Australian Income Tax Rates 2022

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Australian income tax rates are different for companies and individual tax payers. This article gives a summary of the different rates for different classes of taxpayers in the 2022FY.

Tax rates are favorable for most companies compared to the 2021FY while they have remained the same for individuals and sole traders.

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Personal income tax rates 

The following personal income tax table shows the amount of tax payable on every dollar for each income tax bracket depending on gross income.

There are different tax rates for different classes of individual taxpayers:

a. Residents - To be considered as Australian resident, one should:

• Have always lived in Australia or came to Australia and intends to live here permanently
• Have been in Australia continuously for six months or more, and for most of that time worked in the one job and lived at the same place
• Have been in Australia for more than six months of the year, unless your usual home is overseas and you do not intend to live in Australia
• Go overseas temporarily and you do not set up a permanent home in another country
• Are an overseas student who has come to Australia to study and are enrolled in a course that is more than six months long. 

There are also four statutory tests to determine your residency:

• Resides test
• Domicile test
• 183-day test
• The commonwealth superannuation test.

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                                                                                    ***The above rates do not include the Medicare levy of 2%.

 b. Foreign Residents - Are usually those who live outside Australia during the year or spend fewer than 183 days in that tax year in Australia.

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c. Children – are under the age of 18, and receive unearned income (for example, investment income). Special rules apply to income earned by people under 18 years old. Under these rules you may pay tax at a higher rate on certain types of income such as a distribution from a family trust.

For under 18 year olds, a portion of income may be taxed at a higher rate than an adult.

However, the child pays the same individual income tax rates as an adult for:

• all income receive if the child is an 'excepted person' – this may apply if the child:

• had finished full-time study and is working full time
• had disabilities, or
• is entitled to a double orphan pension

Or

• income receive as 'excepted income' – this includes

• Employment or business income
• Centrelink payments
• Income from a deceased person's estate.

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‍d. Working Holiday Makers 

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Working holiday makers can do any kind of work during their stay in Australia, but this is generally limited to six months’ work with any one employer, unless the Department of home affairs has given permission to work with the same employer for longer than six months. A special tax rate applies when you employ a working holiday maker – this is sometimes referred to as the 'backpacker tax'.
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These rates apply to working holiday maker income regardless of residency for tax purposes.

 A working holiday maker has the following visa subclass:

• 417 (Working Holiday)
• 462 (Work and Holiday)

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Sole trader tax rates

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A sole trader is the simplest form of business structure and is relatively easy and inexpensive to set up. A sole trader is legally responsible for all aspects of the business including any debts and losses and day-to-day business decisions.

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A sole trader can employ other workers, but cannot employ themselves. He is responsible for his own super and the super of any other workers he employs.

As a sole trader, the below should also be considered:

• Use of individual tax file number when lodging your income tax return
• Report all income in your individual tax return, using the section for business items to show the business income and expenses (there is no separate business tax return for sole traders)
• Apply for an ABN and use ABN for all your business dealings
• Register for Goods and Services Tax (GST) if annual GST turnover is $75,000 or more
• Pays tax at the same income tax rates as individual taxpayers and may be eligible for the small business tax offset
• Put aside money to pay income tax at the end of the financial year - usually, a sole trader will do this by paying quarterly Pay As You Go (PAYG) instalments
• Claim a deduction for any personal super contributions made after notifying the fund.

Also, a sole trader can't claim deductions for money 'drawn' from the business. Amounts taken from the business are not wages for tax purposes, even if the sole trader thinks of them as wages.

Base rate entity company tax rates 

  The company tax rate for base rate entities has fallen from 27.5% to 26% in 2020–2021 financial year and is now down to 25% for 2021–2022 and later income years. 

A base rate entity for an income year is a company which meets the following criteria:

• the company’s aggregated turnover for that income year is less than the aggregated turnover threshold for that income year ($50m for 2022FY), and
• 80% or less of  assessable income in that income year is base rate entity passive income – this replaces the requirement to be carrying on a business from the 2017–18 income year onwards.

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Looking for an accountant to lodge your 2022FY return?

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CTK Accounting is an Australian based CPA firm operating out of Wollongong, NSW.

We are proactive and responsive and service clients from Sydney, the Illawarra and beyond.

Contact us through our website or email us at: admin@ctkaccounting.com.au

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