Tax Tip 127: Your Average Tax Rate

Discussion in 'Accounting & Tax' started by Terry_w, 21st May, 2016.

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  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

    9th Jun, 2006
    Australia wide
    Your Average Tax Rate

    Someone on $180,000 has reached the marginal tax rate of 47%, but that doesn’t mean they pay 47% in tax as the tax rates are a progressive rate with lower amounts taxed less than higher amounts.

    To work out the average tax rate that someone is paying work out the total tax payable and then divide this by the income.

    Don’t forget to include the Medicare levy. Easiest way to work out your tax rate is to use a website such as


    2015-2016 tax year

    On an annual taxable income of $180,000 the amount of tax payable is $57,832

    That is (just) 32.1%

    Worked out by 57,832/180,000

    Someone on $90,000 income will only pay $22,732 in tax which is merely 25.25%

    Hope this makes you tax payers feel a bit better?
    Simon Moore and Phantom like this.
  2. Greyghost

    Greyghost Well-Known Member

    23rd Jun, 2015
    Good post.
    Just not a good thought to know that every dollar I earn OVER the threshold will be taxed at this rate though..

    I wish I had that problem haha..
    Terry_w likes this.
  3. Scott No Mates

    Scott No Mates Well-Known Member

    18th Jun, 2015
    Sydney or NSW or Australia
    To quote the example:

    It makes me feel so much better knowing that although I have contributed more than 2.5 times the amount of tax paid than someone on half my income, in percentage terms it's only 27% more of my income. Now that's a progressive tax.
    Terry_w likes this.