Latest Tax News & Advice | Income Tax Professionals

The 6-Year Capital Gains Tax Exemption: A Homeowner’s Guide

Imagine being offered a financial lifeline that allows you to pursue your career dreams, travel the world, or adapt to life’s unexpected twists—all without being penalised for moving away from your principal place of residence. Welcome to Australia’s six-year capital gains tax exemption, a tax provision that could save you thousands of dollars in unexpected tax bills.

Consider these real-life scenarios:

You get a dream job in Singapore, but you aren’t ready to sell your Sydney apartment. Instead of losing the tax benefits of it being your main residence, the six-year rule allows you to rent out the property while maintaining your main residence CGT exemption.
You want to travel for a year and rent out your first home instead of selling. The 6-year rule ensures you won’t be hit with a massive tax bill when you return.

These are just a couple of the situations in which the six-year CGT exemption could be a life-saver. Since the possibilities are just about endless, we thought it was about time we gave you a detailed guide to the six-year CGT exemption.

In this comprehensive guide, we’ll fill you in on:

The exact mechanics of the 6-year rule
Detailed eligibility criteria
How to calculate potential tax implications
Strategies to maximise your tax efficiency
Common pitfalls to avoid
Practical examples that bring the rule to life

Whether you’re a property investor, a professional in a mobile career, or simply someone planning for life’s uncertainties, this guide will equip you with the knowledge you need to make informed decisions about your most valuable asset—your home.

What Exactly is the 6-Year Rule?

The 6-year rule is a nuanced provision that allows Australian homeowners to maintain their main residence exemption even after moving out and renting their property. It’s essentially a tax concession that recognises the fact that life doesn’t always follow a predicatable path.

The 6-year rule can kick in if you’ve purchased a home, lived in it for a while, but then circumstances require you to move or work elsewhere. Instead of immediately losing your CGT exemption when you decide to rent the property out, the Australian Taxation Office (ATO) gives you a generous window of opportunity to figure out what you want to do long-term.

How Does the 6-Year Rule Work?

After moving out, you can continue treating a property as your main residence for up to six years while earning rental income from it. This means when you eventually sell, you might still qualify for a full or partial main residence exemption.

While you can earn rental income during this period, it’s crucial to understand that the rental income will be taxable, and the property must maintain its potential as a principal residence.

Eligibility Criteria for the 6-Year Main Residence Exemption

Not everyone can take advantage of this tax benefit. There are specific conditions you’ll need to meet:

Prior Residence Status: The property must have been your principal place of residence before you moved out. You can’t apply this rule to a property you’ve never lived in.
Singular Main Residence: During the six-year period, you cannot nominate another property as your main residence. This is a crucial point that catches many property owners by surprise.
Rental Potential: You’re allowed to rent out the property during this period, but it must maintain its status as a potential principal residence.

Limitations of the 6-Year Rule to Keep in Mind

The six-year rule isn’t an unlimited get-out-of-tax-free card. Several important limitations exist:

If you rent the property for more than six years, CGT will apply to the additional time.
The rule doesn’t apply if you were never a resident of the property.
The rule doesn’t come into effect if you don’t actually move out (i.e., It doesn’t apply if you simply rent part of the property out while still living there).
Partial income use of the property (like running a home business) might still attract CGT for that portion.

It’s also crucial to understand that you cannot use this exemption as a permanent tax escape hatch. The six-year period is a carefully designed provision meant to provide flexibility for homeowners facing temporary life changes. It’s not a loophole for long-term tax avoidance.

For this reason, your documentation matters significantly. The ATO will require clear evidence that the property was genuinely your main residence and that your move was temporary.

This means keeping detailed records covering:

Evidence of your connection to the property
Proof of your original residency (electoral roles, drivers license etc matching the address during your period of residing as a principle residence before renting out)
Rental agreements
Documentation of any periods the property was vacant
Your intent to return

Pro tax tip: Vague or incomplete documentation could compromise your tax exemption, turning what seemed like a straightforward situation into a serious tax challenge.

If you’re considering applying for the main residence exemption, it’s worth speaking to one of ITP’s accountants to ensure you have all your bases properly covered. We live and breathe this stuff, so we can help you get the most out of the six-year rule without slipping into dangerous territory.

6-Year Rule Examples: The Main Residence Exemption in Action

Understanding the Capital Gains Tax (CGT) implications when selling your main residence can be extremely complicated. While your primary residence is generally exempt from CGT, the situation becomes more nuanced when the property has been used to generate income, such as through renting.

Adding to the confusion, there are many other factors that can impact your eligibility for the main residence exemption. The easiest way to wrap your head around it all is to take a look at a few real-world examples.

Before we get started, here’s a breakdown of how the exemption works:

Years as Main Residence: These years are typically fully exempt from CGT.
Years Generating Income: These years may be subject to CGT, depending on the circumstances.
Total Ownership Period: This period is crucial for calculating the proportional exemption.

Okay, now let’s see all these rules in action with a few scenarios:

Scenario 1: The Six-Year Rule and Early Termination

Meet David, a construction worker from South Australia:

In 2015, David purchased a property in Adelaide and lived there for the next three years.
In 2018, he relocated for work and rented out the property.
He purchased a new main residence in 2022.
He sold the Adelaide property in 2024.

David can choose to treat the Adelaide property as his main residence for the period he rented it out, up to six years from when he first moved out. However, since he purchased a new property and began living in it in 2022, the Adelaide property will be subject to CGT from 2022 up to the date he sold it in 2024.

David’s story demonstrates that the six-year rule can be ended early by the purchase of a new main residence.

Scenario 2: The Six-Year Rule with Intermittent Income Production

Meet Michelle, a real estate agent from Queensland:

Michelle bought a house in 2010 and lived there until 2017.
From 2017, she rented it out for three years.
She then left it vacant for two years before renting it out again for two years.
At the end of the last tenancy, it remained vacant until she sold it in 2025.

Because the total time the property was used to produce income was less than six years, and the vacant periods do not count towards income generation, Michelle can treat the entire period from 2017-2025 as her main residence for CGT purposes.

As you can see from Michelle’s example, the six-year rule can apply cumulatively across multiple rental periods.

Scenario 3: Resetting the Six-Year Limit

Meet Simon, a small business owner from Western Australia:

Simon purchased a property in 2009 and lived in it until 2014.
He rented it out from 2014 to 2019.
He then moved back in for two years before renting it out again for three years.
In 2025, he sold the property.

For Simon, each period of absence immediately following a period of residing in the house, is entitled to its own six-year CGT exemption. Therefore, because each rental period was less than six years long, Simon can claim the main residence exemption for the entire period.

Scenario 4: What Happens When the Six-Year Limit Is Exceeded?

If a property is used to generate income for more than six years during a single absence, CGT applies to the period exceeding the limit.

To demonstrate this, let’s take a look at Olivia’s situation in the Northern Territory:

In 2013, Olivia bought a remote property and lived in it for two years.
She moved out in 2015 and rented it for 10 years.

CGT will apply to the four years that exceed the six-year limit. The cost base of the property for CGT purposes is the market value at the time it was first used to generate income.

Scenario 5: Income Production Before Moving Out

If part of your home is used to generate income before you cease living in it, that portion is not eligible for the continuing main residence exemption.

Let’s consider Mark’s experience in Victoria:

In 2010, Mark purchased a house in Melbourne and moved in.
From 2012 to 2018, he used 30% of the house as a professional photography studio, while the remaining 70% was his main residence.
In 2018, Mark moved out and rented the entire property.
He sold the property in 2024, realising a capital gain.

The 30% of the property used as a photography studio means that portion will be subject to Capital Gains Tax for the entire ownership period. This means when Mark sells the property, 30% of his capital gain will be taxable.

The big thing to remember from Mark’s story is that using part of your home for business before moving out can have long-term tax consequences, permanently affecting the CGT treatment of that portion of the property. Renting out part of your home whilst living in it may also have the same consequences.

How to Maximise Your Tax Efficiency With The 6-Year Rule

Tactics That Can Help You

These steps can help you the best possible result when using the six-year rule:

Timing is Everything: Consider selling within the six-year window to get the most out of the main residence exemption.
Cost Base Management: Keep detailed records of all property-related expenses. These can be added to your cost base, effectively reducing your capital gain.
Market Value Assessment: Understanding your property’s market value at different points can help strategic decision-making.
Track Everything: Maintain comprehensive documentation of property use and document all periods of personal residence and rental.

Potential Pitfalls to Avoid

Some common mistakes can unexpectedly trigger full CGT. Be careful of the following:

Multiple Residence Claims: Claiming another property as your main residence during the six-year period automatically disqualifies you from the CGT exemption, potentially exposing you to full capital gains tax.
Exceeding the six-year rental window: Going beyond the six-year period means you’ll be liable for CGT on the additional rental years.
Poor Documentation: Without clear records, you may struggle to prove your eligibility for the CGT exemption, leaving you vulnerable to an ATO audit.
Income Generation: This can permanently reduce or eliminate your main residence CGT exemption.
Incorrect Calculations: Simple errors can lead to unexpected tax liabilities or missed opportunities for tax savings.

Pro tax tip: Foreign residents cannot claim the main residence exemption. So if your residency status changes, you might lose the ability to use the six-year rule.

Making the 6-Year Rule Work for You

The ATO’s six-year CGT exemption offers Australians a genuinely helpful way to account for the career changes, relocations, and personal transitions that are commonplace in modern life. It provides flexibility for property owners, giving you the freedom to take on new challenges and opportunities without stressing about the tax implications.

However, this powerful tax strategy comes with equally powerful implications. A single misstep can transform a massive tax advantage into an unexpected financial burden. The risks are significant. Incorrect documentation can invalidate your exemption. Misunderstood rental periods might trigger full capital gains tax. Partial property use can permanently reduce tax benefits.

With so much at stake, professional guidance is essential. A qualified tax professional can help you understand and work within the rules, protecting you from ATO scrutiny and developing strategies specific to your situation.

Contact ITP today, and we can help you get your strategy underway. Our accountants are absolute tax nerds who get ridiculously excited about helping people navigate these rules—we promise to turn this potential tax minefield into a brilliant financial adventure!

Why Buy A Franchise? All The Pros and Cons You Need to Know

Starting a business can change your life drastically, helping you create wealth, gain financial independence, and fulfil your lifelong dreams. Yet for many Australians with entrepreneurial spirit, the leap from aspiration to action is still daunting.

The current economic environment presents both challenges and opportunities for small business hopefuls. Rising costs, shifting consumer habits, and technology disruptions have complicated the traditional startup journey. Meanwhile, established brands continue to expand their footprint.

Franchising sits at this crossroads of big business and small enterprise. Its business model combines the independence of ownership with the scaffolding of proven systems. For many, it represents the perfect middle path between employment and standalone entrepreneurship.

While franchising mitigates certain risks, it introduces considerations that prospective business owners must carefully evaluate. The initial investment, ongoing fees, and operational restrictions can seem overwhelming without proper guidance.

As one of Australia’s largest franchisors, ITP Accounting Professionals has grown to include franchises across the nation, employing over 1,500 professionals and serving more than 200,000 clients. Our first-hand experience in successful franchise operations gives us unique insight into both sides of the franchising relationship.

The following guide walks you through everything you need to understand about franchising in Australia, helping you determine whether this path aligns with your business ambitions. We’ll cover:

What a franchise is and how the model works
The Australian Franchise Code of Conduct and legal requirements
Critical documents every prospective franchisee should review
Key questions your franchise agreement should answer
The advantages of purchasing a franchise
Current trends reshaping the franchise landscape
Financial considerations beyond the initial franchise fee
Resources for further investigation

With this knowledge, you’ll be better positioned to make an informed decision about whether franchising offers the right entry point for your business journey.

Let’s start with the obvious question…

Why Buy A Franchise?

Many aspiring business owners seek a middle path between starting from scratch and joining the corporate world. Franchising offers exactly that balance.

The Power of Proven Systems

When you purchase a franchise, you gain access to an established business system with proven results. This arrangement allows you to operate your own business while benefiting from methods refined through years of trial and error. The franchisor has already weathered early failures and adapted their approach accordingly—wisdom you get to inherit from day one.

The franchise model works through a structured partnership. As a franchisee, you invest in the right to use a recognised brand name, established business processes, and operational knowledge. The package typically includes comprehensive training, marketing support, and ongoing guidance. This transfer of expertise means you can focus on serving customers and growing your business, rather than reinventing operational systems or building brand recognition from nothing.

A Framework for Success

Consider the practical advantage: while independent business owners split their attention between multiple responsibilities, franchisees can concentrate on execution. The franchisor has already solved many fundamental business challenges, allowing you to direct your energy toward local market success.

Here’s what you can typically expect to receive when buying a franchise:

A recognised brand name that customers already know and trust
Comprehensive training in all aspects of the business operation
Marketing and advertising support at both national and local levels
Proven operational systems and business processes
Ongoing guidance and problem-solving assistance
Access to established supply chains and purchasing power
Territory protection from other franchisees in the same system

The relationship between franchisee and franchisor is formalised through a franchise agreement—a comprehensive legal document outlining each party’s rights and responsibilities. This contract specifies everything from territorial rights and fee structures to operational requirements and dispute resolution procedures. Once signed, it becomes your business constitution, providing both protection and parameters for your enterprise.

Franchising suits people who value independence but appreciate structure. The model blends entrepreneurial opportunity with systematic support—a combination that helps explain why franchise businesses generally show higher success rates than independent startups.

For the right person, this balance of freedom within a framework can be a brilliant foundation for business ownership.

The Risks of Buying a Franchise

Before you sign off any franchise document, make sure you undertake your due diligence. Ask many questions about the franchise so you understand what your requirements and costs are and if there are any risks you’ll be signing up for.

While franchising offers structure and support, it also comes with potential downsides that every prospective franchisee should carefully consider. Understanding these risks will help you make a more informed decision—one that aligns with your business goals and personal circumstances.

Here are the biggest risks to consider when buying a franchise:

Limited autonomy: You will have to stick to the franchisor’s established systems, with little scope for implementing your own ideas or innovations. This is great for some but can be a sticking point if you’re a creative thinker or someone who simply likes to have complete control over what you’re doing.
Contractual restrictions: Similar to the above point, franchise agreements often limit your ability to sell products, set prices, or choose suppliers.
Ongoing fees: Regular royalty payments and marketing contributions can impact your profitability, especially if you’re going through a slow period. Again, there are benefits that come in exchage for your franchising fees, but they are worth factoring in to your decision making process.
Territorial limitations: Your agreement may restrict expansion opportunities or fail to give you adequate protection from nearby competitors.
System-wide reputation impacts: Problems at other franchise locations can damage your business reputation, even if your service is excellent.
Franchisor financial instability: If the parent company struggles financially, support services may diminish while fee obligations remain. Not a fun time for franchisees.
Unexpected costs: Required renovations, equipment upgrades, or system changes can create unplanned expenses that you have no choice about going ahead with.
Exit challenges: Selling your franchise often requires franchisor approval and may involve substantial transfer fees and a mountain of paperwork.
Cultural fit issues: The franchise’s operational philosophy and values may conflict with your management style. This is something you should try to get a good feel for before signing any agreements.
Limited term of ownership: Most franchise agreements have fixed terms, requiring renewal with potentially different conditions.
Inflexible adaptation to local markets: Standardised operations may prevent effective response to unique local conditions. For example, if your franchisor is based in the Melbourne CBD, some of their rigid processes just might not be ideal for the franchise you want to set up in Far North Queensland. This won’t always be the case—the best franchisors recognise the need for regional differences. But it is something to check carefully before you sign up.

What Happens When You Buy a Franchise?

A good franchisor will give you an information statement outlining the risks and benefits of franchising. You should also receive a copy of:

The Franchising Code
A disclosure document
The franchise agreement in its final form
The appropriate information about lease arrangements

Don’t rush into a decision. At least 14 days should pass after the franchisor hands you all relevant information before you sign and make a non-refundable payment. However, you can take more than 14 days to make your decision if you need to—the most important thing is that you don’t feel rushed.

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Franchise Code

The Franchise Code of Conduct is a mandatory code in the form of a legal contract that must be adhered to by both parties. Any misleading or deceptive information should not be allowed.

The Code governs how the franchisor and franchisee should conduct themselves before entering into a franchise agreement, how they should act during the term of the franchise agreement and what they should do upon termination of the franchise agreement.

Disclosure document

The disclosure document details critical information for those considering buying a franchise. You should not be rushed into signing or making a payment by the franchisor or any of the franchisors parties.

You can take the Franchise Code and Disclosure Document to an independent legal professional (lawyer, business accountant, business advisor) so you fully understand each parties’ requirements and help you identify risks.

The disclosure document should include:

A disclosure document
Key facts sheet
Information statement
Franchise agreement
Lease documents if applicable

The Franchise Agreement

The franchise agreement gives the franchisor permission to offer the franchisee the right to carry on a business in Australia under a specified business system. More than that, however, this valuable document should answer all of your questions (even ones you might not have thought to ask).

Such questions include:

What fees and payments are you obligated to pay as a franchisee?
What are the terms of the franchise agreement?
What are the rights and restrictions around running your franchise?
Do you need to purchase certain capital equipment and products?
What are the marketing and advertising requirements?
How are disputes settled?
Is the franchisee entitled to any goodwill in the business?
How are contracts renewed?
How is an agreement terminated?

READ: TAX SCAM ALERT

Now That You Know The Ins and Outs: Why Purchase a Franchise?

For some people who want to own a business, this type of arrangement suits them down to the ground. The risks are real, but if you do your research, you can minimse, or at the very least, prepare for them. And there are plenty of attractive benefits that come along with being a franchisee.

Franchises give you a sense of security, knowing that the business model has a proven track record. If you work with a quality franchisor, you should also get:

Support

When you purchase a franchise, you’re buying into a strong support network. You’ll also be handed a proven blueprint detailing how to set up and run, as well as training on how to execute the business model effectively.

If you have any questions, or if something comes up that’s beyond your capabilities, there’s always someone to ask and to help you out. This may appeal to business owners who don’t have a lot of experience.

Established Brand

A perk of buying into a franchise is knowing that the brand has already been established in the marketplace. Recognition and loyalty normally take a business anywhere from between 2 to 5 years to establish. A franchise is a good way of short-tracking these hard-to-earn qualities.

You don’t have to start from scratch because your customer will already know your brand and what you offer. They’ll come to you with a ready need and confidence that you can attend to it. This normally contributes to a high success rate for new businesses.

Cheaper Operational Costs

It often costs less to start a franchise compared to launching a new business in the same industry. Because of the brand’s reputation, positive image, and proven track record of success in the market place, customers don’t have to learn who you are. They already trust the goods or services you provide.

Marketing and advertising annual fees offer great ‘bang for your buck’ as national campaigns are often much more effective than what could be achieved with the same budget over a smaller area.

Current Franchise Trends Worth Considering

The Rise of Flexible Franchise Models

Home-based and mobile franchises have surged in popularity, partly accelerated by recent global events. These models offer lower overhead costs and greater flexibility than traditional brick-and-mortar operations. Service-based franchises like home cleaning, pet care, and mobile repair services are among those that have risen in popularity.

Meanwhile, multi-unit ownership has become increasingly common. Rather than operating a single location, experienced franchisees often acquire rights to multiple territories or brands. This approach spreads risk across different markets while potentially increasing overall returns.

Technology and Innovation in Franchising

Modern franchise systems typically provide comprehensive digital tools for inventory management, customer relationship management, and performance analytics. The most competitive franchisors offer proprietary apps and software solutions that streamline operations and enhance customer experience. When evaluating potential franchises, the sophistication of their technology stack deserves close scrutiny.

Sustainability and Flexibility

Environmental sustainability has moved from niche concern to mainstream consideration. Franchises that emphasise eco-friendly practices often appeal to socially conscious consumers and may benefit from positive public relations.

The concept of semi-absentee ownership has also gained traction alongside the rise of interest in passive income streams. Some franchise models require only 10-15 hours of owner involvement per week, with day-to-day operations managed by hired staff. While this arrangement offers flexibility, it typically demands higher initial investment to support management infrastructure. Again, something you’ll need to weigh up when deciding which business model is right for you.

Financial Considerations Beyond the Franchise Fee

Capital Requirements and Cash Flow

When contemplating franchise ownership, many prospective buyers fixate on the initial franchise cost while overlooking financial factors that will kick in down the road. Don’t make the mistake of thinking “I’ll be making profits by then, so I don’t need to budget for future costs.”

Working capital requirements often surprise new franchisees. Beyond startup costs, you need to have sufficient capital on hand to sustain operations until profitability—typically six to twelve months.

Your franchisor should give you estimates of these working capital needs based on historical data from existing units. We recommend adding a buffer to these estimates to account for unexpected challenges.

Fee Structures and Ongoing Payments

The structure of ongoing royalty payments is another thing you need to have a solid look at. Traditional percentage-based royalties (typically 4-8% of gross revenue) can become burdensome during periods of thin margins. Some franchises have adopted fixed monthly fees or tiered structures that reduce rates as revenue increases. You need to find out precisely what the lay of the land is with the franchise you’re considering. Understanding how royalties might impact profitability under various revenue scenarios will help you avoid unpleasant surprises.

Marketing fund contributions constitute another regular expense. These fees—usually 1-3% of revenue—support national or regional advertising campaigns. The effectiveness of these marketing efforts varies dramatically between franchise systems. Be your own best friend and ask for specific examples of marketing initiatives and their measurable results before committing. Additionally, clarify what portion of marketing funds remains available for local market activities versus national brand campaigns.

Location and Supply Chain Economics

A franchise territory with 50,000 residents might yield dramatically different results than an identical business model serving 100,000 potential customers. Sophisticated franchisors provide territory analysis reports including population data, competitive landscape, and consumer spending patterns. These reports merit independent verification through census data and local economic development resources.

Supply chain economics can also impact certain franchise categories. Franchises requiring specialised inventory or proprietary products typically mandate purchasing through approved vendors. This arrangement can ensure quality consistency but sometimes at premium prices. Review the franchise disclosure document carefully for information about required suppliers and whether you can source items independently if you want to go that way.

Critical Financial Factors to Evaluate

When assessing the complete financial picture of a franchise opportunity, pay special attention to these often-overlooked elements:

Rent Escalation Clauses: Commercial leases can include annual increases that might eat into your revenue growth.
Exit Strategy Provisions: You need to know the terms for selling your franchise, including transfer fees and right-of-first-refusal clauses.
Tax Structure Implications: Look into the varying depreciation benefits and business expense deductions between franchise models.
Insurance Requirements: Is there mandated coverage that exceeds what you would choose for yourself?
Technology Fees: Are there any recurring charges for software platforms, websites, or digital marketing tools?
Franchisor Financial Stability: Do a deep dive into the parent company’s financial health as this can impact support services and fee stability. Review the franchisor’s financial statements (included in the disclosure document) and research any parent company thoroughly.

Still Keen to Buy a Franchise?

A franchise could be precisely the opportunity you’ve been searching for. Of course, like any business model, franchising presents both advantages and challenges that must be carefully weighed. So, do your due diligence, and take the time needed to make an informed decision.

At ITP, we’ve helped both new and experienced business owners set up successful tax accounting franchises across Australia, supporting our franchisees through every stage of their business journey. Our experience has shown that the right franchise match—combining a proven system with your skills and ambitions—can create a foundation for long-term success.

Before making any commitment, we recommend exploring all available resources to ensure you understand the full scope of franchise ownership. The Australian Competition and Consumer Commission provides detailed information about franchising that serves as an excellent starting point.

Keen to learn more about opening an ITP Accounting Professionals franchise? You can register your interest here.

Claim tax deductions from more than one job

Second Job Tax Deductions: How To Maximise Your Tax Return When Working More Than One Job

The alarm goes off at 5am, but you’re not just heading to your day job—you’re building something more. Whether you’re driving for a rideshare provider after hours, selling handcrafted items online, or picking up weekend shifts at a second workplace, you’re part of a growing movement of Australians with multiple income streams.

Earning income from multiple sources is a powerful strategy to accelerate your financial goals and possibly even pursue your passions. A second job might help you save for your dream home, pay off debt faster, or fund the startup you’ve been planning. But when tax season arrives, your clever income-boosting strategy can quickly turn into a compliance headache.

What can you claim? How much tax will you have to pay? Will you be penalised? These can be tricky questions, but once you’ve reached the end of this article, you’ll have a clearer idea of what you need to do (and what you should avoid at all costs).

In this comprehensive guide, we’ll demystify the tax implications of working multiple jobs. You’ll learn:

How to properly structure your tax withholding across multiple employers
When and how to claim the tax-free threshold correctly
Which expenses you can legitimately claim as deductions
How to handle travel between workplaces for maximum tax benefits
Ways to manage side hustle income to avoid unexpected tax bills
Strategies to smooth your tax payments throughout the year
Common pitfalls to avoid that could trigger an ATO audit

The most important thing to know first is whether to claim the tax-free threshold or not.

What Is The Tax-Free Threshold?

In Australia, the tax-free threshold is $18,200. This means that if you earn $18,200 or below, you are not obligated to pay income tax. When you earn more than $18,200, you’ll need to start paying income tax on the excess.

As a quick guide, if you earn more than $350 a week; $700 a fortnight; or $1,517 a month, you’ll need to pay income tax.

When you start working, your employer will ask you to fill out a Tax File Number Declaration Form to complete before you start work. You’ll need to state whether you want to claim the tax-free threshold on this form. If you only have one employer – always say YES.

Your employer will then take out income tax and pay it to the Australian Taxation Office (ATO) on your behalf with each pay period. If, at the end of the financial year, you have earned less than $18,200, you can claim back all your tax payments. If you’ve earned over $18,200, you’ll need to pay income tax, but your employer should have deducted enough tax to net you a small refund.

You can claim your work expenses as tax deductions in order to reduce the tax payable further, giving you even more of your tax back.

Pro Tax Tip: Don’t forget, payments from Centrelink are taxable income. They will ask you to fill out the same form if you receive payments from them.

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What If You Have More Than One Employer?

Some people work more than one job at the same time. Others earn an income from an employer while also receiving a taxable pension or government allowance.

The ATO require that you only claim the tax-free threshold from one employer, or payer. To do this, claim the tax-free threshold on the amount you earn the highest salary or wage from. This means you will have tax deducted at the lowest marginal tax rate for your income bracket.

On the tax file number application form for the other employer or payer, select NO for claiming the tax-free threshold. Your second employer will withhold tax from a higher marginal tax bracket. This is done to ensure you’ll be able to meet your end-of-year tax obligations and reduce the likelihood of you owing tax.

It’s pretty unpleasant getting taxed so heavily for your second job. But try not to stress about it. If you’ve paid too much tax, you’ll be able to claim the overpayment when you lodge your tax return.

What If You Earn $18,200 Or Less?

If you work multiple jobs but expect your combined annual income from all sources to remain below $18,200, you have a unique situation. According to the ATO, you can claim the tax-free threshold from all of your employers in this scenario.

Here’s how to handle it correctly:

When starting each job, complete your Tax File Number Declaration form and select “Yes” to claiming the tax-free threshold for each employer. This tells your employers not to withhold tax from your wages (or to withhold at a reduced rate), since your total income falls within the tax-free threshold.

If you’re making this choice, you’ll need to use a tax calculator to monitor your income carefully throughout the year. Should your circumstances change, and you realise you’ll earn more than $18,200 in total, you’ll have to:

Complete a Withholding Declaration form (available from the ATO)
Submit this form to your secondary employer(s)
Select NO to claiming the tax-free threshold from these employers

This ensures your secondary employers will start withholding the correct amount of tax, helping you avoid an unexpected tax bill at the end of the financial year.

Pro Tax Tip: Even if you’re earning below the tax-free threshold, it’s still important to lodge a tax return. This allows you to claim any tax that was withheld and potentially access other tax offsets or benefits you may be entitled to.

What If You End Up Paying Too Much Tax?

If you end up earning more than $18,200 per year and your employer or payer has withheld too much tax, you can apply to have the tax withheld reduced by completing and lodging a PAYG withholding variation application.

The ATO will then calculate how much tax you’re overpaying and let your employers or payers know.

Pro Tax Tip: Only do this if you’re sure of your income amounts or are disadvantages by current withholding rates. Typically, this form may be filled in when you are claiming negative gearing on an investment property and you don’t want to wait until you lodge your tax return to get your additional tax back.

Paying Too Little Tax?

If you’ve paid too little tax throughout the year, you’ll need to cover the shortfall when you lodge your return. As you can imagine, this isn’t a fun situation to find yourself in. So again, your best bet is to monitor your income and tax rates regularly, and ask your employer to increase your PAYG withholding tax if necessary.

Discovering you owe the ATO money can create significant stress, especially when it comes out of nowhere. If you get hit with a tax bill you can’t pay immediately, don’t panic. The ATO offers several options to help you manage unexpected tax debts:

Payment plans: The ATO allows eligible taxpayers to spread your tax debt over manageable installments. You can apply online through myGov for debts up to $100,000, or call the ATO directly for larger amounts.
Interest charges: Remember that the ATO typically applies a general interest charge (GIC) to unpaid tax debts. Setting up a payment plan right away can often save you from this interest, but we obviously can’t guarantee that. What we can say is that it’s always best to act promptly when you have a tax bill rather than putting it off for another day.
Hardship provisions: If paying your tax debt would cause serious financial hardship, you might qualify for release from some or all of your debt. This requires clear evidence of genuine financial difficulty.

To prevent tax shortfalls in future years, take these proactive steps:

Review your tax situation mid-year to ensure your withholding amounts align with your actual income
Calculate your expected annual income across all sources around December/January
If it’s looking like you’ll end up with a debt, ask your highest-paying employer to withhold additional tax
Consider making voluntary PAYG installment payments directly to the ATO quarterly
Create a dedicated savings account for tax, and transfer a percentage of any additional income

Pro Tax Tip: Having an ITP accountant complete your tax return ensures you claim every deduction, credit, and tax offset you deserve, reducing your chances of facing a surprise tax bill. ITP also provides free year-round tax advice to help you plan for your tax obligations, no matter how complex your income sources. This preventative approach can save you significant stress and potentially thousands of dollars over time.

Marginal Tax Rates

In Australia, the ATO sets marginal tax rates that take a percentage of your overall earnings. For each dollar you earn over the tax-free threshold, you’ll have to pay a certain amount.

For the 2024-25 financial year, the highest marginal tax rate in Australia is 45% for taxable incomes of $190,001 and over. You’ll also have to pay an amount for the Medicare Levy and/or Medicare Levy surcharge. To learn more about this, visit our guide to the Medicare Levy and which Australians are exempt.

There are different marginal tax rates for residents, foreign residents, and working holiday makers. Let’s take a look at the 2024-25 rates.

Resident tax rates for the 2024-25 income year (not including 2% Medicare surcharge)

Taxable Income	Tax On This Income
0 – $18,200	Nil
$18,201 – $45,000	16 cents for each $1 over $18,200
$45,001 – $135,000	$4,288 plus 30 cents for each $1 over $45,000
$135,001 – $190,000	$31,288 plus 37 cents for each $1 over $135,000
$180,001 and over	$51,638 plus 45 cents for each $1 over $190,000

Foreign resident tax rates for the 2024-25 income year

Taxable Income	Tax On This Income
0 – $120,000	32.5 cents for each $1
$120,001 – $180,000	$39,000 plus 37 cents for each $1 over $120,000
$180,001 and over	$61,200 plus 45 cents for each $1 over $180,000

Working holiday maker tax rates for the 2024-25 income year

Taxable Income	Tax On This Income
0 – $45,000	15%
$45,001 – $135,000	$6,750 plus 30 cents for each $1 over $45,000
$135,001 – $190,000	$33,750 plus 37 cents for each $1 over $135,000
$190,001 and over	$54,100 plus 45 cents for each $1 over $190,000

Note: Australia’s marginal tax rates changed significantly in the 2024-25 financial year thanks to the Stage 3 Tax Cuts. If you’d like to learn more about this significant upgrade to the tax system and how it’s affected your income, check out our complete guide to the Stage 3 Tax Cuts.

What If You’re Under 18?

The ATO applies different tax rules to minors (under 18) primarily to prevent income-splitting arrangements where parents might divert income to their children to reduce their own tax liability. However, for most young people working regular jobs, the tax situation is straightforward.

If you’re under 18 and earn income from:

Employment (wages from a job)
A business you actively participate in
A deceased estate

You qualify as an “excepted person” with “excepted income,” and the ATO taxes this income at the same rates as adults. This means you get the full tax-free threshold of $18,200 and the standard progressive tax rates above that amount.

For example, a 16-year-old working at a fast-food restaurant after school pays exactly the same tax rates as their 25-year-old colleague working the same shifts.

The higher tax rates only apply to “unearned income” for minors, such as:

Interest from bank accounts
Dividends from shares
Trust distributions
Rental income from properties gifted to minors

These types of passive income face higher tax rates:

The first $416 of unearned income is tax-free
Income between $417 and $1,307 is taxed at 66%
Income above $1,307 is taxed at 45%

Most working teenagers simply need to:

Apply for a Tax File Number (TFN)
Complete a Tax File Number Declaration form when starting a job
Lodge a tax return if they earn more than the tax-free threshold or have tax withheld

The different tax rules for minors primarily target sophisticated tax planning arrangements rather than young people earning wages from genuine employment.

Second Job Tax Deductions

You can claim deductions for all of your jobs on the same tax return. However, the ATO treats each job separately when it comes to work-related expenses.

Some key points to remember:

Track expenses by job: Keep separate records for each income source.
Apportion shared expenses: Your mobile phone might be 30% primary job, 20% side hustle, and 50% personal use.
Watch for overlap: Some items like professional memberships might apply to multiple roles.

Common second job deductions include:

Tools and equipment specific to that role
Protective clothing and uniforms (not regular business attire)
Travel between workplaces on the same day (more on that below)
Home office expenses for after-hours work
Professional development directly related to your additional job

Second Job Tax Deductions: Real-life Examples

Consider a nurse who also works as a personal trainer. She can claim nursing scrubs, professional registration fees, and specialised shoes for her hospital role. Meanwhile, she can deduct fitness equipment, liability insurance, and relevant certifications for her training business. Travel directly from the hospital to the gym could also be deductible, unlike her regular commute.

We find clients often miss legitimate second job deductions. A retail worker who drives for a rideshare company might not realise they can claim car maintenance, cleaning, phone mounts, and even a portion of their music streaming service for driving shifts, while separately deducting uniform items and required footwear for their store position.

Record-keeping becomes doubly important with multiple income streams. The ATO looks particularly closely at claims across different jobs. Using the myDeductions tool in the ATO app helps separate expenses by employment type.

Remember: Tax minimisation through legitimate deductions is perfectly legal—just keep proper documentation to support your claims.

Deducting Travel Between Work Locations

Many Australians are unaware they can claim travel expenses between different workplaces. This often-overlooked deduction is particularly valuable when you’re juggling multiple jobs. The ATO allows you to claim travel expenses when you move directly from one workplace to another without stopping at home.

For example, if you work at a café in the morning and then head straight to your retail job in the afternoon, the cost of that journey could be tax-deductible. This applies whether you drive your own vehicle, take public transport, or use rideshare services.

Pro Tax Tip: Keep meticulous records of your travel between workplaces. A digital logbook app can track journeys and calculate deductions automatically. For public transport users, keep receipts or statement records of your transport card. The ATO may request evidence during an audit, and poor record-keeping can result in denied claims.

Remember that travel from home to your first workplace, or from your last workplace to home, remains non-deductible. The deduction applies only to the direct travel between separate work locations.

Managing Your Side Hustle Tax Obligations

The gig economy continues to thrive in 2025, with many Australians supplementing their income through side hustles. Whether you’re delivering food, selling handcrafted items online, or consulting on weekends, understanding how to manage your tax obligations properly can save you from unexpected tax bills.

A common misconception is that small amounts earned from side hustles don’t need to be declared. The reality is that, outside of hobby income, every dollar earned must be reported on your tax return, regardless of the amount. The ATO’s data-matching capabilities have expanded significantly in 2025, making unreported income increasingly difficult to hide.

Pro Tax Tip: The PAYG instalment system works particularly well for side hustles with inconsistent income. Rather than facing a substantial tax bill at year-end, you can make quarterly payments based on your estimated earnings. This smooths your cash flow and prevents the shock of a large lump-sum payment.

Perfecting Your Taxes With Multiple Income Streams

Balancing tax obligations across multiple income streams requires more than a casual understanding of ATO guidelines. It demands knowledge of which expenses overlap, which remain separate, and how to document everything properly. Most people would rather spend their precious time actually earning from their second job than reading tax rulings about it.

This is why it’s so important to have a tax professional in your corner. As ITP accountants, we see countless Australians struggling to maximise deductions across various jobs while staying compliant. Tax rules change frequently. Yesterday’s legitimate deduction might become tomorrow’s audit trigger. That part-time graphic design work might have different claim criteria than your full-time retail position. Those differences matter.

If your tax situation involves multiple employers or side hustles, an ITP Accounting Professional can ensure you pay the right amount—not a dollar more, not a dollar less. We’ll help you claim every legitimate deduction while keeping the ATO happy.

Phone 1800 367 487 to chat with a Professional today about turning your multiple income streams into maximum tax efficiency.

The Bottom Line: Is There GST on Cryptocurrency?

From Bitcoin to Ethereum, crypto assets are becoming increasingly mainstream in Australia. But the tax implications can be a nightmare to wrap your head around. We often get asked questions like, “is there GST on cryptocurrency?”, “When is crypto trading considered a business by the ATO?”, and “How do I calculate capital gains tax on my cryptocurrency?”

Knowing the answers to these questions is crucial if you want to avoid paying too much tax while staying on the right side of the ATO. Of course that’s what you want, which is why we’ve created this comprehensive guide to crypto, GST, and taxes in general.

While the crypto space has seen its share of scams and rug pulls, those risks are beyond the scope of this article. Instead, we’ll focus on legitimate business use cases for cryptocurrency and the tax obligations that come with them.

This guide covers everything you need to know about crypto taxation in Australia. By the end, you’ll have a solid understanding of:

GST treatment of digital currency
How to determine whether you’re running a crypto business
When to register for GST
How to handle international transactions
What your record-keeping requirements are
And special considerations for mining and emerging crypto assets

First, The Basics: Is There GST on Cryptocurrency?

Since 1 July 2017, the ATO has made it clear that sales and purchases of digital currencies are not subject to GST. Good news for traders—you won’t have to pay GST on sales, but the flip side is that you can’t claim GST credits for purchases when you use or trade digital money.

The story changes if you’re running a business that transacts in digital currency or accepts crypto as payment. In these cases, GST consequences need careful consideration. Here’s why:

When your business accepts crypto as payment for goods or services, the transaction is treated as two separate events for tax purposes:

The sale of your goods or services (which may attract GST)
The acquisition of digital currency (which is input-taxed)

For example, if your retail business sells products and accepts Bitcoin as payment, you’ll still need to:

Calculate and remit GST on the sale based on the Australian dollar value of the crypto at the time of the transaction
Record the acquisition of the Bitcoin at its AUD value
Account for any capital gain or loss when you eventually dispose of the Bitcoin

Similarly, if your business model involves buying and selling cryptocurrency, different GST rules apply depending on whether you’re dealing with Australian residents or international customers. These distinctions affect whether your crypto trades are input-taxed financial supplies, or GST-free supplies, which directly impacts your GST reporting obligations and potential credit claims (we get deeper into these details below).

Pro Tax Tip: Crypto exchanges operating in Australia must register with AUSTRAC as financial service providers. No shortcuts here—compliance is mandatory.

Are You Running a Crypto Business? The ATO’s View

Understanding whether the ATO considers you to be running a business is crucial for assessing your GST obligations. The tax department asks several questions when assessing a business:

Do you operate under a registered business name with an Australian Business Number (ABN)?
Do your activities demonstrate a clear profit motive?
Do your transactions follow consistent patterns, with proper business records, separate bank accounts, and appropriate licenses?
Do you conduct repeated business transactions in an organised, business-like manner?

Pro Tax Tip: Once your business hits an aggregated annual turnover of $75,000, GST registration becomes mandatory. You’ll report GST obligations through your Business Activity Statement (BAS) and can claim GST credits on transactions other than digital money.

It’s also worth noting that GST turnover calculations exclude input-taxed sales, which includes sales of digital currency. If your only business activity is selling digital currency, you might not need to register for GST, though normal income tax rules still apply.

CHAT WITH A FRIENDLY ITP TAX ACCOUNTANT TODAY

When to Register for GST (Even If You Don’t Have To)

Registering for GST is optional if you’re below the $75,000 threshold, but might be worth considering based on:

Your tolerance for the additional record-keeping and reporting requirements
Whether GST applies to your other taxable sales
Your ability to claim GST credits on creditable purchases
Potential GST credits on reduced credit acquisitions

You might be able to claim GST credits from associated services like commission costs, brokerage fees, services enabling digital currency trading, and charges from financial institutions.

GST-Free Crypto Sales to Non-Residents

When selling digital currency to non-residents for Australian taxation purposes, your sales are GST-free. This means you don’t charge GST on these sales but can still claim GST credits for costs incurred while making those sales. Standard GST registration requirements still apply.

Using Digital Currency for Business Transactions

Using crypto to pay for business goods and services has no GST consequences by itself. For GST purposes, digital currency is treated like cash.

However, receiving digital currency as payment for goods or services follows normal GST rules. If you make a taxable sale and receive crypto as payment, you’re required to collect GST (or remit 1/11th of the payment) for that sale. This amount must be reported on your BAS in Australian dollars.

Tax Invoice Requirements for Crypto Payments

When issuing invoices for payments in digital currency, you need to include:

Sufficient evidence to calculate the GST component in Australian dollars (stated price/value, conversion rate, or a statement showing the GST calculation)
The standard information required on all tax invoices
The amount payable in Australian dollars, including GST in Australian dollars

Before You Start A Business, You Need To Know These Things

Capital Gains Tax: The Other Side of Crypto Taxes

In Australia, crypto assets are considered capital assets for tax purposes, making them subject to Capital Gains Tax (CGT). These gains or losses must be reported in your income tax return, with income tax paid on gains as part of your assessable income.

The percentage of tax you pay aligns with your personal income tax rate. Any earnings over $18,200 are subject to income tax at your marginal rate. For more information on Capital Gains Tax, visit our guide to what triggers a CGT event.

Pro Tax Tip: Holding crypto for more than 12 months might qualify you for a 50% discount on capital gains for that asset. A decent incentive for long-term investment strategies.

The ATO’s Data-Matching Program: They’re Watching

The ATO has sophisticated data matching programs that they use when checking trading crypto. It’s likely that they already have your data from your exchanges, and they can go as far back as 2014. The ATO also receives your “know your customer” (KYC) information when you sign up for an Australian exchange or wallet.

Over the past three years, the ATO issued letters of warning that crypto was taxable and that it needed to be declared in individuals and businesses annual income tax return. Failure to do so would lead to penalties for tax evasion and auditing.

Record-Keeping Requirements: Your Defence Against Audits

Keeping accurate records is a must when trading in any cryptocurrency because every transaction will need to be backed up and justified. You’ll need to calculate the cost basis of each transaction if you decide to sell or dispose of your crypto, and calculate how much tax you’ll be obligated to pay.

This means you should keep purchase and sale receipts for all crypto transactions. You must also record:

Transaction dates and times
Purpose of each transaction and the other party’s details (their crypto asset address is sufficient)
Exchange records and statements
Australian dollar value of crypto assets at the time of each transaction
Professional service costs (accountant, legal, etc.)
Digital wallet information and keys
Software costs related to tax management

Pro Tax tip: Keep separate records for each crypto asset as the ATO considers them distinct CGT assets.

Retain these records for five years from the latest of: when you prepared the records, when the transactions were completed, or when the CGT event occurred.

Crypto Mining: Business or Hobby?

Is there GST on cryptocurrency when you’re mining as a business or hobby? Let’s take a look.

The tax treatment of crypto mining depends on whether it’s considered a business or a hobby. If you’re mining as a business, income from transferred mined coins is assessable, and mining expenses are deductible.

However, losses from mining activities may be subject to non-commercial loss provisions, meaning they can’t automatically offset other income without meeting specific tests. Crypto held due to a mining business is considered trading stock and must be accounted for at each financial year’s end.

When determining if your mining operation is a business, consider:

The scale and frequency of your mining activities
Any capital investment in specialised equipment
Your business planning activities
Profit motive and commercial viability

Pro Tax Tip: If your mining consumes substantial electricity and computing resources but generates minimal returns, the ATO might question whether it’s genuinely a business with reasonable profit expectations.

NFTs and Emerging Crypto Assets: New Frontier, Same Rules

Non-fungible tokens (NFTs) and other emerging crypto assets follow similar tax principles to traditional cryptocurrencies, though with some unique considerations:

Creating and selling NFTs may constitute a business or be treated as a capital gains event
Royalties from NFT sales are generally assessable income
Purchasing NFTs as investments triggers CGT upon disposal
Collectible NFTs valued above $500 may have special CGT treatment

The rapidly evolving nature of NFTs presents classification challenges, particularly distinguishing between personal use assets, collectibles, and investments. While the ATO continues developing specific guidance, the fundamental principles of income tax and CGT apply.

Pro Tax Tip: If you’re confused about whether the ATO needs to know about your NFT transactions, their website has some helpful information about NFTs.

Seeking Professional Advice: When to Call the Experts

The tax consequences of crypto can be complex, particularly if you’re running a business or accepting crypto as payment. With crypto regulations constantly undergoing updates, tax implications remain something of a moving target.

Professional guidance from a skilled tax agent is especially important if:

Your crypto activities generate substantial income or losses
You’re unsure whether your activities constitute a business
You’ve failed to report crypto transactions in previous tax returns
You’re planning to structure your crypto activities for tax efficiency
You’re involved in DeFi, staking, yield farming, or other complex crypto activities

It’s worth seeking professional advice before making significant financial decisions. A qualified tax professional familiar with crypto assets can help you stay compliant in this rapidly changing space.

Phone 1800 367 487 to chat with a friendly ITP tax accountant who understands both tax regulations and cryptocurrency.

Stage 3 Tax Cuts: What’s Actually Changed and What It Means For You

Remember when tax reform seemed like something only accountants got excited about? The kind of topic that would make most people suddenly remember urgent errands they needed to run? Not anymore. When Stage 3 Tax Cuts landed on July 1, 2024, Australians suddenly developed opinions about marginal tax rates and thresholds.

This wasn’t because tax law suddenly became trendy (it didn’t). It was because these changes affect the take-home pay of every taxpayer in the country. Nothing motivates interest in government policy quite like more money in your bank account.

These aren’t your standard, run-of-the-mill tax adjustments that quietly move a decimal point here or there. The Albanese Government’s redesign represents a significant shift from the package introduced by the Morrison Government years ago. The changes reflect new economic realities that weren’t on the horizon when the cuts were first planned, back when “pandemic” was a concept most of us only encountered in zombie movies.

So what’s changed, who benefits, and most importantly, how does this affect your wallet? We’ve sorted and simplified every detail to give you a clear picture of Australia’s most talked-about tax reform without requiring a degree in economics or three cups of coffee to get through it.

Australian Tax Rates: Then and Now

Before July 1, 2024, Australia’s income tax system operated with five brackets:

2023-24 Income Range	Tax Rate
$0-$18,200	0% (Tax free)
$18,201-$45,000	19%
$45,001-$120,000	32.5%
$120,001-$180,000	37%
$180,001+	45%

The original Stage 3 Tax Cuts, designed by the Morrison Government, planned to abolish the 37% bracket entirely and create a massive single tax bracket at 30% for everyone earning between $45,000 and $200,000.

That plan would have delivered enormous benefits to high-income earners—those making $200,000 would have received tax cuts worth $9,075 annually. Meanwhile, Australians earning $45,000 or less would have received nothing at all.

What’s Changed Under Labor’s Stage 3 Tax Cuts?

The Albanese Government’s redesign maintains the principle of tax cuts for all Australians but redistributes the benefits. Here’s the new system:

2024-25 Income Range	Tax Rate
$0-$18,200	0% (Tax free)
$18,201-$45,000	16%
$45,001-$135,000	30%
$135,001-$190,000	37%
$190,001+	45%

The key changes include:

Reducing the 19% tax rate to 16% (for incomes between $18,200 and $45,000)
Reducing the 32.5% tax rate to 30% (for incomes between $45,000 and $135,000)
Retaining the 37% tax bracket but increasing its threshold from $120,000 to $135,000
Raising the threshold for the top 45% tax rate from $180,000 to $190,000

Unlike the original plan, which concentrated benefits at the top end, these revised cuts spread relief more broadly across income brackets.

Who Benefits from Stage 3 Tax Cuts (and By How Much)?

The new structure means all 13.6 million Australian taxpayers receive a tax cut. But the distribution has changed significantly:

Income Level	Original Stage 3	New Stage 3	Difference
$30,000	$0	$354	+$354
$40,000	$0	$654	+$654
$60,000	$375	$1,179	+$804
$100,000	$1,375	$2,179	+$804
$140,000	$3,275	$3,729	+$454
$160,000	$4,675	$3,729	-$946
$180,000	$6,075	$3,729	-$2,346
$200,000	$9,075	$4,529	-$4,546

The pattern is clear. Australians earning under $135,000 receive more than they would have under the original plan, while those earning over that threshold still get a tax cut—just not as large as originally proposed.

For context, less than 5% of Australians earn more than $180,000 annually. This means that for the overwhelming majority of taxpayers, the revised cuts are either the same or more generous than the original plan.

How The Stage 3 Tax Cuts Affect You

The tax cuts don’t arrive as a lump sum. Instead, they appear gradually in your take-home pay. Here’s what the increased weekly take-home pay might look like for people in different professions:

Hospitality Worker

Annual Salary: $58,000
2023-24 Tax: $10,347
2024-25 Tax: $9,218
Additional Weekly Take-Home Pay: $21.72
Additional Annual Take-Home Pay: $1,129.44

Nurse

Annual Salary: $85,000
2023-24 Tax: $19,792
2024-25 Tax: $17,988
Additional Weekly Take-Home Pay: $34.70
Additional Annual Take-Home Pay: $1,804.40

IT Professional

Annual Salary: $120,000
2023-24 Tax: $31,867
2024-25 Tax: $29,188
Additional Weekly Take-Home Pay: $51.51
Additional Annual Take-Home Pay: $2,678.52

Small Business Owner

Annual Taxable Income: $175,000
2023-24 Tax: $53,317
2024-25 Tax: $49,588
Additional Weekly Take-Home Pay: $71.71
Additional Annual Take-Home Pay: $3,728.92

For someone earning the Australian median weekly salary of $1,300 (approximately $67,600 annually), the tax withheld has decreased from $265.17 to $238.85 per week. That’s an extra $26.32 in your pocket each week, or about $1,369 annually.

The Medicare Levy Adjustment

Beyond the headline tax rates, there’s another important change: an increase to the low-income thresholds for the Medicare levy.

What is the Medicare Levy?

The Medicare levy is a 2% charge on taxable income that helps fund Australia’s public health system. Low-income earners are either partially or fully exempt.

How is the Medicare Levy changing after the Stage 3 Tax Cuts?

For the 2024-25 financial year, people earning $26,000 or less are fully exempt from the Medicare levy (up from the previous threshold). The levy then gradually increases until the full 2% is paid by those earning more than $32,500.

This 7.1% increase in the threshold (in line with inflation) means more than a million low-income earning Australians will pay a reduced rate or no Medicare levy at all.

Why the Change?

The Morrison Government’s original Stage 3 Tax Cuts were designed in 2018—before the COVID-19 pandemic, before inflation, before interest rate rises, and before the cost-of-living pressures many Australians now face.

The Albanese Government argues that the new design responds to current economic realities while maintaining the original commitment to tax relief. The revised plan keeps the same overall budget cost ($107 billion over the forward estimates) but distributes the benefits differently.

According to the government, the new system:

Delivers bigger tax cuts for middle income earners facing cost-of-living pressures
Provides more equitable relief for women (90% of female taxpayers get bigger cuts)
Increases rewards for Australians who choose to work and earn more
Delivers a more equitable share of tax relief
Addresses bracket creep more effectively
Boosts labour supply

Common Misconceptions About the Stage 3 Tax Cuts

Tax law is never an easy read, so tax law changes tend to create a fair bit of confusion. The Stage 3 Tax Cuts have been no exception. With contradictory information circulating, it’s worth clarifying some common misunderstandings.

1. These tax cuts will not affect your 2023-24 tax return

The new rates only apply to income earned from July 1, 2024. If you’re filing your 2023-24 tax return now, these changes won’t affect your refund. The benefits will first appear when you file your 2024-25 tax return after the current financial year ends.

2. This isn’t a one-time payment

Unlike temporary COVID relief measures, these tax cuts represent a permanent change to Australia’s tax rates. The benefits continue each year rather than arriving as a single payment. This ongoing adjustment means slightly higher take-home pay in each pay cheque moving forward, creating a sustained financial benefit.

For business owners and freelancers who don’t receive PAYG income, these tax cuts still apply but work differently. Rather than seeing immediate changes in regular paychecks, you’ll benefit when calculating your quarterly or annual tax obligations. The reduced rates apply when determining your tax liability during your regular Business Activity Statement (BAS) lodgments or when filing your annual return.

3. Your employer should have automatically adjusted your withholding

You don’t have to do a thing to start benefiting from the tax cuts. Your employer should have automatically adjusted their payroll systems to reflect the new tax withholding rates from July 1, 2024. If you haven’t noticed a change in your take-home pay since then, consider checking with your payroll department. The system is designed to implement these changes without requiring any action from individual taxpayers.

For sole traders and business owners, the changes are automatically applied when you calculate your income tax using the new rates. While you may need to adjust your quarterly PAYG instalments to reflect the lower tax rates, this isn’t an application for the tax cuts themselves—it’s simply updating your estimated tax to prevent overpayment throughout the year.

The Broader Economic Context

The Stage 3 Tax Cuts are coming to you as part of a broader cost-of-living relief strategy. Other measures include:

Energy bill relief for households and eligible small businesses
Strengthened Medicare
Cheaper medicines
Cheaper childcare
Higher income support payments
The biggest Rent Assistance upgrade in 30 years

The government has emphasised that these measures are designed to provide relief without adding to inflationary pressures.

Calculating Your Personal Benefit

Everyone’s tax situation is different. Variables like deductions, offsets, and family circumstances affect your final tax position. However, we can generally say that middle-income earners receive proportionally larger cuts. For example, someone earning $80,000 annually can expect approximately $1,679 in tax savings per year, while someone on $120,000 might see savings around $2,679.

Your specific benefit will vary based on factors like:

Your income level and whether you have multiple income sources
Investment income and applicable deductions
Work-related expenses and other deductions
Any tax offsets you’re eligible to claim
Medicare levy obligations and potential surcharges
Any HECS-HELP debt repayments that are income-contingent

For business owners and contractors, the tax savings will affect your effective tax rate, potentially changing your quarterly instalment amounts and end-of-year tax position.

You can get a quick snapshot of how the tax cuts will affect you by using the Australian Government’s Tax Cut Calculator. But please do keep the above factors in mind, and remember this is just to give you a bit of an idea. Your actual tax savings will become clearer once you complete your 2024/25 tax return.

Understanding How Progressive Taxation Works

A common misconception about tax brackets is that when you move into a higher bracket, all your income is taxed at the higher rate. This isn’t how it works.

In Australia’s progressive tax system, only the portion of your income that falls within each bracket is taxed at that bracket’s rate. Here’s how it works for someone earning $100,000 in 2024-25:

First $18,200: $0 tax (tax-free threshold)
$18,201 to $45,000 ($26,799): $4,288 tax (16%)
$45,001 to $100,000 ($54,999): $16,500 tax (30%)
Total tax: $20,788

Understanding this principle helps explain why every taxpayer benefits from cuts to lower tax brackets, even high-income earners. When the 16% and 30% rates apply to portions of a high-income earner’s salary, they still benefit from lower rates on those portions.

Long-Term Implications of the Stage 3 Tax Cuts

Tax systems shape societies. They influence work incentives, wealth distribution, and government capacity to fund services.

The revised Stage 3 Cuts maintain Australia’s progressive taxation principles while acknowledging the economic pressures facing middle-income earners. By retaining multiple tax brackets rather than moving to the flatter system originally proposed, the design continues Australia’s tradition of asking higher contributions from those with greater capacity to pay.

At the same time, the cuts address bracket creep—the phenomenon where inflation pushes income into higher tax brackets even when real purchasing power hasn’t increased.

Understanding how these changes affect your specific situation is worth the effort. Take the time to calculate your benefit, check your payslips, and if needed, adjust your financial planning to make the most of your increased take-home pay.If you have any questions about your tax position or want help with financial planning, ITP’s accountants are happy to be of service. Give us a call, drop into your nearest office, or book an appointment online. We’ve been serving the Australian community for 50 years and counting, and we would love to help you create a more secure financial future for yourself.

Your Complete Tax Reduction Guide: Deductions, Offsets, Credits and More

If you’re like most Australians, you don’t really know to maximise your tax return, leaving money on the table with every return you complete. The average unclaimed deduction sits quietly in plain sight, unnoticed and uncollected, while workers and business owners continue to overpay their taxes without a second thought.

This is why the best part of our job is watching clients’ faces light up when they realise how much money they’re getting back. One client used her unexpected return to finally start the emergency fund she’d been putting off. Another treated himself to a top-of-the-line noise-cancelling headset he’d been eyeing for months. We’ve seen returns used for everything from weekend getaways to new work boots, from bike repairs to special dinners out with the family.

These aren’t life-changing millions. They’re little wins. Extra breathing room. A small reward for staying on top of your financial admin. If you’re keen to maximise your tax return and get yourself one of these little wins, ITP’s accountants are here to help.

This guide will walk you through the essential strategies to:

Uncover overlooked deduction opportunities
Decode tax offsets
Understand credits
Maximise your tax return

The Australian tax system has a lot of rules. Let us help you wrap your head around them.

How Do Tax Deductions Work?

Tax deductions are expenses you can subtract from your total taxable income, effectively reducing what your before-tax income looks like on paper. In turn, this means you’ll pay less in taxes. For a deduction to be valid, it must be an expense directly related to earning your income and something you can prove with documentation.

Here are the most important factors to keep in mind:

Deductions reduce your taxable income, not your tax bill
They must be legitimate work-related or income-generating expenses
You need proof of the expense

Common tax deductions include work-related travel, home office expenses, self-education costs, tools and equipment for work, and professional association memberships. The Australian Taxation Office (ATO) has specific rules about what can and cannot be claimed, so it’s crucial to understand these guidelines or consult a tax professional.

What Is Taxable Income?

Your total taxable income is any income you derive from your wages or salary, tips, gratuities or other payments for your services, allowances, interest on your bank accounts, dividends and other income derived from investments, bonuses, commissions, pensions and rent. If you are paid cash, the ATO will expect you to declare that as a part of your taxable income.

Let’s say, for example, you earn $80,000 when all of these income sources are combined. If you have $10,000 in valid tax deductions, you’ll only be taxed on $70,000, potentially saving you hundreds or thousands of dollars in tax payments.

Is All Income Taxable In Australia?

Some government payments and pensions—including the disability pension and some education payments—are tax-exempt. It’s important to note that, even if you’re receiving a tax-exempt payment, you’ll need to include the information in your tax return. This is important as it helps the government work out if you’re entitled to extra payments and other entitlements.

What Tax Deductions Can I Claim?

Any expense you incur in the course of earning your income could be a tax deduction, but not every expense will qualify. The ATO allows you to deduct qualifying expenses from your total income before tax is calculated.

By getting familiar with the tax deductions you’re entitled to, you can save hundreds, if not thousands of dollars. Common work-related expenses include:

Vehicle and travel expenses
Clothing, laundry and dry-cleaning expenses
Home office expenses
Self-education expenses
Tools, equipment and other assets
ATO interest—calculating and reporting
The cost of managing your tax affairs
Gifts and donations
Interest, dividend and other investment income deductions
Personal super contributions
Undeducted purchase price of a foreign pension or annuity

To claim a deduction:

You must have already incurred the expense
The expense must directly relate to earning your income
You must be able to prove your claim with a record

Australian Tax Rates Have Dropped

Australia has a progressive tax system, which means there is a different percentage of tax to be paid determined by the amount earned.

The Australian Government introduced significant tax cuts that came into effect from 1 July 2024. These changes are designed to provide financial relief amid ongoing cost-of-living pressures, with reductions across multiple tax brackets that mean more money in your pocket.

Key changes include:

The 19% tax rate reduced to 16%
The 32.5% tax rate reduced to 30%
The 37% tax threshold increased from $120,000 to $135,000
The 45% tax threshold increased from $180,000 to $190,000

To put this into perspective, an employee earning $90,000 could see an annual tax cut of approximately $1,929 from these tax cuts alone. These cuts will be reflected in take-home pay, with most taxpayers experiencing the reduction through their regular payslips from 1 July 2024.

Resident Tax Rates 2024-2025

Taxable Income	Tax To Be Paid On This Income
0 – $18,200	Nil
$18,201 – $45,000	16 cents for each $1 over $18,200
$45,001 – $135,000	$4,288 plus 30 cents for each $1 over $45,000
$135,001 – $190,000	$31,288 plus 37 cents for each $1 over $135,000
$190,001 and over	$51,638 plus 45 cents for each $1 over $190,000

Note: The above rates do not include the Medicare levy.

CHAT WITH A FRIENDLY ITP BUSINESS TAX ACCOUNTANT TODAY

Saving Even More Money At Tax Time

The latest tax cuts are a welcome change that should put more money back in your pocket this tax season. However, that doesn’t mean you shouldn’t worry about maximising your tax return with all the deductions, tax credits, and offsets you’re entitled to claim.

In the below sections, we’ll cover the most common claims, starting with one of the most important aspects of tax law for small business owners to understand.

Instant Asset Write-Off

The Instant Asset Write-Off gives small business owners a strategic way to managing capital expenses and reducing tax liability. This provision allows businesses to claim immediate tax deductions on eligible assets, potentially freeing up cash flow and supporting business growth.

The mechanism is straightforward: You claim an immediate tax deduction for the business portion of purchased assets, whether they’re brand new or second-hand. What makes this provision particularly valuable is its flexibility—you can claim multiple assets, with each assessed individually against the current threshold.

For the 2024-2025 financial year, there’s a temporary increase of the instant asset write-off limit available to businesses with an aggregated annual turnover of less than $10 million. These businesses can claim an immediate deduction for assets costing less than $20,000 that are first used or installed between 1 July 2024 and 30 June 2025.

The $20,000 threshold operates on a per-asset basis, meaning you can write off multiple assets that meet the criteria. Assets valued at $20,000 or more follow a different depreciation path. These will be placed in the small business simplified depreciation pool, with a depreciation schedule of 15% in the first income year and 30% in subsequent years.

Instant Asset Write-Off Provisions 2024-25

Small Businesses:

Small businesses with an aggregated annual turnover of less than $10 million can immediately deduct the business portion of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2025.
The $20,000 threshold applies on a per-asset basis, so small businesses can instantly write off multiple assets.

Important Notes:

Assets exceeding the $20,000 threshold can continue to be depreciated under the general depreciation rules.
Maintaining accurate records is crucial to demonstrate the business use of any asset claimed.
The previous temporary full expensing measures have concluded.

What Are The 4 No-Go Working From Home Expenses

How Tax Offsets Can Maximise Your Tax Return

Most people’s eyes glaze over when accountants start talking about offsets, especially if we pull out acronyms like SAPTO. But offsets are something you should be far more excited about. Imagine finding a crisp $50 note in a pair of jeans you just bought from an op shop. That’s what tax offsets feel like. Unlike deductions, they give you a direct, dollar-for-dollar discounts on your tax bill.

Some tax offsets are designed for specific groups. The seniors and pensioners tax offset helps older Australians. The low income tax offset provides a bit of relief for those earning less. Then there’s the Australian superannuation income stream tax offset—another targeted form of support.

But here’s the catch: eligibility matters. Each offset has its own rulebook, and those rules are constantly changing. Take the low and middle income tax offset, for example. It was a reliable fixture for years—and then it vanished into the night after the 2021-22 income year. A reminder that in the world of tax, change is the only constant.

To ensure you’re always on top of changes like this, you can either check the ATO website or talk to a tax professional. ITP offers free tax advice to clients year-round, and we can help you understand what offsets might apply to your specific situation.

For now, let’s break down what’s available for the 2024-25 tax year and beyond.

Tax Offsets Offered By The ATO

Seniors and pensioners tax offset (SAPTO): This one’s for our older and wiser taxpayers. Check if you’re eligible, and see if you can transfer any unused offsets. It’s like a buy-one-get-one-free deal, but for tax.
Superannuation-related tax offsets: Got super? These offsets might be your friend. See if you can claim one for yourself or your spouse. It’s a bit like getting a bonus for saving for retirement.
Beneficiary tax offset: Receiving certain government payments or allowances? This offset might apply. It’s worth a look, just in case.
Private health insurance offset: If you’ve got private health insurance, you might be able to claim this offset. It helps with the cost of those premiums. Think of it as a small thank you for being proactive about your health.
Medical expenses tax offset: This offset was available from 2015–16 to 2018–19. Just a heads up, it’s not current.
Offset for maintaining an invalid or invalid carer: If you’re looking after someone, you might be able to claim this. It’s for those who care for someone 16 or older. It’s a recognition of the important role you play.
Zone and overseas forces tax offsets: Living in a remote area or serving overseas? This one’s for you. It acknowledges the unique circumstances of your situation.
Lump sum payment in arrears tax offsets: Received a lump sum payment that was delayed? This offset might help. It’s designed to smooth out the tax implications of receiving a large payment all at once.
Claiming a foreign income tax offset: Paid tax on income from another country? You might be able to claim this. It’s all about avoiding double taxation.

How Tax Credits Maximise Your Tax Return

When you lodge an income tax return, tax credits work quietly on reducing your tax burden. For employees, this process begins with every pay cheque. Your employer withholds money and sends it to the ATO through the PAYG withholding system.

These withholdings are essentially prepaid tax credits. When tax time rolls around, these credits sit in your account, ready to offset your tax liability. It’s like having a financial buffer you’ve been building all year without even realising it.

Franking credits deserve special mention. Known formally as imputation credits, these are payments made by companies to shareholders alongside dividend distributions. Australia’s tax system uses these credits to prevent the dreaded double taxation—a bureaucratic nightmare where the same income gets taxed twice.

Here’s how it works in practice. If a company has already paid corporate tax on its profits before distributing dividends, shareholders receive a credit for that tax. This means you’re not getting slugged twice for the same income. Clever, right? If you want to learn more about tax on investment income, including the difference between franked and unfranked dividends, take a look at our guide to paying tax on the sale of shares.

Tax credits are powerful. They reduce your overall tax payable by their full amount. In some cases, they can even transform into a tax refund once your taxable income hits zero. We’ve seen countless clients’ eyes light up when they realise how these credits can work in their favour. A few strategic moves, some careful record-keeping, and suddenly that tax return looks a lot more appealing.

Want To Know The Most Reliable Way To Maximise Your Tax Return?

Tax strategies are never one-size-fits-all. The Australian tax system is incredibly intricate, constantly evolving, and full of nuanced opportunities to save. The problem is that each of those opportunities comes with a whole lot of rules. What works for one business might not work for another, and the same is true for individual tax payers.

ITP’s Accounting Professionals have spent over 50 years helping Australian individuals and businesses understand these intricate financial puzzles. Our aim is always to help you keep more of what you’ve earned. That’s why we offer free tax advice year-round—your success is our success.

Ready to maximise your tax return each and every year? Maybe you’re struggling with your BAS obligations? Or perhaps you’ve got a stack of overdue tax returns stressing you out? Let’s chat. No tax problem is too big for our accountants. ITP’s friendly tax experts are waiting to help you maximise your returns and minimise your stress.

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