Australian Tax Brackets 2025-26: Rates, Thresholds and What You Actually Pay

The 2025-26 tax brackets explained

These are the resident marginal tax rates for the 2025-26 income year. Each rate applies only to the slice of income inside its band — not to your whole income:

The most important thing to understand is that these are marginal rates. A person earning $60,000 does not pay 30% on all $60,000. They pay 0% on the first $18,200, 16% on the next $26,800, and 30% only on the last $15,000. Here is the full calculation:

• Tax on the first $18,200: $0
• Tax on $18,201–$45,000 ($26,800 × 16%): $4,288
• Tax on $45,001–$60,000 ($15,000 × 30%): $4,500
• Gross income tax: $8,788
• Less Low Income Tax Offset: −$100
• Plus Medicare levy (2% × $60,000): +$1,200
• Total tax: $9,888 — an effective rate of about 16.5%

Stage 3 tax cuts: from 1 July 2024 the second rate dropped from 19% to 16%. For 2025-26 that change alone saves up to $804 a year on income between $18,201 and $45,000, compared with the old 19% rate — a saving received in full by anyone earning over $45,000.

How much tax do you pay at common salary levels?

This table shows the total tax and take-home pay at common income levels for 2025-26, using the same rates and formulas built into the EOFYmate calculator:

Income tax shown is after the Low Income Tax Offset where it applies. Figures assume a resident with private hospital cover (no Medicare Levy Surcharge) and exclude HELP/HECS repayments and other offsets. Your own figure depends on your deductions and circumstances.

What is the tax-free threshold?

The tax-free threshold is $18,200. As an Australian resident, the first $18,200 you earn in the year is taxed at 0%. A few important points:

• The Low Income Tax Offset (LITO) gives lower earners up to $700 off their tax, which effectively extends their tax-free income a little further.
• Working holiday makers do not get the tax-free threshold. They pay 15% from the very first dollar up to $45,000.
• You can only claim the tax-free threshold from one employer at a time. If you have two jobs, claiming it from both is the most common cause of an unexpected tax bill.

What is a marginal rate vs an effective rate?

These two terms confuse almost everyone, so here is the difference in one line each:

• Marginal rate: the rate charged on your next dollar of income — the band your top dollar falls into.
• Effective rate: your total tax divided by your total income — almost always much lower.

For example, someone earning $85,000 has a marginal rate of 30% but an effective rate of around 21%. This matters for deductions: a $1,000 deduction saves you tax at your marginal rate (30%), not your effective rate — so it is worth $300, not $210.

Medicare levy and surcharge

The Medicare levy (2%)

Most taxpayers pay a Medicare levy of 2% of their taxable income on top of their income tax. It phases in for low-income earners and does not apply at all below the low-income threshold (around $27,000 for singles).

The Medicare Levy Surcharge (extra 1%–1.5%)

The Medicare Levy Surcharge (MLS) is a separate, extra charge of 1% to 1.5% for higher earners who do not hold private hospital cover. It applies to singles earning over $101,000 (or families over $202,000) for 2025-26. The simplest way to avoid it is to take out an appropriate private hospital policy — which often costs less than the surcharge it removes.

How deductions reduce your tax

A deduction does not come straight off your tax bill — it comes off your taxable income. The actual saving depends on your marginal rate:

• At the 30% marginal rate: every $1,000 of deductions saves $300
• At the 16% marginal rate: every $1,000 of deductions saves $160
• At the 37% marginal rate: every $1,000 of deductions saves $370

This is why the same deduction is worth more, in dollars, to a higher earner — and why knowing your marginal rate is the key to understanding what any claim is really worth.

Does a student loan (HELP/HECS) change what you pay?

If you have a HELP or HECS student loan, you may also have a compulsory repayment on top of your income tax. A few things to know:

• It is not optional — the ATO calculates it automatically from your income when you lodge, and collects it through the same tax return.
• Repayments only start once your income passes the annual repayment threshold the ATO sets each year. Below that threshold, no repayment is required for the year.
• The higher your income, the higher the repayment percentage — so a HELP repayment can reduce a refund you were expecting.

Because it is worked out at lodgement, it is worth factoring your loan in when you estimate your return so the final number is not a surprise. Your outstanding HELP balance is shown in your myGov account linked to the ATO.

Why two people on the same salary get different refunds

Your bracket sets your tax, but your refund depends on two more things: how much was withheld from your pay during the year, and how many deductions you claim. Two people each earning $80,000 can walk away with very different refunds — one who tracked their work-from-home hours, car trips and other deductions will reduce their taxable income and get more back, while someone who claims nothing simply pays the full amount the brackets dictate. The brackets are fixed; what you claim is not.