Individual & company tax rates you should know to help EOFY tax planning
Whether you’re an employee, self-employed, or run a business, everyone should understand their obligations to the taxman.
Knowing your tax rates is essential for financial planning and decision making, ensuring you meet compliance requirements. This knowledge can also spotlight opportunities for refining and optimising your tax strategy so you more effectively reach your financial goals, whatever they may be.
Individual tax rates.
Know your tax bracket.
Australia has a progressive tax system, which means the higher your income, the more tax you pay. Income tax is applied to an individual’s taxable income and is payable on all forms of income, including wages, business profits and investment returns. It can also apply to the sale of assets, such as shares or a house.
The following individual income tax rates apply for both the 2023 – 2024 and the 2024 – 2025 financial year:
- Income of $0 - $18,200: $0.00
- Income of $18,201 - $45,000: 16c for each $1 over $18,200
- Income of $45,001 - $135,000: 30c for each $1 over $45,000
- Income of $135,001 - $190,000: 37c for each $1 over $135,00
- Income of $190,001+: 45c for each $1 over $190,000
Please note, these rates do not include the Medicare levy of 2% and the tax-free threshold may be higher for eligible taxpayers, e.g. Seniors.
A quick look at Pay As You Go.
Employees generally pay income tax through Pay As You Go (PAYG) withholding. This is where your employer withholds a portion of your wage each pay period to cover their projected tax liability come June 30.
PAYG ensures employees meet end-of-year tax liabilities and may cover other payments such as superannuation, allowances, and certain government payments. Most notably, PAYG helps taxpayers avoid a large tax bill at the end of the financial year.
Info for sole traders.
If you’re a sole trader, it’s important that you understand that, for tax purposes, your income is considered personal income. This means you’ll pay the same income tax rate as an individual, and only need to lodge one tax return. In other words, the tax brackets above apply to your sole trader income.
Similarly, in a partnership, you’ll also pay individual income rates on your share of the partnership income. Both may pay their tax liability via PAYG instalments quarterly, rather than a lump sum at the end of the financial year.
A tax planning tip!
Consider paying deductible expenses before June 30th. Doing so is a proactive tax planning strategy that can help minimise tax liability, maximise tax benefits, and improve your financial management for the current and future tax years.
This would include investment expenses for rental properties (e.g. repairs), work related expenses, and making voluntary super contribution.
Company tax rates.
In Australia, companies are required to pay tax on their earnings. Company (or corporate) tax is a particular rate of income tax that only applies to incorporated businesses. This federal tax is a flat rate, meaning it doesn’t vary based on the amount of income.
The following company tax rates apply for both the 2023 - 2024 and 2024 - 2025 financial year:
- Base rate entities: 25%
- All others: 30%
Base rate entities are generally small or medium-sized businesses which fall below the aggregated turnover threshold of $50 million (combined between connected entities).
A company with predominantly passive income (more than 80%) cannot access the lower company tax rate as they’re not considered a base rate entity. Passive income includes rent, interest, or net capital gains — earnings not derived from the active operation of a business.
This tax will be applied to the company’s assessable income which is calculated by deducting allowable expenses from total income. It does not include GST collected on sales. As a distinct, legal entity, every company is required to lodge a tax return. Most companies pay this tax liability in quarterly instalments (via PAYG) throughout the year.
Professional tax planning is the way to go.
Gain a professional advantage in your tax preparation this year with Ascent. We’ll minimise your tax, maximise your benefits, help optimise your tax strategy and streamline the preparation process. saving you time, stress and money. Get in touch with our team today, and look forward to stress-free tax prep.
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