Australian Tax Brackets 2025-26: Rates, Calculator & Stage 3 Cuts Explained

Quick reality check. The Australian income tax brackets for the 2025-26 financial year (1 July 2025 to 30 June 2026) are: $0–$18,200 at 0% (tax-free threshold), $18,201–$45,000 at 16%, $45,001–$135,000 at 30%, $135,001–$190,000 at 37%, and $190,001+ at 45%. These rates reflect the revised Stage 3 tax cuts that took effect on 1 July 2024.

On top of these rates, most taxpayers pay the Medicare levy of 2% on taxable income (with a low-income exemption below approximately $27,222 for singles). The effective tax rates are therefore: 0% up to $18,200, 18% from $18,201–$45,000, 32% from $45,001–$135,000, 39% from $135,001–$190,000, and 47% above $190,000. On a salary of $90,000, total tax including Medicare levy is approximately $19,717, giving an effective tax rate of 21.9%.

Understanding your marginal rate — the rate on your next dollar earned — is essential for decisions about overtime, salary sacrifice, and deductions. Keep that in mind.

The original Stage 3 tax cuts proposed a flat 30% rate for all income between $45,001 and $200,000. The revised version, which took effect 1 July 2024, instead cut the 19% bracket to 16%, reduced the 32.5% bracket to 30%, lowered the threshold for the 37% rate from $120,001 to $135,001, and kept the 45% rate but raised its threshold from $180,001 to $190,001.

The revision shifted benefits toward low and middle income earners. A worker on $50,000 receives approximately $929 per year in tax savings. A worker on $80,000 receives approximately $1,679 per year.

Worth knowing: A worker on $120,000 receives approximately $3,279 per year. A worker on $200,000 receives approximately $4,529 per year. The original plan would have given the $200,000 earner approximately $9,075 and the $50,000 earner only $125, so the revision substantially flattened the distribution of benefits.

These are permanent structural changes to the tax system, not temporary offsets.

The Medicare levy is 2% of taxable income for most taxpayers, funding Australia's public healthcare system. Low-income earners are exempt or receive a reduction: singles with taxable income below $27,222 pay no Medicare levy, with a phase-in range up to $34,027 (2025-26).

Families have higher thresholds based on the number of dependents. The Medicare Levy Surcharge (MLS) is a separate charge for high-income earners who don't hold private hospital insurance. The 2025-26 MLS rates for singles are: 1% for $101,001–$118,000, 1.25% for $118,001–$158,000, and 1.5% above $158,000 (family thresholds are double).

On a salary of $120,000 without private hospital cover, the MLS costs $1,500 per year — often more than the cost of a basic hospital policy. This makes holding basic hospital cover effectively compulsory for earners above $101,000: the policy costs $1,000–$1,500 per year but eliminates a $1,200–$1,800 MLS liability. Compare policies on privatehealth.gov.au to find the cheapest cover that removes the surcharge.

Bottom line? Tax offsets (also called tax rebates) reduce the amount of tax you pay but can't create a refund — they can only reduce your tax to zero. The Low Income Tax Offset (LITO) provides up to $700 for taxable incomes up to $37,500, phasing out to zero at $66,667.

This effectively increases the tax-free threshold to approximately $21,884 for low-income earners. The Senior Australians and Pensioners Tax Offset (SAPTO) provides additional relief for eligible seniors, effectively raising their tax-free threshold to approximately $33,532 for singles and $30,680 each for couples. The Low and Middle Income Tax Offset (LMITO) — which provided up to $1,500 for middle-income earners — was discontinued after 30 June 2022.

Its removal was a significant hit to middle-income earners and was only partially compensated by the Stage 3 tax cuts. If you're a low-income earner, LITO is applied automatically — you don't need to claim it. The ATO calculates and applies it when processing your tax return.

Calculating your income tax involves several steps. Step 1: Determine your taxable income — gross salary minus tax deductions (work-related expenses, donations, self-education).

Step 2: Apply the marginal tax rates to your taxable income. On $90,000: the first $18,200 is tax-free ($0), the next $26,800 ($18,201–$45,000) is taxed at 16% ($4,288), and the remaining $45,000 ($45,001–$90,000) is taxed at 30% ($13,500). Total income tax = $17,788.

So what does this actually mean? Step 3: Add the Medicare levy of 2% on full taxable income: $90,000 × 2% = $1,800. Step 4: Subtract any tax offsets — if your income is below $66,667, subtract the LITO amount. Step 5: Your total tax payable is income tax + Medicare levy − offsets.

For $90,000: $17,788 + $1,800 − $125 (reduced LITO) = $19,463. Our Tax Calculator handles all of this automatically, including HELP debt repayments, Medicare Levy Surcharge, and common deductions.

Use it to estimate your tax position before year-end so you can make adjustments.

Every dollar of tax deduction saves you tax at your marginal rate. If you earn $90,000 (30% bracket plus 2% Medicare), a $1,000 deduction saves $320 in tax.

Common deductions most employees can claim: work-from-home expenses ($0.67 per hour fixed rate or actual cost method), work-related travel, uniforms and protective clothing, tools and equipment, professional memberships, self-education related to current employment, and phone and internet expenses (work percentage). The ATO's 'occupation and industry guides' list deductions specific to your profession. Salary sacrifice into super provides a different type of tax reduction: contributions are taxed at 15% inside super rather than your marginal rate.

In plain English: On a $90,000 salary, sacrificing $10,000 saves approximately $1,700 in net tax. Pre-paying deductible expenses before 30 June (income protection insurance, professional subscriptions) brings deductions into the current year. Making a tax-deductible donation of $2 or more to a registered charity provides both a deduction and social benefit.

Use our Take Home Pay calculator to model the impact of different deduction and salary sacrifice scenarios on your actual pay.