How Australian Income Tax Brackets Work
Australia uses a progressive tax system — only the income within each bracket is taxed at that bracket's rate. Your effective (average) rate will always be lower than your marginal rate.
Every dollar you earn falls into exactly one bracket. Most people misread the bracket system as "all income at the top rate" — this chart shows what actually happens to a $95,000 salary.
The red shaded portion inside each bracket shows what fraction of that bracket goes to tax. The 30% bracket's $50,000 produces $15,000 of tax — but it's $15,000 only on the slice from $45,001 to $95,000, not on the whole salary. That's why a "32% marginal rate" (the bracket rate plus Medicare) produces only a 22.3% effective rate on the whole income.
Consider an Australian tax resident earning $95,000 gross for the 2025–26 financial year, with no HECS-HELP debt and standard PAYG arrangements. The brackets are applied to slices of income, not to the whole amount:
Your effective tax rate is $21,188 ÷ $95,000 = 22.3%. Your marginal rate (the rate paid on the next dollar earned) is 30% in the bracket plus 2% Medicare = 32%. Many taxpayers confuse the two — your marginal rate is always higher than your effective rate under a progressive system.
Now salary-sacrifice $10,000 into super. Taxable income drops to $85,000. Base tax becomes $4,288 + ($85,000 − $45,000) × 0.30 = $16,288. Medicare drops to $1,700. Total tax: $17,988 — a personal tax saving of $3,200. Inside super, the $10,000 is taxed at 15% ($1,500). Net result: $1,700 better off, with $8,500 more in super and $0 change in take-home pay (because the sacrifice came off the gross).
Four common taxpayer profiles, all Australian residents on PAYG, full financial year, no HECS unless stated, with private hospital cover where the surcharge would otherwise apply.
1. Graduate — $68,000 salary, HECS-HELP debt
Base tax: $0 + $4,288 + ($68,000 − $45,000) × 0.30 = $11,188. Medicare Levy: $1,360. LITO: phased out ($68,000 > $66,667). HECS at $68,000 sits in the 2.5% repayment band → $1,700 a year. Total deducted: $14,248 (20.9% effective). Take-home: $53,752 a year, or ~$2,067 a fortnight gross-of-super. HECS is the biggest lever a graduate can pull — it doesn't disappear with deductions but does respond to lowering income via salary sacrifice.
2. Mid-career professional — $160,000 salary
Base: $4,288 + ($135,000 − $45,000) × 0.30 + ($160,000 − $135,000) × 0.37 = $4,288 + $27,000 + $9,250 = $40,538. Medicare 2%: $3,200. Total: $43,738 (27.3% effective; marginal 39% including Medicare). If you don't hold private hospital cover, add the Medicare Levy Surcharge of 1.25% at this income tier (~$2,000), making private hospital cover usually cheaper than the surcharge.
3. High earner — $220,000 salary
Base: $4,288 + $27,000 + ($190,000 − $135,000) × 0.37 + ($220,000 − $190,000) × 0.45 = $4,288 + $27,000 + $20,350 + $13,500 = $65,138. Medicare: $4,400. Total: $69,538 (31.6% effective; marginal 47% including Medicare). Above $250,000 of combined income + concessional super, Division 293 adds an extra 15% tax on the super portion above the threshold.
4. Part-time / lower-income — $48,000 salary
Base: $4,288 + ($48,000 − $45,000) × 0.30 = $5,188. LITO at $48,000 is in the 1.5c/$ taper: $700 − ($48,000 − $45,000) × 0.015 = $655 offset. Medicare: in the reduced-payment range — at $48,000 the levy is around $960. Total: $5,493 (11.4% effective). A $1,000 personal after-tax contribution would attract a $500 super co-contribution from the government — a 50% return on the contribution before any market growth.
"Marginal rate" is not your tax rate. A common misconception is that getting a pay rise that "pushes you into the next bracket" means all of your income is suddenly taxed at the higher rate. That's not how progressive taxation works in Australia. Only the dollars above the bracket threshold get the higher rate. A $1,000 raise from $134,500 to $135,500 increases your tax by about $320 (the $500 inside the old bracket at 30% plus the $500 inside the new bracket at 37%), not by 7% of your whole salary.
Tax residency matters more than visa type. Non-residents and working holiday makers (subclass 417/462) face different schedules — no tax-free threshold, no LITO, generally no Medicare Levy. If you've moved overseas mid-year or returned mid-year, the part-year residency rules apportion the tax-free threshold by the number of months you were a tax resident. Use this calculator only for full-year residents; for part-year and non-resident scenarios, the ATO's official tax estimator is more accurate.
Medicare Levy Surcharge cliffs. The MLS thresholds are cliffs, not gradients — earn $1 over the threshold and the entire MLS applies to your whole income, not just the dollar over. At $100,001 (single, no PHI), you pay 1% MLS on the full $100,001, which is $1,000. Private hospital cover that costs less than the surcharge is therefore strictly better than paying the surcharge. The calculator can model the levy but always check the specific MLS tier ranges for the current year.
HECS-HELP indexation now uses the lower of CPI and WPI. Following 2024 legislation, accumulated HECS-HELP debt is indexed annually at the lower of the Consumer Price Index and the Wage Price Index. This is materially friendlier than the prior CPI-only rule in years of high inflation. Your debt is still indexed on 1 June each year before that year's compulsory repayments are credited — paying voluntary lump sums before 1 June can blunt the indexation impact.
What this calculator doesn't model. It does not include: rental property income or losses (negative gearing), investment income beyond salary, franking credits, capital gains, deductions (work-from-home, vehicle, donations), spouse-related offsets, Senior & Pensioner Tax Offset (SAPTO), beneficiary tax offset, FBT-grossed-up reportable fringe benefits, or the small-business tax discount. Treat the output as a salary-only single-person estimate. For an end-of-year actual figure, lodge through myTax or a registered tax agent.
Tax is computed bracket-by-bracket using the 2025–26 resident schedule (the post-Stage-3 brackets, in force from 1 July 2024): $0–$18,200 at 0%; $18,201–$45,000 at 16%; $45,001–$135,000 at 30%; $135,001–$190,000 at 37%; over $190,000 at 45%. LITO is applied as up to $700, tapering at 5c/$ between $37,500–$45,000 and 1.5c/$ between $45,000–$66,667. The 2% Medicare Levy is applied to taxable income with the low-income shading-in formula between the thresholds. HECS-HELP uses the 2025–26 income-percentage schedule starting at $54,435 (1%) and stepping to 10% at $159,664+. No deductions or non-salary income are modelled.
Sources: ATO — Individual income tax rates; ATO — Low Income Tax Offset; ATO — Medicare Levy; ATO — Medicare Levy Surcharge thresholds; ATO — Study and training support loans (HECS-HELP); ASIC MoneySmart — income tax.
Reviewed: 18 May 2026 · Updated for: 2025–26 financial year (Stage 3 tax cuts; HECS indexation = lower of CPI/WPI per 2024 legislation) · Editor: AussieCalc Editorial Team
This calculator applies the 2025–26 Australian resident tax brackets published by the Australian Taxation Office, reflecting the Stage 3 tax cuts that took effect from 1 July 2024. Your gross income is taxed progressively: the first $18,200 is tax-free, income between $18,201 and $45,000 is taxed at 16 cents per dollar, income between $45,001 and $135,000 at 30 cents, between $135,001 and $190,000 at 37 cents, and anything above $190,000 at 45 cents.
On top of the base tax, a 2% Medicare Levy applies to most residents. For low incomes the levy is reduced or waived under the shading-in formula. If you earn over the single-person threshold (around $97,000 for 2025–26) and don't hold private hospital cover, a Medicare Levy Surcharge of 1%–1.5% also applies — the calculator accounts for this if you toggle the Medicare Levy option.
The Low Income Tax Offset (LITO) reduces the amount of tax lower-income earners pay. The maximum offset is $700, available to earners up to $37,500. It tapers to zero at $66,667. The calculator applies LITO automatically for resident taxpayers.
If you have a HECS-HELP debt, the calculator also estimates your compulsory repayment — which starts at 1% of income once you earn above $54,435 and scales up to 10% at higher incomes. Note that this calculator is for estimation purposes only. Your actual tax liability depends on your specific deductions, offsets, and individual circumstances, which only a registered tax agent can fully account for. For the official rates and thresholds, see the ATO individual income tax rates.
What are the 2025–26 Australian income tax brackets?
For Australian residents in 2025–26 (post-Stage-3): $0–$18,200 is tax-free; $18,201–$45,000 at 16%; $45,001–$135,000 at 30%; $135,001–$190,000 at 37%; over $190,000 at 45%. The Low Income Tax Offset (LITO) of up to $700 also applies for lower incomes.
What is the Medicare Levy?
The Medicare Levy is a 2% tax on your taxable income that funds Australia's public health system. Most residents pay it. There is a low-income shading-in formula, and a Medicare Levy Surcharge (an extra 1%–1.5%) applies if your income exceeds the single-person threshold (around $97,000 for 2025–26) and you don't have private hospital cover.
What is HECS/HELP and when do I repay it?
HECS-HELP is a government loan for university and approved vocational fees. Compulsory repayments start once your income exceeds the minimum threshold ($54,435 in 2025–26). The repayment rate scales from 1% to 10% as income rises. Repayments are made through your tax return or PAYG withholding. Since 2024 legislation, the annual indexation on your accumulated debt is the lower of CPI and the Wage Price Index.
What is the Low Income Tax Offset (LITO)?
The LITO reduces the tax payable for lower-income earners. For 2025–26, the maximum offset is $700 for incomes up to $37,500. It phases out between $37,500 and $45,000 (at 5c per dollar), then between $45,000 and $66,667 (at 1.5c per dollar). It cannot reduce your tax below zero.
How are working holiday makers taxed?
Working holiday makers (subclasses 417 / 462) are taxed at 15% on the first $45,000 of Australian-sourced income and then at standard non-resident rates above that. They do not receive the tax-free threshold or LITO and are generally exempt from the Medicare Levy. This calculator is for full-year residents and is not appropriate for WHM scenarios.
What's the difference between marginal and effective tax rate?
Your marginal rate is the rate paid on the next dollar you earn — the rate of the bracket your income sits in (plus Medicare). Your effective rate is total tax divided by total income — always lower than your marginal rate because lower brackets tax your first dollars at lower rates. At $95,000 (2025–26), marginal is 32% (30% + 2% Medicare), effective is ~22.3%.
What happened to the Stage 3 tax cuts?
The legislated Stage 3 tax cuts took effect on 1 July 2024. The revised package lowered the 19% marginal rate to 16% (helping low and middle earners), kept the 30% rate but extended it up to $135,000 (instead of the originally proposed flat $200,000 band), and raised the 37% threshold from $120,000 to $135,000 and the 45% threshold from $180,000 to $190,000. Every resident taxpayer received some reduction; the benefit shifted toward middle-income earners compared to the original 2018 design.
Can salary sacrifice into super reduce my tax?
Yes. Salary-sacrificed contributions are taxed at 15% inside super (or 30% under Division 293 once your combined income + concessional contributions exceed $250,000) instead of your marginal rate. For someone on a 30% bracket, every dollar sacrificed saves 15c of personal income tax and 2c of Medicare in the year, and ends up as 85c in super instead of 70c in pocket. The 2025–26 concessional cap is $30,000 a year, with carry-forward of unused caps available if your total super balance was under $500,000 at the prior 30 June.
Does this calculator include capital gains, rent or investment income?
No — it models salary income only. Capital gains, rental income and losses (including negative gearing), franking credits, foreign income and similar are not included. For capital gains specifically, use the CGT calculator and add the net capital gain to your taxable income before running this calculator.