Australia taxes personal income through a set of progressive brackets, and two things make right now an unusually interesting moment to understand them. First, we are in the 2025–26 financial year, which uses the bracket structure introduced by the stage 3 redesign. Second, from 1 July 2026 the rate on the second bracket drops again, and a brand-new $1,000 automatic deduction for work-related expenses begins. This guide walks through both years' brackets, shows exactly how much tax is paid at $60,000, $90,000 and $150,000, and clears up the single most persistent myth in Australian personal finance: that moving into a higher bracket can somehow leave you worse off.
2025–26 resident tax brackets
For Australian tax residents, the brackets for the year ending 30 June 2026 are:
| Taxable income | Marginal rate | Tax on this bracket |
|---|---|---|
| $0 – $18,200 | 0% | Nil |
| $18,201 – $45,000 | 16% | 16c for each $1 over $18,200 |
| $45,001 – $135,000 | 30% | $4,288 + 30c for each $1 over $45,000 |
| $135,001 – $190,000 | 37% | $31,288 + 37c for each $1 over $135,000 |
| $190,001+ | 45% | $51,638 + 45c for each $1 over $190,000 |
| Plus Medicare levy on most incomes | 2% of taxable income | |
The "base" figures — $4,288, $31,288 and $51,638 — are simply the total tax accumulated in all the brackets below each threshold. They save you re-adding every slice from scratch: if you earn $100,000, your tax before offsets is $4,288 plus 30% of the $55,000 above $45,000, which is $20,788.
What changes from 1 July 2026 (2026–27)
From 1 July 2026, the rate on income between $18,201 and $45,000 falls from 16% to 15%. Every other threshold and rate stays put, but because the second bracket sits underneath everyone's income above $45,000, the cumulative bases all shift down:
| Taxable income | 2026–27 rate | Tax on this bracket |
|---|---|---|
| $0 – $18,200 | 0% | Nil |
| $18,201 – $45,000 | 15% | 15c for each $1 over $18,200 |
| $45,001 – $135,000 | 30% | $4,020 + 30c for each $1 over $45,000 |
| $135,001 – $190,000 | 37% | $31,020 + 37c for each $1 over $135,000 |
| $190,001+ | 45% | $51,370 + 45c for each $1 over $190,000 |
The maximum saving from the rate cut is one cent on each of the 26,800 dollars in the second bracket — $268 a year for anyone earning $45,000 or more.
The new $1,000 automatic work-expense deduction
Also from 1 July 2026, taxpayers with work income can claim a flat $1,000 deduction for work-related expenses without keeping receipts. If your actual deductible expenses exceed $1,000 you can still itemise as normal, so nobody is worse off. For someone on a 30% marginal rate the automatic deduction is worth up to $300 (plus $20 of Medicare levy) if they previously claimed little or nothing — and it removes the shoebox-of-receipts ritual for millions of simple returns.
Marginal rate vs effective rate
Your marginal rate is the tax on your next dollar of income. Your effective (average) rate is total tax divided by total income, and it is always lower, because your first $18,200 is taxed at nothing and the next slices at reduced rates. The table below shows income tax plus the 2% Medicare levy, after the Low Income Tax Offset where it applies:
| Income | 2025–26 tax + Medicare | 2026–27 tax + Medicare | Marginal rate | Effective rate (2026–27) |
|---|---|---|---|---|
| $60,000 | $9,513 | $9,245 | 30% (+2%) | ≈15.4% |
| $90,000 | $19,588 | $19,320 | 30% (+2%) | ≈21.5% |
| $150,000 | $39,838 | $39,570 | 37% (+2%) | ≈26.4% |
Working through the $60,000 case for 2025–26: bracket tax is $4,288 + 30% × $15,000 = $8,788; LITO reduces that by $475 (see below) to $8,313; the Medicare levy adds $1,200, giving $9,513. In 2026–27 the base falls to $4,020, so the total is $9,245 — the full $268 saving. At $90,000, tax is $4,288 + 30% × $45,000 = $17,788 plus $1,800 Medicare (no LITO above $66,667); at $150,000 it is $31,288 + 37% × $15,000 = $36,838 plus $3,000 Medicare. In each case the 2026–27 figure is exactly $268 lower.
Notice how different the two numbers are: a $150,000 earner has a 37% marginal rate but hands over only about 26–27 cents of each dollar overall. When you weigh up overtime, a second job or salary sacrificing, the marginal rate is the one that matters; when you budget your annual take-home, the effective rate is.
See your exact 2025–26 and 2026–27 take-home pay
Our free calculator applies the brackets, Medicare levy, LITO and the new deduction for you.
Open the Income Tax Calculator →"Won't a pay rise push me into a higher bracket?" — the myth that won't die
Australia's system is marginal: each rate applies only to the slice of income inside its bracket. If you earn $135,001, only that final $1 is taxed at 37 cents; the rest of your income is taxed exactly as it was before. Crossing a threshold can never reduce your after-tax income through the brackets themselves. There is no salary at which refusing a pay rise or extra shifts leaves you better off on income tax. (Means-tested items outside the tax scale — the Medicare Levy Surcharge, family payments, HELP repayment rates, Division 293 super tax — can create genuine cliff effects, but those are separate policies, not the brackets.)
Bracket creep: why "no change" is really a tax rise
The thresholds are fixed dollar amounts, but wages drift upward with inflation. If your pay rises 3.5% just to keep pace with prices, a bigger share of your income lands in your top bracket even though your purchasing power hasn't improved — so your effective tax rate quietly climbs. This is bracket creep, and it is why governments periodically legislate cuts like the 2026–27 change: they partially hand back revenue that inflation has silently collected. Over a full career, indexed thresholds would make a substantial difference; in their absence, expect discretionary adjustments every few years and factor creep into long-term salary planning. For strategies to blunt it, see our guide on how to legally reduce income tax in Australia.
Medicare levy and the Low Income Tax Offset
Two extras sit alongside the brackets. The Medicare levy adds 2% of taxable income for most taxpayers, with reductions or exemptions for low-income earners and some categories such as certain foreign residents. High earners without private hospital cover may also face the Medicare Levy Surcharge on top.
The Low Income Tax Offset (LITO) directly reduces tax payable by up to $700 and phases out completely at $66,667. At $60,000, for example, the offset is worth $475 — which is why our worked example above comes in lower than the raw bracket maths. LITO is applied automatically when you lodge; you don't claim it. Combined with the tax-free threshold, it means genuinely low incomes pay no income tax at all until well past $18,200.
Non-residents and working holiday makers
Everything above applies to Australian tax residents. Foreign residents for tax purposes get no tax-free threshold and no LITO: tax starts from the first dollar at higher rates, though they generally don't pay the Medicare levy. Working holiday makers on 417 and 462 visas have their own separate rate schedule again. If either category applies to you, check the current ATO rate tables for your situation rather than using the resident brackets here — residency for tax purposes is also a different test from immigration residency, and getting it wrong is expensive.
Putting it together
The brackets are the skeleton of your tax bill, but your final position depends on deductions, offsets, super contributions and levies layered on top. For the full picture — including how PAYG withholding, HELP debts and salary packaging interact with the brackets — read our companion complete Australian income tax guide, then run your own numbers through the income tax calculator.
Frequently Asked Questions
What are the Australian tax brackets for 2025–26?
For residents: 0% to $18,200; 16% to $45,000; 30% to $135,000; 37% to $190,000; and 45% above $190,000 — plus the 2% Medicare levy for most taxpayers.
What changes from 1 July 2026?
The 16% rate on income between $18,201 and $45,000 drops to 15%, saving up to $268 a year, and a new $1,000 automatic work-related expense deduction begins, letting most workers claim without receipts.
Do I pay the higher rate on all my income when I cross a threshold?
No. Only the income inside each bracket is taxed at that bracket's rate. A pay rise can never cut your take-home pay through the income tax brackets.
What is the effective tax-free threshold?
The statutory threshold is $18,200, but the Low Income Tax Offset (max $700, gone by $66,667) means eligible low-income earners pay no net income tax until roughly $22,500.
Do non-residents use these brackets?
No. Foreign residents pay tax from the first dollar with no tax-free threshold, and working holiday makers have a separate schedule. Check the ATO's current tables for your residency category.
Disclaimer: This article is general information only, prepared without regard to your personal circumstances, and is not tax, legal or financial advice. Rates and thresholds can change; confirm current figures with the ATO or a registered tax agent before acting.