What are the Australian income tax brackets for 2025–26?

For 2025–26, Australian residents pay: 0% on income up to $18,200; 16% on $18,201–$45,000; 30% on $45,001–$135,000; 37% on $135,001–$190,000; and 45% on income above $190,000. These are marginal rates — you pay each rate only on that slice of income, not on your total. The 2% Medicare levy applies on top of all taxable income. From 1 July 2026, the 16% rate drops to 15%.

What is the difference between marginal tax rate and effective tax rate in Australia?

Your marginal rate is the rate you pay on your next dollar of income. Your effective rate is the total tax paid divided by your total income — and it is always lower than your marginal rate because lower brackets apply to the earlier portions of your income. For example, someone on $100,000 has a 30% marginal rate but an effective rate of around 20% once you account for the tax-free threshold and lower rates on lower income slices.

What is the standard $1,000 work deduction in Australia from 2026?

From the 2026–27 financial year, the government is introducing a $1,000 standard deduction for work-related expenses. It applies automatically — no receipts required — for taxpayers with employment income. People whose actual work expenses exceed $1,000 should still itemise their real expenses (WFH at 70c/hour, tools, self-education, etc.) to claim a larger deduction.

Who pays the Medicare levy surcharge in Australia?

The Medicare levy surcharge of 1–1.5% applies to Australian residents whose taxable income exceeds the surcharge threshold and who don't hold adequate private hospital cover. The exact threshold and rates depend on your income tier. In many cases, the cost of private hospital cover is similar to or less than the surcharge — making it worth comparing the two figures for your specific income level.

How can I reduce my income tax in Australia legally in 2026?

The most widely applicable legal options are: (1) claiming all legitimate work-related deductions — or the new $1,000 standard deduction if your actual expenses are lower; (2) checking eligibility for offsets like the Low Income Tax Offset, seniors offsets and private health surcharge avoidance; (3) making concessional super contributions (salary sacrifice or personal deductible contributions) to move income from your marginal rate into the 15% super tax environment, within annual caps. Always consult a registered tax agent for advice tailored to your situation.

Evidence-backed. Sourced from the ATO, MoneySmart, PwC, OECD and the Melbourne Institute. General information only — not financial or tax advice. Tax rates and legislation may change — verify your situation with a registered tax agent or via myTax. Last updated: June 2026.

⚡ Key Takeaways

Australia’s 2025–26 tax brackets (post Stage 3): 0% up to $18,200; 16% on $18,201–$45,000; 30% on $45,001–$135,000; 37% on $135,001–$190,000; 45% above $190,000 — plus 2% Medicare levy on top of all taxable income. ^[1][3]
At common Australian incomes: $60k earner pays ~$8,988 total (about 15% of gross); $100k pays ~$20,288 (just over 20%); $150k pays ~$34,288 (about 23%). These are meaningful but often lower than people assume. ^[1][3]
The “stacking” effect is the real trap: for a 30-year-old on $95,000 with HECS and no private hospital cover, the combined take from income tax + Medicare levy + Medicare levy surcharge + HECS repayments can exceed 25% of each extra dollar earned. ^[4][3][2]
From 1 July 2026, the 16% marginal rate on $18,201–$45,000 drops to 15%. From 1 July 2027, it drops to 14%, and a new $250 Working Australians Tax Offset applies to more than 13 million workers. ^[6]
A standard $1,000 work-expense deduction kicks in from 1 July 2026 — automatic for anyone with employment income, no receipts needed. If your actual work expenses are higher, you should still itemise. ^[10][6]
The Melbourne Institute’s HILDA analysis found that over the past 21 years, high-income earners received the most tax relief, while ordinary workers were most hurt by bracket creep as wages rose faster than tax thresholds. The people winning at tax are those with advice — not those with the highest incomes. ^[8]

Australian Income Tax 2026: How Much Are You Actually Losing?

By The Fine Print editorial team | Last updated: June 2026 | 12 min read | ⚠️ Not financial advice

When Australians complain about tax, they often blame the marginal rate. “I’m on 30%, so 30% of everything goes to tax.” That’s not how it works — but the misunderstanding costs real money, because people avoid overtime and promotions out of fear of a tax hit that will never actually arrive. Meanwhile, the real leak is complexity and inertia: millions of Australians overpay because they don’t know their true effective rate, don’t claim basic deductions, and never use the straightforward structures that move income into lower-tax buckets. Here’s exactly what the numbers look like in 2026 — and how to stop losing more than you have to.

📋 What’s in This Guide

The 2025–26 tax brackets in plain language
How much you’re actually losing at common incomes
The stacking effect: tax + Medicare + HECS + surcharge
Bracket creep: inflation’s slow tax hike
2023–2026 changes: Stage 3, standard deduction, new offset
Three moves to legally reduce how much you lose
Frequently asked questions

The 2025–26 Tax Brackets in Plain Language

Australia taxes residents on a progressive scale — meaning you pay different rates on different slices of income, not one flat rate on everything. The ATO’s 2025–26 resident marginal rates (excluding Medicare) are: ^[1][3]

🇦🇺 2025–26 Tax Rates (Residents, excl. Medicare)

$0–$18,200: 0% (the tax-free threshold)
$18,201–$45,000: 16%
$45,001–$135,000: 30%
$135,001–$190,000: 37%
$190,001+: 45%

Add 2% Medicare levy to all taxable income. Add 1–1.5% Medicare levy surcharge if your income exceeds the threshold and you don’t hold adequate private hospital cover. ^[2][3]

The critical thing to understand: these are marginal rates. A person on $80,000 doesn’t pay 30% on their full $80,000. They pay 0% on the first $18,200, 16% on the next $26,800 (to $45,000) and 30% on the remaining $35,000. The effective rate — total tax as a percentage of total income — is always lower than the marginal rate. ^[3]

How Much Are You Actually Losing at Common Incomes?

Using ATO and MoneySmart 2025–26 rates and excluding offsets (which vary by individual), the total tax + Medicare levy at common Australian salaries looks like this: ^[1][3]

💰 What You Actually Lose (2025–26, excl. offsets and HECS)

$60,000: income tax ~$7,788 + Medicare $1,200 = ~$8,988 total (~15% of gross)
$100,000: income tax ~$18,288 + Medicare $2,000 = ~$20,288 total (~20% of gross)
$150,000: income tax ~$31,288 + Medicare $3,000 = ~$34,288 total (~23% of gross)

Note: these exclude the Low Income Tax Offset and other offsets that can further reduce tax, particularly at lower incomes. They also exclude any HECS repayments, which add a separate layer. ^[1][3]

The numbers are often lower than people expect. The common assumption — “I’m on 30%, so almost a third of everything goes to tax” — is wrong for most Australians. At $100,000, the effective rate is about 20%, not 30%. At $60,000 it’s about 15%. This matters because people sometimes avoid accepting overtime or a promotion, fearing a tax hit that is far smaller than they imagined. ^[3]

The Stacking Effect: Tax + Medicare + HECS + Surcharge

Where the numbers get genuinely confronting is when you stack all the layers together. Many Australians in their twenties and thirties are paying income tax at their marginal rate, plus 2% Medicare, plus HECS/HELP repayments (1–10% of income above the $67,000 threshold), and potentially the Medicare levy surcharge of 1–1.5% if they’re above the surcharge threshold without private hospital cover. ^[4][3][2]

⚠️ The stacking trap in practice: A 30-year-old earning $95,000 with HECS debt and no private hospital cover can face a combined marginal take — income tax at 30% + 2% Medicare + 1.5% surcharge + HECS repayment — of well over 25 cents in every extra dollar they earn at the margin. This isn’t their effective rate on total income; it’s the rate on each additional dollar at that income level. Knowing this matters when deciding whether a $5,000 pay rise is worth the trade-offs of a busier role. ^[4][3][2]

The fix for the surcharge component is straightforward: adequate private hospital cover (typically costing $1,500–$2,500 per year) removes the 1–1.5% surcharge. At $100,000 of income, the surcharge costs $1,000–$1,500 per year — which is often similar to or less than the cost of the private cover needed to avoid it. The calculation is worth running. ^[2][3]

Bracket Creep: Inflation’s Slow Tax Hike

Bracket creep is the mechanism by which inflation quietly raises your effective tax rate without any legislation. When prices rise and wages follow, your nominal income goes up — potentially crossing into a higher tax bracket — even though your real purchasing power hasn’t improved. The government collects more tax without passing any new laws. ^[8]The Melbourne Institute’s HILDA-based analysis found that over the past 21 years, high-income Australians received the most tax relief, while the majority of workers were hurt by bracket creep as wages rose faster than tax thresholds. With the inflation spikes of 2022–2024, the effect intensified: more Australians saw an increasing share of their pay swallowed by tax even though their real income hadn’t grown meaningfully. ^[8]The legislated Stage 3 changes (delivered from 1 July 2024, then adjusted) were partly designed to address this — particularly the collapsing of the 19% and 32.5% brackets into the current simpler 16%/30% structure, and the widening of the 30% band from $45,000 to $135,000. This means a much larger slice of Australian incomes now sits in the 30% bracket rather than creeping into the 37% bracket as fast as before. ^[9][6]

2023–2026 Changes Worth Knowing

Stage 3 redesign (from 1 July 2024)

The Stage 3 tax cuts were redesigned before implementation, shifting more benefit to low and middle earners and reducing the top-end benefit compared with the original plan. Critics argue higher earners still receive more in absolute terms over time, but the redesign broadly moved things in a fairer direction. ^[9][6]

Further rate cuts coming: 16% → 15% → 14%

From 1 July 2026, the 16% rate on the $18,201–$45,000 band drops to 15%. From 1 July 2027, it drops further to 14%. For someone earning $45,000, this is worth about $450 per year when fully phased in. ^[6]

Standard $1,000 work-expense deduction (from 1 July 2026)

From the 2026–27 tax year, the government is introducing a $1,000 standard deduction for work-related expenses — no receipts required. This automatically benefits anyone who currently claims nothing, or whose actual work expenses are under $1,000. For people with larger legitimate expenses (WFH at 70c/hour, tools, self-education, travel), itemising will still produce a bigger deduction. ^[10][6]

Working Australians Tax Offset (from 1 July 2027)

A new $250 Working Australians Tax Offset will apply from 1 July 2027 to more than 13 million workers with employment or sole-trader income, providing a modest annual tax cut that partly offsets bracket creep and cost-of-living pressure. ^[6]

💡 The complexity gap: H&R Block and other tax commentators note that while the tax law is the same for everyone, people who can afford tax agents, financial planners and salary-packaging providers consistently end up with lower effective tax rates than people on the same income who just press “Submit” in myTax. The gap isn’t usually tax evasion — it’s deductions not claimed, offsets not applied, and structures not used. ^[5][6]

✅ Three Moves to Legally Reduce How Much You Lose

Action 1: Know your marginal rate and your effective rate — they’re not the same thing

Use the MoneySmart income tax calculator or the ATO’s tax tables to find two numbers: your marginal rate (the rate on your next dollar earned) and your effective rate (total tax + Medicare divided by total income). Once you know both, you can make cleaner decisions. You’ll stop avoiding overtime out of fear of “losing half to tax” — because at $80,000, the rate on each extra dollar is 30% + 2% Medicare = 32%, not 50%. And you’ll understand where structural moves like salary sacrifice actually save money, because you’ll see exactly which bracket the redirected income comes out of. ^[1][3]

Action 2: Capture the easy wins — standard deduction, offsets and what you’re already owed

From 2026–27, the automatic $1,000 standard work deduction is money many Australians are currently leaving on the table by not claiming anything. If your work expenses genuinely exceed $1,000 — WFH at 70c/hour, tools and equipment, self-education, union fees, income protection insurance — itemise them rather than defaulting to the standard amount. Also check your eligibility for the Low Income Tax Offset, seniors and pensioners offset, private health surcharge avoidance (if the cover costs less than the surcharge), and any spouse or dependent tax offsets. These are often unclaimed simply because people didn’t know they existed. ^[10][6][3]

Action 3: Use super and structure to shift income into lower-tax buckets

Concessional super contributions — whether via salary sacrifice or personal deductible contributions — move money from your marginal income tax rate into the 15% super tax environment. If you’re earning $80,000 and in the 30% marginal band, contributing $5,000 extra to super saves you 15 percentage points of tax on that $5,000 (about $750), compounding over your working life inside a low-tax structure. This doesn’t require a financial planner — it requires understanding one form (a Notice of Intent to Claim) and your super fund’s contribution rules. For those with business income, getting advice on whether a sole trader, company or trust structure best suits your situation is increasingly important as new minimum-tax rules on discretionary trusts take hold. The goal isn’t to dodge tax — it’s to stop leaving income in the highest-tax bucket by default when the law allows it somewhere lower. ^[2][6][10]

❓ Frequently Asked Questions

What are the Australian tax brackets for 2025–26?

0% up to $18,200; 16% on $18,201–$45,000; 30% on $45,001–$135,000; 37% on $135,001–$190,000; 45% above $190,000. Plus 2% Medicare levy. From 1 July 2026, the 16% rate drops to 15%. ^[1][3]

What’s the difference between marginal and effective tax rate?

Marginal rate = the rate on your next dollar. Effective rate = total tax ÷ total income. Effective is always lower. At $100k, your marginal rate is 30% but your effective rate is about 20%. Many Australians avoid overtime based on the marginal rate fear — but the extra income is only taxed at the marginal rate on that top slice. ^[3]

What is the $1,000 standard deduction from 2026?

From 2026–27, a $1,000 standard work-expense deduction applies automatically — no receipts needed. If your real work expenses (WFH, tools, self-education) exceed $1,000, itemise instead. Investment property and rental expenses are not affected — they remain separately claimable. ^[10][6]

Who pays the Medicare levy surcharge?

Higher-income earners without adequate private hospital cover pay an extra 1–1.5% surcharge on top of the 2% Medicare levy. The cost of qualifying cover is often similar to or less than the surcharge — worth comparing for your income level. ^[2][3]

⚖️ The Fine Print Verdict

When Australians complain about tax, they often blame the marginal rate. But the real leak is complexity and inertia. In 2026, the system still quietly takes more than it should from people who don’t know their true effective rate, don’t claim basic deductions, and never use the simple structures that move income into lower-tax buckets. The marginal-rate myth costs people promotions they turned down and overtime they didn’t take. The inertia costs them deductions they never filed. Neither of those is the law’s fault — both are fixable with about an hour of your attention each year.

👉 Know your actual effective rate. Claim the $1,000 standard deduction (or more). Put what you can into super. Stop leaving it in the highest-tax bucket by default.

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📚 Sources & References

ATO, “Tax rates — Australian residents,” ato.gov.au/tax-rates-and-codes/tax-rates-australian-residents
PwC, “Australia — taxes on personal income,” taxsummaries.pwc.com/australia/individual/taxes-on-personal-income
MoneySmart, “Income tax,” moneysmart.gov.au/work-and-tax/income-tax
AusCals, “Budget 2026 — HECS impact,” auscalcs.com.au/budget-2026/hecs-impact/
H&R Block, “Australian income tax system,” hrblock.com.au/tax-academy/australian-income-tax-system
PwC Australia, “Federal Budget 2026 — personal tax and superannuation analysis,” pwc.com.au/insights/federal-budget-tax-analysis-and-insights/personal-tax-and-superannuation.html
OECD, “Taxing Wages 2026,” oecd.org/en/publications/taxing-wages-2026
Melbourne Institute / Pursuit, “Over the last 21 years, the highest earners received the most tax relief,” pursuit.unimelb.edu.au
Ashurst, “Australia Federal Budget 2025–2026 — key tax measures,” ashurst.com/en/insights/australia-federal-budget-2025-2026-key-tax-measures/
ATO, “Latest news on tax law and policy,” ato.gov.au/about-ato/new-legislation/latest-news-on-tax-law-and-policy

This article is general information only and does not constitute financial or tax advice. Tax rates and legislation may change — always verify your specific situation via myTax or a registered tax agent. The Fine Print 🇦🇺 is not affiliated with the ATO or any financial services provider.

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