Beginner’s Guide to Tax in Australia (2025 Edition)
Beginner’s Guide to Tax in Australia (2025 Edition)
Published: 4 November 2025 • Read time: 10–12 minutes
New tax rates apply for 2025. This guide explains how Australian income tax works, what counts as residency, how Medicare levy and the surcharge interact with your return, and the fastest way to lodge online. It also lists common offsets and deductions beginners often miss.
How Aussie tax works
- Financial year: 1 July to 30 June.
- Progressive system: Only the slice in each bracket is taxed at that bracket’s rate.
- Medicare levy: Most residents pay an extra 2% of taxable income (reductions for low income apply).
- Withholding vs assessment: Employers withhold PAYG during the year; you reconcile at tax time to get a refund or top-up.
2025 tax rates at a glance (residents)
Excludes the 2% Medicare levy. LITO can reduce tax for low incomes.
| Taxable income (AUD) | Marginal rate | Tax on this income |
|---|---|---|
| 0 – 18,200 | 0% | $0 |
| 18,201 – 45,000 | 16% | 16% of amount over $18,200 |
| 45,001 – 135,000 | 30% | $4,288 + 30% of amount over $45,000 |
| 135,001 – 190,000 | 37% | $31,288 + 37% of amount over $135,000 |
| 190,001+ | 45% | $51,638 + 45% of amount over $190,000 |
Tax residency essentials
You are taxed as a resident if you meet the ATO’s residency tests. The primary test is the resides test. Other tests include the 183-day test. Residency is about your pattern of life, not your visa label. Non-residents don’t get the $18,200 tax-free threshold and have different rates.
Medicare levy & surcharge
- Medicare levy: 2% of taxable income for most residents. Reductions apply for low income and certain concession categories.
- Medicare Levy Surcharge (MLS): 1%–1.5% if your income is above the MLS threshold and you don’t hold eligible hospital cover for the year. 2025–26 thresholds start at about $101,000 (single) and $202,000 (family). Extras-only policies don’t avoid MLS.
HELP student debt & indexation
Compulsory HELP repayments are a percentage of your taxable income once you pass the annual threshold. From 1 June 2023 the government ties indexation to the lower of CPI or WPI and applied credits to reduce prior high indexation. Check your myGov for your current balance and indexation details.
How to lodge online with myTax
- When: Lodge from 1 July; for accurate prefill, wait until late July when employers/banks report. Self-lodgers’ due date is 31 October. Using a registered agent can extend due dates.
- Where: myGov → ATO → Lodge with myTax.
- Data prefill: Salary, interest, dividends, and some private health details prefill automatically; confirm everything matches your records.
- Keep records: Keep receipts and logs for five years for deductions you claim.
Offsets & deductions beginners miss
- LITO: Up to $700 for eligible low incomes (phasing out as income rises).
- Work-related expenses: Only what you paid for, required for earning income, and not reimbursed. Keep evidence.
- Self-education: If it maintains or improves skills for your current job.
- Charitable gifts: To Deductible Gift Recipients with receipts.
- Private health: May avoid MLS if eligible hospital cover in place all year.
Get tax-ready
Check residency, add MyGov-ATO, confirm private hospital cover status, review HELP balance, and collect receipts.
Find a registered tax agent · Download a receipts tracker
Disclosure: We may earn a commission if you sign up through our links. This does not affect our comparisons.
FAQs
Do I have to lodge a return?
Most people do. If you think you don’t, submit a non-lodgement advice via myGov/ATO.
What’s the Medicare levy vs the surcharge?
The levy is 2% for most residents. The surcharge is an extra 1%–1.5% for higher incomes without eligible hospital cover.
When will I get my refund?
ATO says most online refunds are issued within about two weeks, assuming accurate data and no review.
Can international students be residents for tax?
Yes, if they meet residency tests. Visa type alone doesn’t decide it.
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