Australian Tax Brackets 2025-26 Explained: Rates, Medicare Levy & What Changes Next

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 covers the 2025-26 financial year (1 July 2025 to 30 June 2026), the same rates that applied in 2024-25 under the Stage 3 tax cuts, plus the legislated changes coming from 1 July 2026 and 1 July 2027.

2025-26 resident tax brackets

These are the official rates for Australian tax residents for the 2025-26 financial year:

Taxable income	Tax rate
$0 – $18,200	Nil (tax-free threshold)
$18,201 – $45,000	16c for each $1 over $18,200
$45,001 – $135,000	30c for each $1 over $45,000
$135,001 – $190,000	37c for each $1 over $135,000
$190,001 and over	45c for each $1 over $190,000

These rates do not include the Medicare levy, which is added separately for most taxpayers (more on that below).

How marginal tax rates actually work

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

Here's a worked example for someone earning $80,000:

The first $18,200 → taxed at 0% = $0
The next $26,799 (from $18,201 to $45,000) → taxed at 16% = $4,287.84
The remaining $35,000 (from $45,001 to $80,000) → taxed at 30% = $10,500

Total income tax = $14,787.84, plus the 2% Medicare levy of $1,600, for a total of $16,387.84.

That's an effective (average) tax rate of about 20.5% — even though this person's marginal rate is 30% (32% including Medicare). Getting a pay rise into the 30% bracket doesn't mean your whole salary gets taxed at 30% — it just means your next dollars do.

Worked examples for common salaries (2025-26)

All figures below include the 2% Medicare levy and assume no deductions, offsets, or HECS-HELP debt.

Taxable income	Income tax	Medicare levy (2%)	Total tax	Approx. take-home
$60,000	$8,787.84	$1,200	$9,987.84	$50,012.16
$80,000	$14,787.84	$1,600	$16,387.84	$63,612.16
$100,000	$20,787.84	$2,000	$22,787.84	$77,212.16
$120,000	$26,787.84	$2,400	$29,187.84	$90,812.16
$150,000	$36,837.84	$3,000	$39,837.84	$110,162.16
$200,000	$56,137.84	$4,000	$60,137.84	$139,862.16

Want your exact number, including offsets and HECS-HELP? Use our Income Tax Calculator — it factors in the Low Income Tax Offset and other adjustments automatically.

The Medicare levy

Most Australian residents pay an additional 2% Medicare levy on their taxable income, on top of the rates in the table above. It funds Australia's public health system (Medicare) and is calculated on your total taxable income — not just the portion above a threshold.

Low-income earners get relief: if your taxable income is below approximately $26,000, you may pay a reduced levy or none at all, with a phase-in zone just above that threshold.

Medicare Levy Surcharge — the one most people forget

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

You're a higher-income earner (broadly, above ~$101,000 for singles or ~$202,000 for families, with the exact thresholds tiered), and
You don't hold an appropriate level of private hospital cover

This is one of the most commonly missed items at tax time — if you fall into this income range and don't have hospital cover, the surcharge can cost more than a basic policy would.

Low Income Tax Offset (LITO)

The LITO reduces the tax payable (not your taxable income) for lower and middle-income earners:

Maximum offset of $700 for taxable income up to $37,500
Reduces by 5 cents for every dollar between $37,501 and $45,000 (down to $325)
Reduces by a further 1.5 cents for every dollar between $45,001 and $66,667 (down to $0)

If your income is under roughly $66,667, it's worth checking that this offset has been applied correctly — it's automatic in myTax, but it's a useful number to know when estimating your refund.

What changes from 1 July 2026 and 2027

Two further rate cuts are already legislated:

From 1 July 2026: the 16% rate (on income between $18,201 and $45,000) drops to 15%
From 1 July 2027: that rate drops again, to 14%

For someone earning $45,000 or more, each of these changes is worth roughly $268 per year in extra take-home pay — so around $536 a year better off by 2027-28 compared with 2025-26, before accounting for any other policy changes.

Non-residents and working holiday makers

If you're not an Australian tax resident, different rates apply:

Foreign residents: 32.5% from $0 to $135,000, 37% from $135,001 to $190,000, and 45% above $190,000 — with no tax-free threshold and no Medicare levy
Working holiday makers (subclass 417/462 visas): 15% on the first $45,000 of Australian-sourced income, then foreign resident rates apply above that

Frequently asked questions

Do I pay more tax on my whole income once 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 the lower rates — this is what "marginal tax rate" means.

Is the Medicare levy included in the tax bracket percentages?

No. The brackets above show income tax only. Most residents add a further 2% Medicare levy on top, calculated on total taxable income, plus a possible Medicare Levy Surcharge if you're a higher earner without private hospital cover.

What's the tax-free threshold for 2025-26?

$18,200. Australian residents pay no income tax on the first $18,200 of taxable income in a financial year.

Will my tax rate go down next year?

If your taxable income includes amounts between $18,201 and $45,000, yes — the rate on that portion drops from 16% to 15% from 1 July 2026, and to 14% from 1 July 2027. Rates above $45,000 are unchanged under currently legislated settings.

How do I work out my exact tax for this year?

Use our Income Tax Calculator — enter your taxable income and it applies the 2025-26 brackets, Medicare levy, and LITO to give you an estimate of your tax payable and take-home pay.

This article is general information only and does not constitute tax advice. Rates, thresholds, and offsets are based on currently legislated 2025-26 settings as at June 2026 and may be subject to change. Always check the ATO website or speak with a registered tax agent for advice specific to your circumstances.