Australian Tax Brackets 2025-26 and 2026-27: Rates, Medicare Levy & Take-Home Pay

If you've ever looked at the tax brackets and panicked that "earning more pushes me into a higher tax bracket and I'll take home less" — that's not how it works, and this guide will show you exactly why, with real numbers for real salaries.

This guide now covers both the 2025-26 financial year (the return you're lodging now) and the new 2026-27 rates that took effect from 1 July 2026, including the 15% rate on income between $18,201 and $45,000 — and what that means for your take-home pay.

Use our Income Tax Calculator to calculate your exact take-home pay for 2025-26 or 2026-27, including Medicare levy, LITO and HECS.

2025-26 resident tax brackets

These are the official rates for Australian tax residents for the 2025-26 financial year — the year ending 30 June 2026, for which most people are currently lodging their return:

Taxable income	Tax rate
$0 – $18,200	Nil (tax-free threshold)
$18,201 – $45,000	16%
$45,001 – $135,000	30%
$135,001 – $190,000	37%
$190,001 and over	45%

These rates do not include the Medicare levy, which is added separately for most taxpayers (more on that below). They also don't account for the Low Income Tax Offset (LITO), which reduces the tax payable for lower-income earners.

2026-27 resident tax brackets — what changed from 1 July 2026

From 1 July 2026, the second stage of the legislated rate cuts took effect. The 16% rate on income between $18,201 and $45,000 dropped to 15%. Every other bracket is unchanged.

Taxable income	2025-26 rate	2026-27 rate
$0 – $18,200	0%	0%
$18,201 – $45,000	16%	15% ← changed
$45,001 – $135,000	30%	30%
$135,001 – $190,000	37%	37%
$190,001+	45%	45%

What this saves you: Every Australian taxpayer earning more than $45,000 saves the same dollar amount — $268 per year (1% of the $26,799 that falls in the changed bracket). Taxpayers earning between $18,201 and $45,000 save a proportionally smaller amount.

This rate reduction is applied automatically by your employer through updated ATO withholding tables. You don't need to do anything — it should already be reflected in your payslips from the first pay period after 1 July 2026.

The three-year rate cut journey

Australia's current tax rate reductions are part of a legislated three-year programme. Here's the full picture across four consecutive years:

Taxable income	2024-25	2025-26	2026-27	2027-28 (legislated)
$0 – $18,200	0%	0%	0%	0%
$18,201 – $45,000	16%	16%	15%	14%
$45,001 – $135,000	30%	30%	30%	30%
$135,001 – $190,000	37%	37%	37%	37%
$190,001+	45%	45%	45%	45%

Year	Tax saving vs 2024-25 (for incomes above $45k)
2024-25	Baseline
2025-26	$0 (no change from 2024-25)
2026-27	+$268/year
2027-28	+$536/year (two rate cuts combined)

The 14% rate for 2027-28 is already law — it doesn't require a new Budget decision or legislation.

How marginal tax rates actually work

The most common misunderstanding is thinking your entire income gets taxed at the rate for your top bracket. It doesn't. Australia uses a progressive system — each portion of income is taxed only at the rate for the bracket it falls into. Only the last dollars you earn are taxed at your highest ("marginal") rate.

Worked example — $80,000 income in 2026-27:

The first $18,200 → taxed at 0% = $0
The next $26,799 (from $18,201 to $45,000) → taxed at 15% = $4,019.85
The remaining $35,000 (from $45,001 to $80,000) → taxed at 30% = $10,500
Total income tax: $14,519.85
Medicare levy (2%): $1,600
Total tax payable: $16,119.85
Take-home: $63,880.15

Compare this to 2025-26 (16% bracket): total tax payable was $16,387.84. The difference is $267.99 — roughly $5.15 per week. Small on its own, but combined with the 2027-28 cut it becomes $536/year — about $10.30 extra per week.

Getting a pay rise that pushes you into the 30% bracket doesn't mean your whole salary gets taxed at 30%. It just means the portion above $45,000 does. Your effective (average) tax rate at $80,000 is about 20.1% — well below the 30% marginal rate.

Worked take-home examples — 2025-26 vs 2026-27 side by side

All figures include the 2% Medicare levy. No deductions, offsets or HECS assumed. LITO is not included (see below — it only applies at lower incomes).

Taxable income	2025-26 take-home	2026-27 take-home	Annual saving
$45,000	$38,168	$38,383	$215
$60,000	$50,012	$50,280	$268
$75,000	$57,912	$58,180	$268
$80,000	$63,612	$63,880	$268
$100,000	$77,212	$77,480	$268
$120,000	$90,812	$91,080	$268
$150,000	$110,162	$110,430	$268
$200,000	$139,862	$140,130	$268

Everyone earning above $45,000 gains exactly $268 per year — the saving is capped because the changed bracket only goes up to $45,000. The $215 saving at a $45,000 salary is lower because part of the income is below $18,201 and doesn't benefit from the rate change.

Use our Income Tax Calculator to see your personalised take-home for either year, including HECS repayments and the Low Income Tax Offset.

The Medicare levy

Most Australian residents pay an additional 2% Medicare levy on their taxable income on top of the bracket rates above. It funds Medicare and is unchanged for 2026-27.

Low-income exemption: The Medicare levy phase-in threshold for singles is approximately $28,011 in 2026-27 (updated annually). Below this, no levy applies. Between $28,011 and approximately $35,014, a reduced levy applies — phasing up to the full 2% at higher incomes.

If you're a dependant spouse or have dependants, different thresholds apply. The ATO calculates this automatically when you lodge your return.

Medicare Levy Surcharge — the extra charge for higher earners without private health cover

Separate from the standard Medicare levy, the Medicare Levy Surcharge (MLS) is an additional 1% to 1.5% charge that applies if:

Your taxable income exceeds the MLS threshold, and
You don't hold an appropriate level of private hospital cover

MLS income thresholds and rates for 2026-27:

Income (singles)	Income (families)	Surcharge rate
$0 – $97,000	$0 – $194,000	No surcharge
$97,001 – $113,000	$194,001 – $226,000	1.0%
$113,001 – $151,000	$226,001 – $302,000	1.25%
$151,001+	$302,001+	1.5%

At $100,000 income without private hospital cover, the MLS costs $1,000 per year. A basic private hospital policy often costs $1,200–$1,800 annually — so at this income level, the decision is close. Above $120,000, taking out hospital cover almost always costs less than the surcharge. Below $97,000, there is no surcharge regardless of your health cover status.

Low Income Tax Offset (LITO)

The LITO reduces the tax payable (not your taxable income) for lower and middle-income earners. It is unchanged for 2026-27:

Income range	LITO amount
Up to $37,500	Maximum $700
$37,501 – $45,000	Reduces by 5c per $1 over $37,500 (down to $325)
$45,001 – $66,667	Reduces by 1.5c per $1 over $45,000 (down to $0)
Above $66,667	$0 — no LITO applies

The LITO is applied automatically by the ATO when you lodge. It means someone earning $40,000 in 2026-27 pays less income tax than the bracket rates alone suggest — effectively bringing their tax-free threshold higher.

HECS-HELP repayment threshold — updated for 2026-27

If you have a HECS-HELP debt, a compulsory repayment is calculated on your 2026-27 income. The minimum repayment threshold for 2026-27 is $69,528 — meaning you only begin making compulsory repayments if your income exceeds this figure.

Repayment rates range from 1% of total income at $69,528 to 10% above $151,201, with the rate applied to your entire income (not just the excess). The HECS repayment is separate from income tax and Medicare levy.

For 2025-26, the threshold was $54,435 under the new marginal repayment system. The significant rise to $69,528 for 2026-27 means many part-time workers and lower-income earners who previously made compulsory repayments will not be required to do so in 2026-27.

Use our HECS / HELP Repayment Calculator to calculate your 2026-27 compulsory repayment amount.

Non-residents and working holiday makers

If you're not an Australian tax resident, different rates apply. These are unchanged for 2026-27:

Foreign residents:

32.5% from $0 to $135,000
37% from $135,001 to $190,000
45% above $190,000
No tax-free threshold, no Medicare levy

Working holiday makers (subclass 417 and 462 visas):

15% on the first $45,000 of Australian-sourced income
Foreign resident rates apply above $45,000

Frequently asked questions

What are the Australian income tax rates for 2026-27? From 1 July 2026: 0% up to $18,200; 15% on $18,201–$45,000 (down from 16%); 30% on $45,001–$135,000; 37% on $135,001–$190,000; 45% above $190,000. These rates exclude the 2% Medicare levy. The only change from 2025-26 is the reduction from 16% to 15% on the second bracket.

How much does the 15% rate save me in 2026-27? Anyone earning more than $45,000 saves exactly $268 per year — that's 1% of the $26,799 that falls in the changed bracket ($18,201 to $45,000). For someone earning between $18,201 and $45,000, the saving is proportionally less. The $268 saving applies to every taxpayer earning above $45,000 regardless of whether they earn $50,000 or $500,000.

Do I pay more tax on my whole income when I move into a higher bracket? No. Only the portion of your income that falls within the higher bracket is taxed at that rate. Everything below that threshold continues to be taxed at lower rates. This is the marginal tax system — your effective (average) rate is always lower than your marginal (top) rate.

When does the 14% rate start in Australia? The 14% rate on income between $18,201 and $45,000 is legislated to begin on 1 July 2027, applying from the 2027-28 financial year. This is already written into law and does not require a new Budget decision. It will add another $268/year to the saving for anyone earning above $45,000.

Is the Medicare levy included in the tax bracket percentages? No. The bracket rates shown are income tax only. Most Australian residents add a further 2% Medicare levy on top, calculated on total taxable income. Some lower-income earners pay a reduced levy or none at all. The Medicare Levy Surcharge (an extra 1–1.5%) applies separately to higher-income earners who don't hold private hospital cover.

What's the tax-free threshold for 2026-27? The tax-free threshold remains $18,200 — unchanged from 2025-26. Australian residents pay no income tax on the first $18,200 of taxable income. The LITO effectively extends this further for incomes below $66,667 by reducing the tax payable on income above $18,200.

This article covers 2025-26 and 2026-27 Australian resident tax rates as legislated and in effect as at July 2026. The 2026-27 rates apply from 1 July 2026. The 2027-28 rate (14%) is legislated but has not yet commenced. MLS thresholds are confirmed annually by the ATO — verify current figures at ato.gov.au. This is general information only and does not constitute tax advice.