Frequently Asked Questions

What are the current Australian income tax rates?

In 2025–26: 0% up to $18,200; 16% from $18,201 to $45,000; 30% from $45,001 to $135,000; 37% from $135,001 to $190,000; 45% above $190,000. Plus 2% Medicare levy above $26,000. The second bracket dropped from 19% to 16% under Stage 3 tax cuts from 1 July 2024.

What is the Low Income Tax Offset (LITO)?

LITO reduces your income tax by up to $700 if you earn $37,500 or less. It tapers to $0 at $66,667. It's applied automatically at tax time — you don't need to claim it.

How do the 2026 budget tax cuts work?

In 2026–27, the second bracket drops from 16% to 15% — saving up to $268/year. In 2027–28 it drops again to 14% — saving up to $536/year. A new Work and Training Tax Offset of $250/year also starts from 2027–28 for workers earning $10,000–$125,000.

When do HECS repayments start?

HECS repayments are mandatory once your income exceeds $54,435 (2025–26). Your employer withholds them automatically. Below this threshold your balance still grows each year through CPI indexation — currently capped at the lower of CPI or the Wage Price Index from 2025.

How much of my pay goes to HECS?

Repayment rates: 1% at $54,435; rising in steps to 10% above $158,904. On $75,000 you repay 3.5% ($2,625/yr). On $100,000 you repay 5.5% ($5,500/yr). On $150,000 you repay 9.5% ($14,250/yr).

Does HECS affect my ability to get a home loan?

Yes. Lenders count HECS repayments as a recurring expense when assessing your serviceability. A $50,000 HECS debt on $80,000 income reduces borrowing capacity by roughly $50,000–$80,000 depending on the lender and their assessment model.

What is HECS indexation and how does it affect my balance?

On 1 June every year, your outstanding HECS balance is indexed to inflation (CPI). In 2023 it rose 7.1% — adding $7,100 to a $100,000 balance overnight. From 2025, indexation is capped at the lower of CPI or the Wage Price Index, which will moderate balance growth in high-inflation periods.

What is the CGT discount and is it changing?

If you hold an asset (shares, property) for more than 12 months, only 50% of the capital gain is taxable under current rules. This 50% discount is being replaced from 1 July 2027 with CPI indexation of the cost base plus a 30% minimum tax floor. Selling before 30 June 2027 locks in the old rules for that asset.

Do CGT changes affect my principal place of residence?

No. Your main home remains fully exempt from CGT regardless of the 2027 changes. The new rules apply to investment assets only — shares, investment properties, crypto, etc.

What is the CGT rate inside superannuation?

Capital gains inside super are taxed at 15% (10% for assets held more than 12 months). These rates are not affected by the 2026 budget changes. Super remains one of the most tax-effective vehicles for long-term investment.

What is the First Home Guarantee?

The First Home Guarantee (FHBG) lets eligible buyers purchase with a 5% deposit without paying LMI. The government guarantees up to 15% of the loan. Income must be under $125,000 (single) or $200,000 (couple), and the purchase price must be within caps ($900,000 for Sydney and Melbourne). 35,000 places/year.

What is the FHSS and how much can I save?

The First Home Super Saver Scheme lets you make extra super contributions (taxed at 15%) and withdraw up to $50,000 for a first home deposit. The tax saving depends on your marginal rate — on $80,000 income you save roughly $1,400 in tax for every $10,000 saved through FHSS vs. a savings account.

What changes to negative gearing in 2027?

From 1 July 2027, rental losses from established investment properties can no longer be deducted against other income for new investors. Existing investors are grandfathered — their current deductions continue. New investors must buy newly-built properties to access negative gearing deductions.

What is the superannuation guarantee rate?

The Superannuation Guarantee (SG) rate is 12% from 1 July 2025. Your employer must pay this into your super fund on top of your salary. SG contributions are concessional — taxed at 15% inside super, not your marginal rate.

How much can I contribute to super concessionally?

The concessional (pre-tax) cap is $30,000 per year, including your employer's SG contributions. Exceeding this cap means the excess is taxed at your marginal rate. If your super balance is under $500,000, unused cap amounts carry forward for up to 5 years.

How does the government co-contribution work?

If you earn under $58,445 and make a personal after-tax super contribution, the government adds up to $500 to your super fund. At $43,445 or less, they match 50 cents per dollar — so a $1,000 contribution gets you $500 free. The co-contribution tapers to zero at $58,445.

What is an ETF and how are they taxed?

An Exchange Traded Fund (ETF) is a basket of shares or assets that trades on a stock exchange like a single share. Returns come from dividends and capital growth. Dividends are taxed at your marginal rate (offset by franking credits where applicable). Capital gains are taxed at your marginal rate — with the 50% discount if held over 12 months (changing in 2027).

What are franking credits?

When an Australian company pays tax at the 30% corporate rate and then pays dividends, those dividends come with 'franking credits' representing the tax already paid. If your marginal rate is below 30%, the ATO refunds the difference. If you're on 0% or 16%, you receive a cash refund at tax time.

What is the difference between a savings account, HISA, and ETF?

A savings account earns 1–2% p.a. A High Interest Savings Account (HISA) earns 4–5% p.a. — but the rate can change. A broad market ETF has historically returned 7–10% p.a. over long periods, but with more short-term volatility. For money you need in under 2 years, a HISA is appropriate. For 5+ years, an ETF has outperformed every time historically.

Should I pay off HECS or invest?

HECS grows at ~3% (CPI-indexed). If you invest in a HISA at 4.5%+ or ETFs at 7%+ (after tax), you're likely better off investing and letting HECS repay automatically through your payroll. The case for voluntary repayment strengthens when: (1) your marginal HECS rate is high and (2) investment returns are below CPI. There's no longer a bonus for paying early — the 10% discount was removed in June 2023.