Australian income tax brackets 2025–26 explained simply

The 2024 Stage 3 amendments dropped tax rates across every bracket. Here's exactly what you owe at common Australian salaries, plus how Medicare, HECS and offsets stack on top.

By ECTD Editorial · Published 2026-05-02 · Updated 2026-05-02

How much tax do I actually pay? It's a simple question with a more complicated answer than most people realise. There are four separate calculations stacked on top of each other — income tax brackets, Medicare levy, HECS withholding, and offsets — and each works slightly differently. Here's the complete plain-English breakdown for 2025–26, including the Stage 3 reforms that took effect 1 July 2024.

The 2025–26 tax brackets at a glance

For Australian residents in 2025–26:

$0 – $18,200: 0% (the tax-free threshold)
$18,201 – $45,000: 16% on the excess over $18,200
$45,001 – $135,000: $4,288 + 30% on the excess over $45,000
$135,001 – $190,000: $31,288 + 37% on the excess over $135,000
$190,001+: $51,638 + 45% on the excess over $190,000

Australia's tax system is progressive — you only pay the higher rate on the income above each threshold. Earning $46,000 doesn't mean all your income is taxed at 30%. Only the $1,000 above $45,000 is. The first $18,200 is free, the next $26,800 is at 16%, and only that last $1,000 is at 30%.

What changed under the Stage 3 amendments

The Stage 3 tax cut amendments passed in early 2024 changed the brackets significantly compared to before 1 July 2024. The original Stage 3 plan (legislated by the Coalition government in 2018) was to abolish the 37% bracket entirely and apply 30% from $45,000 to $200,000. The Albanese Government amended the plan to keep more progressivity:

The 19% bracket dropped to 16%
The 32.5% bracket dropped to 30% and now extends to $135,000 (was $120,000)
The 37% bracket now starts at $135,000 instead of $120,000
The 45% bracket threshold rose to $190,000 (was $180,000)

For a typical $90,000 earner, this is roughly $1,500–$2,000 more in take-home pay per year compared to the pre-2024 rates. For a $200,000 earner, the saving is about $4,500/year. The cuts are locked in for 2024–25 and 2025–26 financial years.

Worked examples at common salaries

These calculations include income tax + 2% Medicare levy. Assume Australian resident, no HECS, no salary sacrifice, no deductions, no Medicare Levy Surcharge.

$50,000 income

Tax: 16% on $26,800 (the slice from $18,200 to $45,000) + 30% on $5,000 (the slice from $45,000 to $50,000) = $4,288 + $1,500 = $5,788
Medicare: 2% × $50,000 = $1,000
LITO offset: $325 - 1.5% × $5,000 = $250
Total tax: $5,788 + $1,000 - $250 = $6,538
Take-home: $43,462 per year (~$1,672/fortnight)
Effective rate: 13.1%

$80,000 income

Tax: $4,288 + 30% × $35,000 = $14,788
Medicare: $1,600
LITO offset: $0 (above $66,667)
Total: $16,388
Take-home: $63,612 (~$2,447/fortnight)
Effective rate: 20.5%

$120,000 income

Tax: $4,288 + 30% × $75,000 = $26,788
Medicare: $2,400
Total: $29,188
Take-home: $90,812 (~$3,493/fortnight)
Effective rate: 24.3%

$200,000 income

Tax: $51,638 + 45% × $10,000 = $56,138
Medicare: $4,000
Total: $60,138
Take-home: $139,862 (~$5,379/fortnight)
Effective rate: 30.1%

Marginal vs effective tax rate

These two terms cause a lot of confusion and matter for a lot of decisions.

Your marginal tax rate is the rate applied to your next dollar earned. So at $80,000 your marginal rate is 30% — earning an extra $1,000 means $300 of it goes to tax (plus 2% Medicare = $320 actually).

Your effective tax rate is your total tax as a percentage of your total income. It's always lower than your marginal rate because not all your income is taxed at the top bracket — the lower brackets and the tax-free threshold bring the average down.

Why this matters: when deciding whether something is worth doing — taking on extra work, salary sacrificing into super, claiming a deduction — what matters is your marginal rate, not your effective. Salary sacrificing $1,000 saves you 30% in tax (or whatever your marginal rate is), not your 22% average.

Medicare levy explained

Medicare is a flat 2% of taxable income for most Australians. There's a low-income threshold and a "shading-in" range:

Below $27,222: no Medicare levy at all
$27,222 to $34,027: shading-in zone (lower than 2%)
Above $34,027: full 2%

There's also a separate Medicare Levy Surcharge (MLS) for higher-income earners without private hospital cover. The MLS is an additional 1–1.5% on top of the regular 2% Medicare levy:

Below $97,000 (singles): no MLS
$97,001–$113,000: 1% MLS
$113,001–$151,000: 1.25% MLS
$151,001+: 1.5% MLS

For singles earning over $97,000 without private hospital cover, the MLS often costs more than basic private hospital cover would. This is why most high-income singles take out a basic policy purely to avoid the MLS — the maths usually favours it by a few hundred dollars per year.

The Low Income Tax Offset (LITO)

LITO is a tax offset that reduces tax for lower-income earners. For 2025–26:

Income up to $37,500: $700 offset
$37,501–$45,000: $700 minus 5 cents per $1 above $37,500
$45,001–$66,667: $325 minus 1.5 cents per $1 above $45,000
Above $66,667: $0

LITO is a non-refundable offset — it can reduce your tax to zero, but it can't generate a refund of more than you paid. It's applied automatically when you lodge your return; you don't claim it explicitly.

How HECS withholding stacks on top

If you have a HECS-HELP debt, an additional withholding applies on top of income tax and Medicare. From 1 July 2025, HECS uses a marginal-rate system:

Under $67,000: $0 HECS
$67,000–$125,000: 15% on income above $67,000
$125,000+: 17% on income above $125,000 + the 15% on the lower bracket

For an $80,000 earner with HECS, that's an extra ~$1,950/year on top of income tax and Medicare. Combined with everything else, an $80,000 earner with HECS takes home roughly $61,662 instead of $63,612.

Salary sacrifice: the most powerful tax move

Salary sacrifice (technically "concessional contributions" to super) lets you redirect part of your salary into super before tax. Money packaged into super is taxed at 15% inside the fund instead of your marginal rate.

For someone on the 30% bracket, every dollar packaged saves 17 cents (32% combined including Medicare, minus 15% inside super). On the 37% bracket, the saving is 24 cents per dollar. On the 45% top bracket, 32 cents per dollar.

The 2025–26 concessional cap is $30,000 per year, which includes the 11.5% super your employer pays plus any additional sacrifice. For a $100,000 earner with the standard 11.5% employer contribution ($11,500), you can sacrifice up to $18,500 more before hitting the cap.

Trade-off: the money is locked in super until preservation age (60 for most). For high-income earners with capacity to wait, it's typically the most tax-effective single move available.

Non-residents and working holiday makers

Two categories of taxpayer have very different rules:

Non-residents for tax purposes

Don't get the $18,200 tax-free threshold. Don't pay the Medicare levy. Brackets:

$0 – $135,000: 30% from the first dollar
$135,001 – $190,000: $40,500 + 37% on the excess
$190,001+: $60,850 + 45% on the excess

Working holiday makers (417/462 visas)

Have separate brackets starting at 15% from the first dollar:

$0 – $45,000: 15% from the first dollar
$45,001 – $135,000: $6,750 + 30% on the excess
$135,001 – $190,000: $33,750 + 37% on the excess
$190,001+: $54,100 + 45% on the excess

Common questions

When does the financial year start and end?

The Australian financial year runs 1 July to 30 June. Tax brackets, HECS thresholds, and Medicare rules all change at the start of each new FY. The 2025–26 FY runs 1 July 2025 to 30 June 2026, with returns lodged from late July 2026.

When do I have to lodge my tax return?

If you lodge yourself (e.g. via myTax), the deadline is 31 October after the end of the financial year. If you use a registered tax agent, the deadline is typically extended to 15 May the following year — but you have to be on their books by 31 October.

What's the difference between a deduction and an offset?

A deduction reduces your taxable income — so it saves you tax at your marginal rate (e.g. 30 cents per $1 of deduction at the 30% bracket). An offset reduces your tax bill directly, dollar-for-dollar (so a $700 offset saves you $700 regardless of your bracket).

The bigger picture

Australian income tax is fundamentally a four-layer cake — tax brackets, Medicare, HECS withholding (if applicable), and offsets — and the interactions between them matter for every meaningful financial decision. The good news is that you don't have to do this maths in your head. Use the income tax calculator linked above to see your actual situation, and lean on a tax agent for anything more complex than standard salary income.

General information only — not personal financial, tax, legal or medical advice. Consider your own situation and consult a licensed professional before acting. Figures are current as at the date shown above.