tax rates mentioned in my previous response.

In Australia, the taxable income for individuals is subject to progressive tax rates, which means that the more you earn, the higher percentage of tax you will pay. As of the 2021-2022 financial year, the tax rates for individuals in Australia are as follows:

  • For taxable income up to $18,200, the tax rate is 0%
  • For taxable income from $18,201 to $45,000, the tax rate is 19%
  • For taxable income from $45,001 to $120,000, the tax rate is 32.5%
  • For taxable income from $120,001 to $180,000, the tax rate is 37%
  • For taxable income above $180,000, the tax rate is 45%

It’s important to note that these rates only apply to your taxable income, which is your total income minus any deductions or offsets you may be eligible for. Additionally, residents of Australia are subject to the Medicare Levy, which is currently 2% of taxable income, with some exemptions and reductions based on income and other factors.

Susan Sangroula is Partner at Expert Business and Tax Advisory, a member of Chartered Accountants Australia and New Zealand and a registered tax agent.

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