The highest marginal income tax rate an Australian resident can pay is 45% on taxable income exceeding $180,001 for the 2023-24 financial year. When including the standard Medicare Levy, this effective top marginal rate rises to 47%.
Understanding Australia's Highest Tax Rates
Australia operates on a progressive income tax system, meaning that as your income increases, higher portions of your income are taxed at progressively higher rates. This system ensures that those who earn more contribute a larger percentage of their income in tax.
The question "What is the most tax you can pay in Australia?" is generally interpreted in terms of the highest rate applied to taxable income, rather than a maximum dollar amount, as theoretically, there's no upper limit to income.
Highest Marginal Income Tax Rate for Residents (2023-24)
For the 2023-24 financial year, the highest marginal income tax rate for Australian residents is 45%. This rate applies to every dollar of taxable income earned over $180,001.
Here's a breakdown of the resident income tax rates and brackets for the 2023-24 financial year:
| Taxable Income | Tax Rate |
|---|---|
| $0 – $18,200 | Nil |
| $18,201 – $45,000 | 19% |
| $45,001 – $120,000 | 32.5% |
| $120,001 – $180,000 | 37% |
| $180,001 and over | 45% |
Source: Australian income tax brackets and rates (2024-25 and previous years) - superguide.com.au
The Impact of the Medicare Levy
In addition to the income tax rates, most Australian residents are also required to pay the Medicare Levy. This levy helps fund Australia's public health system.
- Standard Rate: The standard Medicare Levy is an additional 2% of your taxable income.
- Combined Highest Rate: When combined with the highest marginal income tax rate of 45%, the effective top marginal tax rate for an Australian resident becomes 47% (45% income tax + 2% Medicare Levy).
There are low-income thresholds and exemptions for the Medicare Levy, but for individuals earning above these thresholds, it is a mandatory additional tax on taxable income.
Other Australian Taxes to Consider
While the highest personal income tax rate is a key component of an individual's tax burden, it's important to note that Australia has a range of other taxes that individuals and businesses may pay. These include:
- Goods and Services Tax (GST): A 10% tax on most goods and services.
- Capital Gains Tax (CGT): Tax on profits from the sale of assets like property or shares.
- Fringe Benefits Tax (FBT): Tax on certain benefits provided by employers to employees.
- Superannuation Contributions Tax: Tax on contributions to superannuation funds.
- State-based Taxes: Such as stamp duty on property purchases or land tax.
However, when people refer to "the most tax you can pay" in the context of an individual's earnings, they are generally referring to the highest marginal rate applied to their income, which encompasses both the income tax rate and the Medicare Levy.
