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Australia uses a progressive income-tax system. Your marginal rate applies only to the portion of taxable income that falls inside a particular band, not to every dollar you earn. To estimate your bill, first identify your taxable income after allowable deductions and your tax residency for the relevant income year. Then calculate each slice separately and add items that sit outside the bracket table, such as the Medicare levy, Medicare levy surcharge, study-loan repayments and any applicable offsets.
The figures below explain the resident brackets for 2025–26, show exactly how a $60,000 taxable income is treated, and outline scheduled rate changes for later years.
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What an Australian tax bracket actually means
A tax bracket is a range of taxable income with its own marginal rate. Australia’s system is progressive: as taxable income rises past a threshold, only the dollars in the next range receive the higher rate. The Australian Taxation Office’s explanatory memorandum describes the rates as applying to “the part of the taxable income” within each range.
That distinction answers a common concern: moving from $45,000 to $45,001 does not make your entire income taxable at 30 per cent. The first $18,200 remains in the 0 per cent range, the next slice remains at 16 per cent for 2025–26, and only the extra dollar is in the 30 per cent slice. A higher salary can therefore increase tax, but it does not reduce the after-tax value of all your earlier dollars.
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Your bracket is not the same as your average (or effective) tax rate. The marginal rate is what applies to your next dollar in the relevant slice. The average rate is total ordinary income tax divided by taxable income, before considering separate levies, repayments, offsets or withholding.
2025–26 Australian resident tax brackets
The following table applies to an Australian resident individual’s taxable income for the 2025–26 income year. It is a table of marginal slices, not a single rate applied to the whole amount.
| 2025–26 taxable-income slice | Marginal rate | How the slice works |
|---|---|---|
| $0–$18,200 | 0% | No ordinary income tax is charged on this slice. |
| $18,201–$45,000 | 16% | Only the dollars between $18,201 and $45,000 are taxed at 16%. |
| $45,001–$135,000 | 30% | Only the dollars above $45,000 and up to $135,000 are taxed at 30%. |
| $135,001–$190,000 | 37% | Only the dollars above $135,000 and up to $190,000 are taxed at 37%. |
| Over $190,000 | 45% | Only the amount over $190,000 is taxed at 45%. |
The 0 per cent range is commonly called the tax-free threshold. It does not mean every resident with income below $18,200 will have no obligations of any kind: residency, Medicare rules, study-loan arrangements and other circumstances can affect an assessment.
How to calculate ordinary income tax
Use taxable income rather than gross salary. Taxable income starts with assessable income and subtracts deductions that are allowable under the tax rules. A salary figure on a job offer, payslip or payroll report may therefore be higher than the figure used in the tax calculation.
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- Choose the income year. Rates and thresholds are tied to the year selected. The 2025–26 table above should not be substituted for another year.
- Confirm residency. Resident, foreign-resident and part-year-resident rules are different. A working-holiday-maker status can also trigger special treatment.
- Work out assessable income. Include the income that is taxable under the rules applying to your circumstances.
- Subtract allowable deductions. The result is taxable income. Keep evidence for deductions because an estimate based only on gross pay can overstate the amount used in the brackets.
- Split taxable income across the bands. Apply 0 per cent to the first slice, then 16 per cent, 30 per cent, 37 per cent and 45 per cent only where the income reaches those ranges.
- Add or subtract items outside the table. Consider the Medicare levy, Medicare levy surcharge, study or training support loan repayment, working-holiday-maker rules, First Home Super Saver liabilities and offsets.
- Compare the result with PAYG withholding. Amounts withheld during the year are prepayments. They are not automatically the final tax assessed.
Worked examples for 2025–26 residents
These illustrations use taxable income, not gross salary, and show ordinary income tax before the Medicare levy, Medicare levy surcharge, study-loan repayments, offsets and withholding. They demonstrate the bands; they are not personal assessments.
| Taxable income | Slice calculation | Ordinary income tax before other items | Approximate average rate |
|---|---|---|---|
| $20,000 | 16% of $1,800 | $288 | 1.44% |
| $45,000 | 16% of $26,800 | $4,288 | 9.53% |
| $60,000 | 16% of $26,800 plus 30% of $15,000 | $8,788 | 14.65% |
| $100,000 | 16% of $26,800 plus 30% of $55,000 | $20,788 | 20.79% |
| $150,000 | 16% of $26,800 plus 30% of $90,000 plus 37% of $15,000 | $36,838 | 24.56% |
| $200,000 | 16% of $26,800 plus 30% of $90,000 plus 37% of $55,000 plus 45% of $10,000 | $56,138 | 28.07% |
What happens at $60,000?
For the frequently asked $60,000 example, the first $18,200 is taxed at 0 per cent. The next $26,800 is taxed at 16 per cent, producing $4,288. The remaining $15,000 is taxed at 30 per cent, producing $4,500. Ordinary income tax is therefore $8,788 before the separate items listed above. The final assessment can be higher or lower depending on deductions, offsets, Medicare rules, study-loan obligations and the amount already withheld.
Why the average rate stays below the top marginal rate
Someone with $150,000 of taxable income has some dollars taxed at 0 per cent, some at 16 per cent, most of the middle portion at 30 per cent and only the final $15,000 at 37 per cent. The resulting ordinary tax of $36,838 is about 24.56 per cent of taxable income, even though the marginal rate on the next dollar is 37 per cent. This is why describing the whole income as “a 37 per cent tax bill” is misleading.
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Scheduled changes from 2026–27
Legislation changes the first taxable band after 2025–26 while retaining the listed thresholds and the 30 per cent, 37 per cent and 45 per cent rates. The enacted schedule is:
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| Income year | First taxable slice above $18,200 | Other listed thresholds and rates |
|---|---|---|
| 2025–26 | $18,201–$45,000 at 16% | $45,001–$135,000 at 30%; $135,001–$190,000 at 37%; over $190,000 at 45% |
| 2026–27 | Above $18,200 up to $45,000 at 15% | The 30%, 37% and 45% rates and the $45,000, $135,000 and $190,000 thresholds remain in the Act |
| 2027–28 and later | Above $18,200 up to $45,000 at 14% | The same listed 30%, 37% and 45% rates and thresholds are specified |
Apply the rate for the income year being assessed. Do not recalculate a 2025–26 return using the later 15 per cent or 14 per cent first-band rate.
Residency can change the answer completely
Australian residents
The table is the resident schedule for 2025–26. Residency is determined for tax purposes during the relevant income year, not simply by citizenship or where a bank account is held.
Foreign residents
The ATO states that foreign residents pay tax at a higher rate and cannot claim the tax-free threshold. Their calculation is therefore not obtained by inserting income into the resident table. Use the ATO’s current income-tax estimator and residency guidance for the relevant year.
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A person who is resident for only part of an income year can usually claim a part-year tax-free threshold. The amount and calculation depend on the circumstances and dates involved, so a full-year resident estimate can be wrong even when the person lived in Australia for part of the year.
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Working-holiday makers
Working-holiday-maker obligations are separate from the ordinary resident table. The ATO estimator warns that this status can change the result; select it explicitly rather than assuming resident rates apply.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Medicare levy and surcharge are separate from the brackets
The headline income-tax table does not include the Medicare levy. The basic Medicare levy is generally 1.5 per cent of taxable income, subject to applicable thresholds and adjustments. An estimate that multiplies taxable income by a marginal rate and stops there can therefore understate the final amount.
The Medicare levy surcharge (MLS) is a separate charge linked to the income-for-MLS test and hospital-cover rules. For a single taxpayer in 2025–26, the published tiers are:
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| Single income-for-MLS tier, 2025–26 | MLS rate |
|---|---|
| $101,000 or less | 0% |
| $101,001–$118,000 | 1% |
| $118,001–$158,000 | 1.25% |
| $158,001 or more | 1.5% |
These are single-person thresholds and are subject to the income-for-MLS test and hospital-cover rules. Do not infer MLS exposure from the ordinary marginal bracket alone: a person can be in the 30 per cent income-tax band without owing the surcharge, or face a surcharge calculation that uses a different income measure.
Study loans, offsets and other adjustments
HELP and other study or training support loans
Compulsory repayments for a study or training support loan are not another marginal income-tax bracket. They are calculated under their own rules and can materially change the amount payable or the amount withheld from wages. Include the relevant loan status in an estimate.
Offsets
Tax offsets reduce tax calculated under the rules for which you qualify. They do not move taxable income into a lower bracket and do not alter the published marginal rates. Eligibility, income limits and the value of an offset depend on the specific measure and income year.
First Home Super Saver liabilities
The ATO estimator identifies First Home Super Saver liabilities as an item excluded from its basic income-tax result. Treat any such liability as a separate adjustment rather than folding it into a bracket rate.
PAYG withholding is not your final tax bill
Pay-as-you-go (PAYG) withholding takes money from payments during the year as a prepayment toward the eventual assessment. Employers use withholding tables that account for factors such as the selected income year, Medicare levy, study-loan components, residency, working-holiday-maker status, the tax-free-threshold declaration and some offsets.
The amount withheld can differ from final tax because your actual taxable income, deductions, offsets, residency, levy position or loan repayment may differ from the assumptions used by payroll. A refund generally means more was withheld than the final assessment; an amount to pay can mean withholding was insufficient. Neither outcome changes the marginal rates themselves.
A practical method for estimating your own position
- Gather the right income figure. Start with assessable income for the relevant year, then subtract only deductions you are entitled to claim. Do not use a gross salary figure without checking what is included.
- Record your residency status. Select resident, foreign resident, part-year resident or working-holiday-maker treatment as appropriate.
- Calculate the ordinary tax slices. Use the table for that year and apply each rate only to the dollars in its range.
- Check Medicare items. Add the basic Medicare levy if applicable and test whether the single MLS thresholds and hospital-cover rules affect you.
- Check statutory additions. Include HELP or another study and training support loan, working-holiday-maker treatment and any First Home Super Saver liability that applies.
- Apply eligible offsets. Subtract offsets only after confirming their conditions for the income year.
- Compare with withholding. Subtract PAYG already withheld to estimate whether the assessment may result in a refund or payment. The final notice from the ATO controls.
The ATO’s income-tax estimator covers the 2025–26 rates, Medicare levy, study-loan components, residency, working-holiday-maker status, the tax-free threshold and offsets. Its tax-withheld calculator is designed to check payroll withholding. Both tools warn that their ordinary income-tax result excludes items such as the Medicare levy, Medicare levy surcharge, working-holiday-maker obligations, First Home Super Saver liabilities and study and training support loan repayments unless the relevant inputs are handled separately.
Common mistakes to avoid
- Calling the marginal rate the tax rate on all income. Only the slice inside that band receives the rate.
- Using gross pay instead of taxable income. Deductions can change the amount that reaches each band.
- Using the wrong year. The first-band rate changes from 16 per cent to 15 per cent in 2026–27 and is scheduled to become 14 per cent from 2027–28.
- Assuming residency. Foreign residents cannot claim the tax-free threshold, while part-year residents may receive only a part-year threshold.
- Leaving out Medicare items. The levy and surcharge are not contained in the ordinary bracket table.
- Treating PAYG as the final result. Withholding is a prepayment and can be more or less than the eventual assessment.
- Applying the single MLS table to every household. The listed tiers are for singles and remain subject to the income-for-MLS test and hospital-cover rules.
For a reliable estimate, identify the year and residency first, calculate on taxable income, keep each marginal slice separate, and then check levies, surcharge exposure, loan repayments, offsets and withholding as distinct lines.
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