Ah, income tax. The bittersweet pill we all have to swallow each year. It's like that uninvited guest who shows up to the party and takes a big chunk of the snacks.
Plus this week, the government announced an overhaul of the Stage 3 tax cuts after it passed the Senate — the changes aiming to bolster the benefits for those on lower incomes.
So to keep you in the loop without putting you to sleep, here is a jargon-free guide that will have you up to speed in a flash.
Video: 4 money hacks that don't cut out your daily cup of coffee! Post continues below.
How does the tax system work?
You may already know that in Australia, you pay income tax based on a percentage of your pay, and this percentage depends on the income bracket your annual salary falls into.
What many people misunderstand, however, is that your entire pay isn't taxed on the one rate. Instead, your annual salary is broken up into segments and each segment is taxed at a different rate.
Let's take someone who earns $110,000. This puts them in the 32.5 per cent marginal tax bracket. The word 'marginal' here is key, because it means only their income between $45,001 and $110,000 is taxed at 32.5 per cent. The amount they earn between $18,201-$45,000 is taxed at 19 per cent, while the amount below $18,200 is tax free.