Why am i paying so much tax

One of the questions that a number of tax payers ask is ‘Why am I paying so much tax?” The answer is fairly straightforward. The amount that you pay in taxes correlates directly with the amount of income you earn during the financial year. The ATO has broken down income levels into what is referred to as ‘Tax Brackets’. Below are the various tax brackets and also the amount taxable by the ATO.

Taxable Income Tax on Income
$0.00-$18,200 Tax Free Threshold ($0.00)
$18,201-$37,000 19% of amount over $18,000
$37,001-$80,000 $3,572 plus 32.5 % of amount over $37,000
$80,001-$180,000 $17,547 plus 37% of amount over $80,000
180,001 and Over $54,547 plus 45% of amount over $180,000


Looking at the above table you will find that your income falls into one of the five categories. Once you have located the bracket your income falls into, in the right hand column, you can calculate the amount you are liable to pay for the year.

For example; if you earn $38,000 annual income, you will fall into the third bracket, $37,001-$80,000. The amount over $37,000 is $1000. As a result your tax due to the government, without application of the Medicare levy, would be $3,752 plus $325, or $3,897.  This is your basic tax.

On top of the basic tax, you will also be liable for the Medicare levy, unless you have an exemption from it. The Medicare Levy is a standard 2%.

Singles earning over $90,000 or couples over $180,000 will also be liable for a Medicare levy surcharge of 1-1.5% if they don’t have Private Health Insurance.

For those fortunate enough to be earning over $180,000 there is also a temporary Budget Repair Levy.  This is set at 2% of your earnings over $180,000 and applies only to the 2014-15, 2015-16 and 2016-2017 income years.

When it comes to understanding your tax obligations the ATO website offers a comprehensive source of information, as well as asking your tax agent when you next meet with them.