Income Tax in Australia

How PAYG Withholding Works

If you are an employee, your employer withholds tax from your wages through the Pay As You Go (PAYG) withholding system. The amount withheld depends on the information you provide on your Tax File Number (TFN) declaration.

What if I have multiple jobs?

You can only claim the tax-free threshold from one employer. For any additional employers, you should not claim the tax-free threshold, which means more tax will be withheld from those payments. This helps prevent a tax debt at the end of the financial year.

Tax Calculation Example

Example: Sarah earns $85,000 per year.
  • First $18,200: $0 tax
  • $18,201 to $45,000: ($45,000 - $18,200) x 16% = $4,288
  • $45,001 to $85,000: ($85,000 - $45,000) x 30% = $12,000
  • Total tax: $16,288
  • Plus Medicare levy: $85,000 x 2% = $1,700
  • Total payable: $17,988

Foreign Residents

If you are a foreign resident for tax purposes, different tax rates apply. Foreign residents do not have access to the tax-free threshold and are taxed from the first dollar earned:

Tip: Your residency status for tax purposes is different from your visa status. The ATO uses several tests to determine your tax residency, including the resides test, domicile test, 183-day test, and Commonwealth superannuation test.