Australia has a progressive personal income tax schedule with a seemingly simple five rate structure (including a zero rate), but overlaying the statutory tax schedule are more than 40 offsets designed to reduce tax liability for certain taxpayers.

These offsets add complexity to the tax system and result in a person's tax liability being determined by several factors, not just their level of income as implied by the statutory schedule.

This article examines the adverse impacts of high levels of tax system complexity and list the offsets which are available in the personal income tax system. It describes the operation of the low income tax offset and the Medicare levy to illustrate how offsets and other features of the tax system can add complexity and reduce transparency.