Personal Income Tax
Income tax on personal income is a progressive tax. The current tax-free threshold is $18,200, and the highest marginal rate for individuals is 45%. In addition, most Australians are liable to pay the Medicare levy, of which the standard is 1.5% of taxable income. On 10 July 2011, the Gillard Government announced that it would increase the tax-free threshold to $18,200 on 1 July 2012 as part of the Clean Energy Future package, while reducing the Low Income Tax Offset to $300.
As with many other countries, income tax is withheld from wages and salaries in Australia, often resulting in refunds payable to taxpayers. A nine-digit Tax File Number (TFN) must be quoted to employers for employees to have withholdings calculated using the various tax brackets. While it is not an offence to fail to provide a bank or financial institution with a TFN, in the absence of this number, employers are required to withhold tax at the rate of 46.5% (the highest marginal rate plus Medicare levy) from the first dollar. Likewise, banks must also withhold the highest marginal rate of income tax on interest earned on bank accounts if the individual does not provide their TFN to the bank. In the same way, corporate and business taxpayers are required to provide their TFN or Australian Business Number (ABN) to the bank, otherwise the bank will be required to withhold income tax at the highest rate of tax.
Read more about this topic: Income Tax In Australia
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