Australia’s tax rates for the 2025-26 financial year — running from 1 July 2025 to 30 June 2026 — are among the most consequential numbers in most Australians’ financial lives. Understanding where your income sits in the brackets, what Medicare levy you owe, and what tax offsets reduce your bill is essential for budgeting, salary negotiation, and tax return preparation.
Here is a complete, plain-English guide to Australia’s income tax rates and brackets for 2026, based on current ATO rates and thresholds.
Australia’s Income Tax Brackets 2025-26
Australia uses a progressive tax system — meaning you only pay the higher rate on the portion of your income that falls within that bracket, not on your entire income. The brackets for Australian residents for the 2025-26 financial year are:
| Taxable income | Tax rate |
|---|---|
| $0 to $18,200 | Nil — tax-free threshold |
| $18,201 to $45,000 | 16 cents per dollar |
| $45,001 to $135,000 | 30 cents per dollar |
| $135,001 to $190,000 | 37 cents per dollar |
| $190,001 and above | 45 cents per dollar |
These figures do not include the 2 per cent Medicare Levy, which is calculated separately.
These brackets reflect the Stage 3 tax cuts that took effect from 1 July 2024 — the most significant tax restructure in a decade. The key changes from the previous structure were reducing the 19 per cent rate to 16 per cent, and reducing 32.5 per cent to 30 per cent, with higher thresholds for the top two brackets. The Government confirmed in May 2025 that the same scales apply for the full 2025-26 year.
The Most Common Misconception About Tax Brackets
Many Australians believe that moving into a higher tax bracket means all their income gets taxed at the new higher rate. This is incorrect — and it is important to understand why.
Only the dollars above the threshold are taxed at the new rate. If you earn $50,000:
- The first $18,200 is taxed at 0%
- The next $26,800 ($18,201 to $45,000) is taxed at 16% — costing $4,288
- Only the final $5,000 ($45,001 to $50,000) is taxed at 30% — costing $1,500
- Total income tax: $5,788
A pay rise that takes you above $45,000 makes you better off — the extra dollars are taxed at 30 per cent, not your entire income. You cannot earn more and end up with less after-tax income because of bracket creep.
What You Actually Pay — Real Examples Including Medicare
Adding the 2 per cent Medicare Levy to the income tax calculation gives the total tax bill for most Australians. Here are the real numbers for common salaries in 2025-26:
| Salary | Income tax | Medicare levy | Total tax | Effective rate |
|---|---|---|---|---|
| $60,000 | $8,788 | $1,200 | $9,988 | 16.6% |
| $80,000 | $14,788 | $1,600 | $16,388 | 20.5% |
| $100,000 | $20,788 | $2,000 | $22,788 | 22.8% |
| $120,000 | $26,788 | $2,400 | $29,188 | 24.3% |
| $150,000 | $36,338 | $3,000 | $39,338 | 26.2% |
| $200,000 | $54,838 | $4,000 | $58,838 | 29.4% |
These figures assume no deductions, offsets, or HECS-HELP debt. The effective tax rate — the percentage of total income paid in tax — is always lower than the marginal rate shown in the brackets, because the lower brackets still apply to the first portions of income.
The Medicare Levy and Medicare Levy Surcharge
Medicare Levy: Most Australian residents pay a 2 per cent Medicare Levy on their entire taxable income. This funds the Medicare public health system. Low-income earners below approximately $26,000 may pay a reduced levy or none at all.
Medicare Levy Surcharge (MLS): A separate additional charge applies to higher-income earners who do not hold eligible private hospital cover. The surcharge is:
- 1.0% for incomes $93,001 to $108,000
- 1.25% for incomes $108,001 to $144,000
- 1.5% for incomes above $144,000
For higher earners without private hospital cover, the MLS can exceed the cost of a basic private hospital policy — making private health insurance a financially rational decision. For the full picture of healthcare costs, see our healthcare costs guide.
Tax Offsets That Reduce Your Bill
Several tax offsets directly reduce the amount of tax you pay — they are more valuable than deductions because they reduce tax dollar-for-dollar rather than reducing taxable income.
Low Income Tax Offset (LITO):
- Maximum offset: $700 for taxable incomes up to $37,500
- Phases out gradually, disappearing completely at $66,667
- Means low-income earners effectively pay no tax on income up to approximately $24,000
- Applied automatically by the ATO — no separate claim required
Seniors and Pensioners Tax Offset (SAPTO):
- Up to $2,230 for eligible singles aged 67 or over
- Means a single senior can have taxable income up to approximately $32,615 before paying any income tax
Low and Middle Income Tax Offset (LMITO): This offset ended on 30 June 2022 and does not apply for 2025-26. Some Australians still ask about it — it is gone.
HECS-HELP Student Loan Repayments
If you have a HECS-HELP debt, compulsory repayments apply once your repayment income exceeds $67,000 per year for 2025-26. The new marginal rate system introduced in 2025-26 means you only pay on income above the threshold — not a flat percentage on your total income.
| Repayment income | Marginal repayment rate on income above threshold |
|---|---|
| $67,000 to next threshold | 15% on income above $67,000 |
| Higher income bands | Increasing rates up to 10% of total income at $179,286+ |
Your employer withholds HECS-HELP repayments automatically if you declare a debt on your Tax File Number declaration. These repayments reduce your outstanding HECS-HELP balance — they are not an additional tax but a recovery of your loan.
Superannuation and Tax in 2025-26
Super Guarantee: Your employer must contribute 12 per cent of your ordinary time earnings to your superannuation from 1 July 2025. This rate increased from 11.5 per cent — meaning most employees received a superannuation contribution increase on top of any wage growth.
Concessional contributions tax: Super contributions made by your employer — and personal contributions you claim as a tax deduction — are taxed at 15 per cent inside super. This is significantly lower than the marginal income tax rates most Australians pay, making voluntary super contributions an effective tax minimisation strategy for those in the 30, 37, or 45 per cent brackets.
Concessional contributions cap: $30,000 per year (including employer SG contributions). Exceeding this cap results in excess contributions being included in your assessable income and taxed at your marginal rate.
Division 293: If your income plus concessional contributions exceeds $250,000, an additional 15 per cent tax applies to your concessional contributions — effectively taxing them at 30 per cent total.
What Is Changing From 1 July 2026
The next legislated change to income tax is already locked in for the 2026-27 financial year. From 1 July 2026:
- The 16 per cent rate on the $18,201 to $45,000 bracket drops to 15 per cent
- From 1 July 2027 it drops further to 14 per cent
This means Australians earning above $18,200 will pay slightly less tax from next financial year onwards — the saving is approximately $226 per year for someone earning $45,000 or more when the 2026-27 change takes effect.
Tax Return Lodgement — Key Dates 2026
- The 2025-26 financial year ends: 30 June 2026
- Standard lodgement deadline: 31 October 2026 for individuals lodging via myTax
- Tax agents: extended deadline — check with your agent
- Late lodgement penalty: $222 per 28-day period, up to a maximum of five periods ($1,110)
Lodge your return via myTax at my.gov.au for free. The average tax refund in Australia is approximately $2,500 to $3,500 — the main drivers are work-related deductions, HECS-HELP repayment adjustments, and private health insurance rebate adjustments.
Key Takeaways — Australia Tax Rates 2026
The 2025-26 income tax brackets are: 0% to $18,200, 16% to $45,000, 30% to $135,000, 37% to $190,000, and 45% above that. Add 2% Medicare Levy for most taxpayers. An Australian on $80,000 pays an effective rate of 20.5% — not 30%. The Low Income Tax Offset provides up to $700 for lower earners. HECS-HELP repayments start at $67,000 income. The Super Guarantee is 12% in 2025-26. From 1 July 2026, the 16% bracket rate drops to 15%.
For context on how Australian wages compare to the cost of living and tax burden, see our wages guide — Are Australian Wages Keeping Up With the Cost of Living in 2026? — and our Centrelink payments guide — Australia Centrelink Payments 2026 — Current Rates for Age Pension, JobSeeker, Youth Allowance and More.
This article is for general informational purposes only and reflects the author’s own research and understanding of publicly available ATO information. Tax rates, thresholds, and offsets can change. Always verify current rates with the ATO at ato.gov.au or consult a registered tax agent for advice specific to your circumstances.
