Australian Tax Guide — Playing the Game Legally

General information only. Not financial or legal advice. Consult a registered tax agent. This guide is a plain-English map of deductions, offsets, and structures that are available to ordinary wage earners under Australian tax law. Every major section links to the ATO's primary-source guidance so you can verify — and so you can take it to your accountant.

The brackets (2025–26, resident individuals)

Taxable income Marginal rate
$0 – $18,200 0%
$18,201 – $45,000 16%
$45,001 – $135,000 30%
$135,001 – $190,000 37%
$190,001+ 45%

On top of this: - Medicare levy: 2% of taxable income (phased in from $27,222 for singles). - Medicare Levy Surcharge: 1–1.5% extra if your income exceeds $97k (single) / $194k (family) and you do not have eligible private hospital cover. - HECS/HELP: 1–10% of repayment income, applied to the whole amount once you cross $67,000 — not just the excess.

Source: ATO — individual income tax rates

The big levers for a wage earner

1. Salary sacrifice to super (concessional contributions)

  • You can direct up to $30,000/year (2025–26 cap) of your pre-tax income into super.
  • It is taxed inside super at a flat 15% instead of your marginal rate (up to 47% including Medicare).
  • At a 30% marginal bracket, every $1,000 salary-sacrificed saves you $150 in tax this year; at 37% it saves $220; at 45% it saves $300.
  • Unused cap carry-forward: if your super balance is under $500k at 30 June of the previous year, you can roll forward unused concessional cap for up to 5 years — so a single big year can soak up several years of missed contributions.
  • Source: ATO — concessional contributions cap

2. Non-concessional contributions

  • Up to $120,000/year (2025–26) of after-tax money into super, or $360,000 under the three-year bring-forward rule.
  • No upfront deduction, but earnings inside super are taxed at 15% (or 0% in the retirement phase).
  • Useful when you have a sudden lump (inheritance, bonus, house sale).
  • Source: ATO — non-concessional contributions cap

3. Spousal contributions and split

  • Contribute up to $3,000 to a low-income spouse's super and claim an 18% tax offset ($540).
  • Split up to 85% of your concessional contributions to your spouse's super after year end.
  • Useful for evening out balances — matters because of the $1.9m transfer balance cap per person.
  • Source: ATO — super contributions for your spouse

4. Low Income Tax Offset (LITO)

  • Up to $700 tax offset if you earn under $37,500.
  • Phases out at 5c/$ between $37,500–$45,000, then 1.5c/$ to $66,667.
  • Automatic — you don't claim it, it's applied when your return is assessed.
  • Source: ATO — low income tax offset
  • Work from home: fixed rate method (70c/hour for 2024–25, includes electricity, phone, internet, consumables) or actual cost method.
  • Car: cents-per-km method (88c/km for 2024–25, up to 5,000 km) or logbook method.
  • Self-education: courses directly connected to your current income-earning activity, including course fees, textbooks, internet, depreciation on a laptop.
  • Tools, uniforms, professional subscriptions, union dues, income-protection insurance premiums.
  • Source: ATO — deductions you can claim

6. Donations

7. Private health insurance rebate

  • Means-tested rebate of 8–33% on private hospital premiums, depending on age and income.
  • Also removes the Medicare Levy Surcharge (1–1.5%). For a single earner above $97k, the MLS often exceeds the cost of a basic hospital policy — meaning private cover is effectively free or tax-positive.
  • Source: ATO — private health insurance rebate

Structural levers (non-wage income)

These require more setup, and almost always require a tax agent to run correctly. They are widely used by professionals, tradies running their own business, and anyone with investment income.

Negative gearing (investment property or shares)

  • If your investment loan interest + property running costs exceed the rental income, the loss is deductible against your other income.
  • You're effectively letting the taxpayer subsidise part of your investment while the capital value grows.
  • Combined with the CGT 50% discount below, this is the single most consequential tax structure in Australia.
  • Source: ATO — rental property — claiming a loss

CGT 50% discount

  • If you hold an asset (shares, investment property) for more than 12 months, only half of the capital gain is taxable.
  • Source: ATO — CGT discount

Main residence exemption

  • The home you live in is completely exempt from CGT.
  • Can be extended for up to 6 years after you move out (rental), and layering rules let people treat successive homes as exempt.
  • Source: ATO — your main residence (home)

Franking credits

  • Dividends from Australian companies carry "franking credits" for the 30% company tax already paid.
  • If your personal marginal rate is below 30%, you get a refund of the difference (including all the way down to zero income — a cash refund).
  • This is why retirees with large share portfolios in pension-phase super can receive franking credit refunds that effectively tax the government.
  • Source: ATO — franking credits and dividends

Family trusts (discretionary trusts)

  • Income is distributed each year at the trustee's discretion to beneficiaries (family members), who pay tax at their own marginal rate.
  • Useful when family members have different incomes — a high-income earner running a business through a trust can distribute some income to a lower-earning spouse or an adult child.
  • The ATO's TR 2022/4 "section 100A" ruling has tightened how far this can go; seek advice.
  • Source: ATO — family trusts and discretionary trusts

Small-business CGT concessions

  • If you sell an active business asset, up to $500,000 of the gain can be disregarded or rolled into super (retirement exemption), on top of the 50% discount.
  • Four concessions stack: 15-year, retirement, active asset reduction, rollover.
  • Source: ATO — small business CGT concessions

Division 293 (the high-income super tax)

  • Additional 15% tax on concessional super contributions for earners above $250,000.
  • Still half the marginal rate — salary sacrifice remains beneficial above the threshold, just less so.
  • Source: ATO — Division 293 tax

Records to keep

Five years from the date you lodge your return. Bank statements, receipts, logbook pages, diary entries for deductions without receipts, and proof of donations. Keep a running file during the year — not a shoebox at 30 June.

Where to get real advice

Disclaimer

This is educational material, not financial or legal advice. Tax law is complex, your circumstances matter, and penalties for getting it wrong are real. Use this as a starting point for a conversation with a registered tax agent — not as a DIY guide.

Last reviewed: 11 Apr 2026