Registered Tax Agent
CPA-Qualified Team
Sydney · Homebush · Brisbane
A plain-English reference to how Australian tax works, written by our team for clients who want to understand the detail behind the numbers.
Open any topic below. If something does not match your situation, call us and we will explain how it applies to you.
Income tax is levied on your taxable income, which is calculated as: Assessable income less allowable deductions.
After applying any relevant tax offsets and credits, this determines your final tax payable or refund.
Individuals are taxed at marginal tax rates, meaning higher portions of income are taxed at higher rates. The Australian Taxation Office (ATO) provides guidance on assessable income, allowable deductions, and available offsets. Sole traders report their business income within their individual tax return and are not required to lodge a separate business return.
| 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 | $31,288 plus 37c for each $1 over $135,000 |
| $135,001 – $190,000 | $19,822 plus 37c for each $1 over $87,000 |
| $190,001 and over | $51,638 plus 45c for each $1 over $190,000 |
Note: The above rates do not include the Medicare levy of 2%.
| Taxable Income | Tax on this Income |
|---|---|
| $0 – $135,000 | 30% |
| $135,001 – $190,000 | $40,500 + 37% for each $1 over $135,000 |
| $190,000+ | $60,850 + 45% for each $1 over $190,000 |
Note: Special rates apply to children and working holiday makers. See the ATO web site for more information on Individual Income Tax Rates.
More: Special rates apply to children and working holiday makers. See the ATO web site for more information on Individual Income Tax Rates.
A company is a separate legal entity with its own income tax obligations and is required to lodge a Company Income Tax Return. Unlike individuals, a company is taxed directly on its taxable income, rather than passing the income through to its owners.
Eligibility for the lower tax rate depends on factors such as the company’s aggregated turnover and the nature of its income.
A partnership carrying on a business is required to lodge a Partnership Tax Return, which outlines the income earned, deductions claimed, and how the net result is distributed between the partners.
However, a partnership is not a taxable entity. Instead, each partner is assessed individually on their share of the net income or loss, which is included in their own tax return.
The partnership return therefore serves as an informational return, ensuring that income and expenses are correctly allocated. In certain cases, a partnership return may not be required. For example, where income is derived solely from joint investments (such as jointly owned rental properties or shares), each party may declare their share directly in their own tax return.
Trust taxation depends on how income is distributed and whether beneficiaries are presently entitled to that income.
Where a beneficiary is presently entitled to a share of the trust’s net income and is not under a legal disability, the beneficiary is generally taxed on that share.
The tax treatment of a trust can vary depending on the structure of the trust and the characteristics of its beneficiaries.
Trusts cannot generally distribute net losses to beneficiaries. Instead, losses are retained within the trust and carried forward to offset future income, subject to applicable trust loss rules.
A superannuation fund is a separate taxable entity and is required to lodge its own income tax return. Different return requirements may apply depending on whether the fund is a self-managed superannuation fund (SMSF) or another type of super fund.
Superannuation funds are subject to specific regulatory and tax rules, which differ from other entity types.
Tax residency is determined based on your circumstances, including where you live and your ties to Australia. It is not the same as visa or citizenship status.
Company profits are taxed at the company level. If distributed as dividends, shareholders may also be taxed, although franking credits may reduce double taxation.
No, trust losses cannot generally be distributed. They are retained within the trust and carried forward to future years.
No, a partnership does not pay tax. Each partner includes their share of the partnership income or loss in their own tax return.
Late lodgement may result in penalties and interest charges from the ATO. It is important to meet deadlines or seek assistance if required.
Yes, the way business income is taxed depends on the structure used (e.g. sole trader, company, or trust), and each structure has different tax and reporting obligations.
A Tax File Number (TFN) is a unique personal reference number issued by the Australian Taxation Office (ATO) to individuals and entities for tax and superannuation purposes. It is used as the primary identifier within the Australian tax system to ensure that income, tax payments, and entitlements are correctly recorded against the correct taxpayer. Once issued, a TFN is generally retained for life, regardless of changes in employment or circumstances.
This allows the ATO to maintain accuracy and compliance across the tax system.
While it is not mandatory to provide a TFN, it is practically essential in most situations.
Providing your TFN helps ensure your tax position is managed accurately and efficiently.
You can apply for a TFN directly through the ATO. In most cases, the application can be completed online, with identity verification carried out digitally or via Australia Post depending on your circumstances.
This removes the need for traditional payment summaries for employees covered under STP.
A TFN is considered sensitive personal information and must be handled securely.
There are strict rules governing the collection, storage, and use of TFNs, and significant penalties may apply where the TFN system is misused or disclosed improperly.
TFNs should only be provided to authorised parties such as employers, financial institutions, or registered tax agents.
You can apply online through the ATO, with identity verification completed digitally or via Australia Post depending on your circumstances.
No, each individual or entity is issued with one TFN for life.
Yes, TFNs are sensitive information and should only be shared with authorised parties.
Single Touch Payroll (STP) is an ATO reporting framework that requires employers to report payroll information each time employees are paid, rather than through a single annual report. STP is integrated into most modern payroll software, allowing payroll data to be securely transmitted to the ATO in real time. This ensures that employer obligations are met progressively throughout the year.
STP operates through STP-enabled payroll software, which automatically sends payroll data to the ATO when a pay run is processed. Instead of preparing separate reports at year-end, payroll information is reported continuously, aligning directly with your pay cycle.
STP reporting applies to all employers, regardless of business size or number of employees. What was initially introduced for larger businesses is now a standard compliance requirement across all Australian employers.
For most employers, STP reporting must be completed on or before each pay run
This ensures payroll information is reported to the ATO in real time, improving compliance and reducing the need for end-of-year reporting adjustments.
Employees can access their payroll information through myGov (linked to the ATO), including:
This removes the need for traditional payment summaries for employees covered under STP.
At the end of each financial year, employers must complete an STP Finalisation Declaration to confirm that all payroll information reported through STP is accurate and complete. This process replaces the traditional issue of payment summaries for employees covered under STP.
Once finalised: Employees can access their finalised income statement through myGov Payroll information becomes “Tax Ready” for individual tax return preparation The ATO treats the finalised STP data as the official year-end payroll record What employers should review before finalisation: • Salary and wages reported throughout the year PAYG withholding amounts Superannuation reporting Allowances, deductions, and salary sacrifice amounts Termination payments and other employee-related reporting
Employers should ensure all payroll information is accurate before lodging the finalisation declaration, as employees rely on this information for their tax returns. For most employers, STP finalisation should generally be completed by: 14 July each financial year.
Yes, STP reporting is mandatory for all employers in Australia, regardless of business size.
STP reporting must generally be completed on or before each pay run.
No. Payment summaries are no longer required for employees reported through STP, as information is available via myGov.
You will need STP-enabled payroll software. Most modern payroll systems support STP.
Yes. Employees can view their information through myGov when linked to the ATO.
Missed or late reporting may result in compliance issues. It is important to report with each pay cycle.
Yes. Employers must complete an STP finalisation declaration to confirm all data is correct.
Tax Facts is a general reference and does not take your personal circumstances into account. For advice on your own situation, speak with our registered tax agents on 1300 043 325.
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