How income tax works in Australia
Australia taxes income in brackets: each slice of your income is taxed at its own rate, so a higher rate only ever applies to the dollars above a threshold. Here is how it works in 2026–27, step by step.
The tax brackets for 2026–27
These are the rates for Australian residents. The first $18,200 is tax-free, which is the tax-free threshold.
| Taxable income | Tax on this income |
|---|---|
| 0 – $18,200 | Nil |
| $18,201 – $45,000 | 15c for each $1 over $18,200 |
| $45,001 – $135,000 | $4,020 plus 30c for each $1 over $45,000 |
| $135,001 – $190,000 | $31,020 plus 37c for each $1 over $135,000 |
| $190,001 and over | $51,370 plus 45c for each $1 over $190,000 |
Your income is not taxed at one rate. Each bracket only applies to the part of your income that falls inside it. Your marginal rate is the rate on your next dollar; your average rate is your total tax divided by your income, and it is always lower.
A worked example: $80,000
- Taxable income: $80,000 less the $1,000 standard deduction for work expenses = $79,000.
- The first $18,200: no tax.
- $26,800 at 15% = $4,020.
- $34,000 at 30% = $10,200.
- Income tax: $14,220.
- Medicare levy: 2% of $79,000 = $1,580.
- Total: $15,800, leaving $64,200 after tax.
The marginal rate is 30% (plus the Medicare levy), but the average rate is only 19.75%.
Things that change your tax
- The standard deduction. From 2026–27, residents with salary or wages get up to $1,000 off their taxable income for work expenses, automatically. See the standard deduction guide.
- Other deductions, such as work expenses above the standard deduction, donations and tax agent fees, lower your taxable income.
- The low income tax offset takes up to $700 off the tax of residents earning up to $37,500, reducing gradually to nothing at $66,667. It can reduce tax to nil but is not paid out as cash.
- The Medicare levy of 2% funds the public health system. Low earners pay less or none: it starts at a taxable income of $28,011 for singles.
- The Medicare levy surcharge of 1% to 1.5% applies on top for singles earning over $105,000 without private hospital cover.
- HECS-HELP repayments are not tax, but they are collected with it once your income passes the threshold. See the HECS calculator.
Tax on common salaries in 2026–27
| Salary | Tax and Medicare levy | Take-home pay | Average rate |
|---|---|---|---|
| $50,000 | $5,935 | $44,065 | 11.87% |
| $70,000 | $12,600 | $57,400 | 18% |
| $90,000 | $19,000 | $71,000 | 21.11% |
| $120,000 | $28,600 | $91,400 | 23.83% |
| $150,000 | $39,180 | $110,820 | 26.12% |
| $200,000 | $59,400 | $140,600 | 29.7% |
What’s changing
- From 2027–28: The 15% rate on taxable income between $18,201 and $45,000 falls to 14%. (ATO)
- From 2027–28: A new non-refundable Working Australians tax offset of up to $250 for residents whose net labour income is above the tax-free threshold. (ATO)
The tax cut calculator shows what these changes mean for you.
Frequently asked questions
Can earning more leave me with less after tax?
Not because of income tax brackets: a higher rate only applies to the dollars above each threshold, so a pay rise always leaves you with more. Two things can bite at a threshold, though. Without private hospital cover, the Medicare levy surcharge applies to your whole income once you pass $105,000, and HECS-HELP repayments start once your income passes the repayment threshold.
What is the tax-free threshold?
The first $18,200 of an Australian resident’s taxable income each year is not taxed. You claim it on the tax file number declaration you give an employer, which lowers the tax withheld from your pay. Claim it from one employer only: if two employers both apply it, too little is withheld and you will owe tax.
Do foreign residents pay the same tax?
No. Foreign residents get no tax-free threshold or low income tax offset and pay tax from the first dollar, but they don’t pay the Medicare levy. Working holiday makers on 417 and 462 visas have their own rates. The working holiday tax calculator covers both.
General information based on ATO rules and rates, not tax advice. Figures are worked out by our calculators; see how we calculate.