Australian Tax System
📅 2025–26 Financial Year Update | Source: Australian Taxation Office (ATO) | Updated: July 2025
What is Income Tax?
Income tax is collected by the Australian Taxation Office (ATO) on behalf of the Federal Government. It applies to individuals and companies on their taxable income.
- Individuals (residents): Taxed on a progressive scale — the more you earn, the more tax you pay.
- Companies: Taxed at a flat rate of either 25% or 30%, depending on size.
- Partnerships & Trusts: Income is not taxed directly — it is distributed to partners or beneficiaries who pay tax individually.
Income tax applies to wages, business profits, investment returns, and capital gains (such as selling a house or shares).
Tax-Free Threshold
In the 2025–26 financial year, Australian tax residents earning $18,200 or less pay no income tax. This is called the tax-free threshold — tax only begins once your income exceeds this amount.
💡 Simply put: If you earn less than $18,200 a year, you pay zero tax!
Australian Resident Individual Tax Rates 2025–26
(Note: These rates do not include the 2% Medicare Levy)
| Taxable Income | Tax on This Income |
|---|---|
| $0 – $18,200 | Nil |
| $18,201 – $45,000 | 16c for each $1 over $18,200 |
| $45,001 – $135,000 | $4,288 plus 30c for each $1 over $45,000 |
| $135,001 – $190,000 | $31,288 plus 37c for each $1 over $135,000 |
| $190,001 and over | $51,638 plus 45c for each $1 over $190,000 |
⚠️ The above rates do not include the 2% Medicare Levy (low-income earners may be exempt or pay a reduced amount).
Foreign Resident Tax Rates 2025–26
(No tax-free threshold. Foreign residents do not pay the Medicare Levy.)
| Taxable Income | Tax on This Income |
|---|---|
| $0 – $135,000 | 30c for each $1 |
| $135,001 – $190,000 | $40,500 plus 37c for each $1 over $135,000 |
| $190,001 and over | $60,850 plus 45c for each $1 over $190,000 |
Working Holiday Maker Tax Rates 2025–26 (Visa 417 & 462)
| Taxable Income | Tax on This Income |
|---|---|
| $0 – $45,000 | 15% (flat rate) |
| $45,001 – $135,000 | $6,750 plus 30c for each $1 over $45,000 |
| $135,001 – $190,000 | $33,750 plus 37c for each $1 over $135,000 |
| $190,001 and over | $54,100 plus 45c for each $1 over $190,000 |
Low Income Tax Offset (LITO)
If you are an Australian tax resident earning up to $66,667, you may be entitled to the Low Income Tax Offset (LITO) — up to $700 in tax relief, automatically applied when you lodge your return.
- Income $37,500 or less: Maximum offset of $700
- Income $37,501 – $45,000: Reduces by 5c for every $1 above $37,500
- Income $45,001 – $66,667: Reduces by 1.5c for every $1 above $45,000
💡 No action needed — the ATO calculates and applies this automatically when you lodge your tax return.
Superannuation (Super)
For 2025–26, employers must contribute 12% of an eligible employee’s ordinary time earnings to their super fund. This money is set aside to help you save for retirement.
💡 Tip: Check your super account regularly to make sure your employer is paying correctly and on time!
Tax Return Lodgement
- Australian financial year runs from: 1 July to 30 June
- Self-lodgement deadline: 31 October each year
- Lodging through a registered tax agent like ELTAX Accountants may give you an extended deadline
Before lodging, make sure you have gathered all your documents — payment summaries, receipts, bank statements and investment records. Keeping organised records will save you time and help maximise your refund.
Common Tax Deductions
Work-related expenses can be claimed as deductions to reduce your taxable income and increase your refund:
- 🚗 Work-related travel and transport costs
- 👔 Uniforms, protective clothing and dry-cleaning
- 💻 Computers, tablets or phones used for work (proportional to work use)
- 📚 Work-related education and training courses
- 🏠 Home office expenses (internet, electricity, desk, etc.)
- 🛠️ Tools and equipment required for your job
Not sure what you can claim? Contact ELTAX Accountants — our qualified CPAs will review your circumstances and prepare your return to maximise your refund.
