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

10 March 2026|6 min read

Complete guide to Australian income tax brackets for 2025-26. Understand the current rates after Stage 3 tax cuts, Medicare levy, tax offsets, and how to calculate your tax bill.

Current Australian tax brackets for 2025-26

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 $26,000 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.

Stage 3 tax cuts explained: what changed and who benefits

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. 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.

Medicare levy and Medicare levy surcharge

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 approximately $26,000 pay no Medicare levy, with a phase-in range up to approximately $32,500. Families have higher thresholds based on the number of dependents. The Medicare Levy Surcharge (MLS) is a separate charge for high-income earners who do not hold private hospital insurance. The MLS rates are: 1% for singles earning $97,000–$113,000, 1.25% for $113,001–$151,000, and 1.5% above $151,000 (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 $97,000: 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.

Tax offsets: LITO, SAPTO, and what happened to LMITO

Tax offsets (also called tax rebates) reduce the amount of tax you pay but cannot 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 are a low-income earner, LITO is applied automatically — you do not need to claim it. The ATO calculates and applies it when processing your tax return.

How to calculate your tax: step by step

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. 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.

Using salary sacrifice and deductions to reduce your tax

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. 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.