In partnership with Student Super
Dropping the facts on tax
Who pays for things like roads, the army, police, hospitals and public schools?
We all do. Everyone in Australia chips in and pays for these through the tax system - it’s how our government gets money.
What’s income tax?
When you get paid for work, you have to pay, by law, a percentage of your income to the government.
Who collects income tax?
The ATO, the Australian Tax Office. Their website is surprisingly helpful: ato.gov.au.
The government isn’t dumb.
They could have designed a system where they just send you a tax bill at the end of each year and ask you to pay… Imagine what would happen. Everyone would be “Oh… ummm can I pay next month? I don’t have that money right now”.
So, how does it work?
The government created a system, so you pay your tax before it is even given to you! Smart… your employer sets it aside when you get paid and later sends it to the ATO.
What’s a TFN?
A “tax file number” is your member number at the ATO. You only have one to keep for life. Your boss will send your tax to the ATO along with your TFN, so the ATO knows who the tax belongs to. Your employer will ask you for your TFN on your first day. If you don’t tell them, the ATO requires you to pay 47% tax!! So, make sure you fill in the “Tax File Number Nomination Form”. You can even get the form on the ATO website1 and fill it in before you start.
How do I know if my tax is paid?
Your boss should give you a pay slip each time you are paid. It shows how much money your boss has set aside to pay to the ATO for you. It doesn’t mean it’s been paid.
You don’t have to worry if your boss actually paid it or not. It’s now the tax office’s money, and they chase your employer if they didn’t actually pay it. They regard you as having paid it, if your boss held it back from your pay.
How much tax will I pay?
There is no single percentage that applies to everyone. The percentage gets higher the higher your income. The government sets out brackets of income and has a percent you pay for each. The first bracket is 100% tax free!
| Taxable income | Tax on this income | |
|---|---|---|
| $1 - $18,200 | Zero | |
| $18,201 - $45,000 | 16c for each $1 over $18,200 | |
| $45,001 - $135,000 | $4,288 + 30c for each $1 over $45,000 | |
| $135,001 - $190,000 | $31,288 + 37c for each $1 over $135,000 | |
| $190,001 and over | $51,638 + 45c for each $1 over $190,000 |
Current as at 01/07/2025. Income tax rates are subject to change; this is current for the financial year 2025-26 (1 July 2025 - 30 June 2026)2.
What is the “tax-free threshold”?
Everyone freaks out a bit when they get asked “Do you want to claim the tax-free threshold?” on the Tax File Number Declaration Form. You fill this form in every time you start a new job.
If you are working two jobs at the same time, you can only claim this with one job.
If you don’t tick the box - your employer will assume you earn over $18,200 at another job, and start your tax from your first dollar of income.
Don’t worry too much - if you get it wrong, it all gets sorted out when you lodge your tax return. If you ended up paying too much tax, you could get a refund at the end of the financial year.
What is the “cash economy”?
Sometimes you will be offered “cash jobs”. Think about it - if you get paid in cash (not through a bank account) you could hide the income from the government… and avoid paying your tax! You are a genius… except, you’re not. It’s completely illegal. Plus, it is immoral - everyone chips in to pay for community resources.
Why do some bosses offer you cash?
If you don’t get a payslip showing tax and super, they could be paying you less than they are required to pay you. If you normally get paid $25 an hour (of which after-tax you keep, say… $20), a cash job might offer you only $22 an hour, and won’t pay you any super. Just remember, this is illegal.
What’s a tax return?
At the end of the financial year (June 30), the ATO asks you to list all your income for the financial year (e.g. 1 July 2025 to 30 June 2026).
They then look up how much tax you actually paid, and either give you a refund or a bill. If you are connected to the ATO on your myGov account, you can lodge a tax return electronically on the my.gov.au website. Individuals have until Oct 31 to complete their tax return. The ATO has info on lodging your first tax return here3.
Why do young people often get a refund?
Young people often work for short periods - like over summer. But also have periods when they don’t work. If you have a summer job, your boss calculates your tax by estimating your annual income. To do this, they have to assume you work the same hours for 52 weeks a year. But often you aren’t working 52 weeks, so your estimate of annual income is too high, then you end up paying too much tax. However, when you do your tax return, the ATO gets the real number and realises if you paid too much and sends you a refund!
- Tax file number declaration - https://www.ato.gov.au/forms-and-instructions/tfn-declaration
- ATO Individual tax rates, current 2025-26 - https://www.ato.gov.au/tax-rates-and-codes/tax-rates-australian-residents
- https://www.ato.gov.au/individuals-and-families/your-tax-return/how-to-lodge-your-tax-return/lodging-your-first-tax-return
The information which is summarised above does not constitute taxation, financial or other professional advice and is general in nature.