Taxes in Australia: What no one told you and how to keep them from hitting your wallet

Moving to Australia is an exciting experience, but—just like in any country—managing your personal finances is key to maintaining balance in your daily life. One of the main concerns for newcomers is understanding how taxes can impact their wallet. Whether you're working, saving, or simply planning your finances, understanding taxes in Australia is essential to having a stable and successful financial experience.

In this blog, we’ll explain how taxes in Australia affect your finances and share practical tips to help you optimise your financial situation. Keep reading and get ready to manage your finances like a pro!

What Are Taxes in Australia and How Do They Work?

In Australia, taxes are essential for funding public services, infrastructure, and social benefits. The Australian tax system is based on a progressive model, which means that people who earn more pay a higher proportion of tax.

What Taxes Should You Know About?

• Income Tax: This is the main tax that affects your salary. The rate varies based on your income, and you may pay between 0% and 45% depending on how much you earn.

  
  

• GST (Goods and Services Tax): A 10% tax on most goods and services in Australia. You'll see it applied when you buy products or services in any store.

  
  

• Medicare Levy: Permanent residents pay 1.5% of their annual income to contribute to Australia’s public healthcare system, Medicare.

  
  

How Is Income Tax Calculated?

Income tax is calculated in brackets, meaning the more you earn, the higher the tax rate on the portion of income in each bracket. For the 2024–2025 financial year, the rates are:

• Up to $18,200: 0% tax (this is your tax-free threshold)

• $18,201 to $45,000: 19% on the amount over $18,200

• $45,001 to $120,000: 32.5% on the amount over $45,000

• $120,001 to $180,000: 37% on the amount over $120,000

• Over $180,000: 45% on the amount over $180,000

  
  

So, if you earn $60,000 per year, only a portion of your income will be taxed at the higher rates. And don’t worry—all residents are eligible for deductions that can reduce the amount of tax you pay, such as work-related expenses.

What About GST? Does It Affect Your Wallet?

GST: The tax in every purchase.

GST is a 10% tax added to almost all goods and services you purchase in Australia. This means whether you buy a coffee, clothing, or even internet services, you’re paying 10% more due to this tax.

Although it’s not deducted directly from your salary, GST impacts your daily budget, so it’s important to factor it into your spending. Some essential items like certain groceries and medical services are exempt from GST.

Pro tip: If you frequently spend on goods and services, it's a good idea to budget for this additional 10% to avoid surprises at checkout.

Medicare Levy: Your Contribution to Public Healthcare

Why do you pay the Medicare Levy?

One of the benefits of living in Australia is access to public healthcare through Medicare. All permanent residents are required to contribute by paying the Medicare Levy, which is 1.5% of their annual income. This allows you to access high-quality medical services for free or at a low cost.

For many, this is a valuable benefit that significantly reduces healthcare costs. However, temporary visa holders, such as international students or short-term workers, may not be required to pay the Medicare Levy. Be sure to check your specific situation with a tax advisor to understand your obligations.

Practical Tips to Manage Your Taxes and Improve Your Financial Situation

1. Keep detailed records of your expenses:

Knowing how much you're spending on goods, services, and other costs is essential to controlling your money. Since GST is added to almost everything, being aware of your purchases will help you better estimate your monthly spending.

2. Take advantage of tax deductions:

If you're working, remember you can deduct certain work-related expenses, such as uniforms, materials, work-related travel, and more. Keep detailed records of these to reduce your taxable income and pay less tax.

3. Consult a tax expert:

If you're just starting to work in Australia or are unsure about managing your taxes, it’s wise to speak with a tax advisor. They can provide personalised recommendations to help you optimise your financial situation.

Final Thoughts

Taxes in Australia—like Income Tax, GST, and the Medicare Levy—are a fundamental part of the system that funds public services and social well-being. But with some planning, you can optimise your financial position and make sure your wallet doesn’t suffer.

If you're new to Australia, make sure you understand how taxes work so you can be well-prepared. Keep good records of your expenses and make use of available deductions. And don’t forget that getting the right advice can make all the difference.

With this information in hand, you’re ready to make smarter financial decisions and enjoy your experience in Australia—without tax-related worries!

If you have questions about the process or need guidance, feel free to reach out to us on our new WhatsApp line for personalised assistance. At AustraliaPRO, our expert team is ready to support you through the entire migration process and ensure you meet all necessary requirements.

📍 Click here to request your free consultation now.