Individual Rates of Tax – 2021/22

As an Australian resident, you will have to pay income tax to the Australian government. This rule applies whether you work for a local Australian company or a foreign one. The only exception to this rule involves specific types of foreign income and capital gains made by temporary residents of Australia. 

Meanwhile, non-residents are only required to pay taxes on income from Australian sources.

Find out about the tax rates for individual taxpayers for 2021-2022

Resident Individual

The following rates apply to resident individuals for the 2022 income year:

1. The above rates do not include the Medicare levy of 2%.
2. The tax-free threshold may effectively be higher for taxpayers eligible for the Low Income Tax Offset, the Low and Middle Income Tax Offset, the Seniors and Pensioners Tax Offset and/or certain other tax offsets.
   
   

Pro-Rated Tax-Free Threshold – Ceasing or Becoming a Resident

The tax-free threshold that applies to resident individuals ($18,200 in 2021/22) is pro-rated in an income year in which a taxpayer either ceased to be or became, a resident for tax purposes. For the 2022 income year, the pro-rated threshold is calculated using the following formula:

$13,464 + ($4,736 x number of months taxpayer was resident for the year ÷ 12)

Non-resident Individual

The following rates apply to individuals who are not residents of Australia for tax purposes for the entire income year:

1    Medicare Levy is not payable by non-residents.

Working Holiday Makers

The following rates apply to the 'working holiday taxable income' of an individual who is a 'working holiday maker' (e.g., if they hold a subclass 417, 462 or Covid -19 pandemic event 408 visa):

1. The above rates do not include the Medicare levy of 2%. Note, however, that the Medicare levy is not payable by working holiday makers that are non-residents for tax purposes.
2. These WHM tax rates do not apply to nationals of the United Kindom, Chile, Finland, Japan, Norway, Turkey, Germany (from 1 July 2017) and Israel (from 1 July 2020).
   
   

Resident Minor – Unearned (Division 6AA) Income

The following rates apply to the income of certain resident minors (e.g., resident persons who are under 18 years of age on the last day of the income year and are not in a full-time occupation) that is not 'excepted income':

1. Medicare Levy may also be payable.
2. Resident minors are not entitled to the Low Income Tax Offset or the Low and Middle Income Tax Offset in respect of 'unearned' income.
   
   

Non-resident Minor – Unearned (Division 6AA) Income

The following rates apply to the income of certain non-resident minors (e.g., non-resident persons who are under 18 years of age on the last day of the income year and are not in a full-time occupation) that is not 'excepted income':

1     The Medicare Levy is not payable by non-residents.

Medicare Levy – 2021/22

General Rate

Low-income Thresholds – Individuals

1. No Medicare levy is payable on taxable income levels at or below the Threshold Amount.
2. If taxable income falls within the Phase-in Limit, the Medicare Levy is payable at 10% of the excess over the Threshold Amount.
3. The Medicare Levy of 2% applies to the entire amount of taxable income.
   
   

Low-income Thresholds – Families

A taxpayer may be eligible to pay no, or a reduced Medicare Levy, if their family income is within the thresholds, set out below, and the taxpayer:

• has a spouse (including a de facto, same or opposite-sex spouse) on the last day of the income year; or
• has not remarried after their spouse died during the income year; or
• is entitled to the Dependent (Invalid and Carer) Tax Offset in respect of the taxpayer's child; or
• is entitled to a notional tax offset by having sole care of another individual who is either under age 21 or under age 25 and a full-time student.
  
  

The 2021/22 Medicare Levy low-income thresholds for families are as follows:

1. 'Family Income' is the combined taxable income of a taxpayer and their spouse. If the taxpayer does not have a spouse, Family Income is the taxpayer’s taxable income only. No Medicare levy is payable on taxable income levels at or below the Family Income Threshold.
2. Where 'Family Income' falls within the range stated in this column, then each spouse who is liable for the Medicare levy will receive a reduction in the amount that is otherwise payable, in accordance with the formula in S.8(2) of the Medicare Levy Act 1986. This effectively limits the levy payable by taxpayers with families to 10% of the amount of Family Income that exceeds their Family Income Threshold.
3. More specifically, where 'Family Income' equals or exceeds the amount stated in this column, then the levy payable by each spouse will be determined separately in accordance with the relevant threshold set out on the above point.

Medicare Levy Surcharge – 2021/22

Resident taxpayers may be liable for a Medicare levy surcharge (‘MLS’) of 1%, 1.25% or 1.5% (i.e., in addition to the 2% Medicare Levy) for any period in an income year when they did not have an appropriate level of private patient hospital cover for themselves, their spouse and dependent children (subject to certain exceptions for ‘prescribed persons’), if they exceed the relevant income threshold.

'Income for surcharge purposes as defined in S.995-1(1) of the ITAA 1997. Generally, this broadly includes taxable income for the income year (subject to certain adjustments), reportable fringe benefits total, reportable superannuation contributions and total net investment losses.

Where the MLS applies, it is levied on a taxpayer’s taxable income, reportable fringe benefits and on any amounts on which family trust distribution tax has been paid.

The table below sets out the 2021/22 income thresholds and MLS rates applicable to the following:

• Taxpayers who were single for the whole income year.
• Taxpayers who were married (including de facto, same, or opposite-sex partners) and/ or had at least one ‘dependent child’ for the whole income year.
  
  

1. For a couple, their combined 'income for surcharge purposes is generally applied against the family threshold. However, any liability for the MLS is levied on each taxpayer’s own taxable income, reportable fringe benefits and any amounts on which family trust distribution tax has been paid. Note, if the 'income for surcharge purposes of one member of the couple does not exceed the applicable Medicare levy low-income threshold (being $23,365 for 2021/22), that member is not liable for the MLS.
2. If the taxpayer is not married (or in a de facto relationship) but has one or more dependents, only the taxpayer's 'income for surcharge purposes is taken into account. For these purposes, a dependent is a resident child that is aged less than 21 years (or between 21 years and less than 25 years and receiving full-time education at a school, college or university) and the taxpayer contributed to the maintenance of the child.
   
   

Note, where a taxpayer’s circumstances change during the income year (e.g, the taxpayer marries, or ceases to be married), the MLS is calculated separately for each of these periods, based broadly on the above rules.

If you have any questions about individual income tax or need a hand filing your taxes, please call or email us.