Income Tax Calculator (Australia)

How Australian Income Tax Works

Australia operates a progressive income tax system administered by the Australian Taxation Office (ATO). Under this system, your income is divided into bands (or brackets), and each band is taxed at a progressively higher rate. The first $18,200 you earn each financial year is completely tax-free — this is known as the tax-free threshold. Only the income above that threshold is subject to tax, and only the portion within each bracket is taxed at that bracket's rate. This means your average (effective) tax rate is always lower than your highest marginal rate.

Most employed Australians have tax withheld from their wages through the Pay As You Go (PAYG) withholding system. Your employer calculates the amount to withhold each pay cycle based on ATO tax tables and remits it directly to the ATO on your behalf. When you lodge your annual tax return after 30 June, the ATO compares the total tax withheld against your actual liability. If too much was withheld, you receive a refund; if too little, you owe the balance. Self-employed individuals and sole traders make quarterly PAYG instalments instead.

Australia's financial year runs from 1 July to 30 June. Individual tax returns are generally due by 31 October, though taxpayers using a registered tax agent typically receive an extended deadline. The ATO's online portal, myTax, pre-fills much of your return with data from employers, banks, and health funds, making lodgement straightforward for most salary earners. Use this calculator to estimate your income tax, Medicare Levy, and take-home pay under the current 2025-26 brackets before you lodge.

2025-26 Tax Brackets and Rates

The Stage 3 tax cuts, which took effect on 1 July 2024, continue to apply for the 2025-26 financial year. These changes lowered the 19% bracket to 16%, reduced the 32.5% bracket to 30%, and raised the threshold for the 37% bracket from $120,000 to $135,000. The following table shows the current resident individual tax rates:

These rates apply to Australian residents for tax purposes. Non-residents do not receive the tax-free threshold and pay 30% from the first dollar up to $135,000, with higher brackets applying above that. Working holiday makers (subclass 417/462 visa holders) pay 15% on the first $45,000 and standard rates thereafter.

Key Tax Terms

Taxable income is your gross income minus allowable deductions. It includes salary and wages, business income, investment income (interest, dividends, rental income), and capital gains. Deductions such as work-related expenses, self-education costs, and donations reduce your taxable income and therefore your tax liability.

Medicare Levy is a flat 2% charge on taxable income that funds Australia's universal public health system. Most residents pay it unless their income falls below the low-income threshold or they qualify for an exemption (e.g., certain foreign residents or people with specific medical conditions).

HELP/HECS debt refers to the Higher Education Loan Program (formerly HECS). It is a government loan for tertiary education that you repay through the tax system once your repayment income exceeds the minimum threshold — $67,000 for 2025-26. Repayments are calculated as a percentage of your total repayment income, not just the amount above the threshold. Use our HECS-HELP Repayment Calculator for a detailed breakdown.

Franking credits (or imputation credits) are tax credits attached to dividends paid by Australian companies that have already paid company tax at 30% (or 25% for base rate entities). When you receive a franked dividend, you include both the cash dividend and the franking credit in your taxable income, then claim the franking credit as a tax offset. If your marginal rate is below the company rate, you receive a refund of the excess credit.

Negative gearing occurs when the costs of owning an investment property (mortgage interest, maintenance, depreciation) exceed the rental income it generates. The resulting loss can be offset against your other income — including your salary — reducing your overall taxable income. This is a common investment strategy in Australia, particularly for property investors in higher tax brackets.

Superannuation is Australia's compulsory retirement savings system. In 2025-26, employers must contribute 12% of your ordinary time earnings into your nominated super fund via the Superannuation Guarantee (SG). These contributions are taxed at a concessional rate of 15% inside the fund. You can learn more with our Superannuation Calculator.

Medicare Levy and Medicare Levy Surcharge

The Medicare Levy and the Medicare Levy Surcharge (MLS) are two separate charges that are often confused. The table below summarises the key differences:

For most employees, the Medicare Levy is automatically withheld through PAYG. The MLS, however, is assessed at tax return time. If your income for MLS purposes exceeds $93,000 as a single (or $186,000 for families) and you do not hold an eligible private hospital policy, the surcharge is applied on top of the standard 2% levy. Taking out hospital cover before 1 July each year is often cheaper than paying the surcharge, particularly at higher income levels where the 1.5% rate adds up quickly.

Practical Examples

Example 1 — Graduate earning $65,000:

• Tax-free portion ($0 – $18,200): $0
• 16% on $18,201 – $45,000: $4,288
• 30% on $45,001 – $65,000: $6,000
• Total income tax: $10,288
• Medicare Levy (2%): $1,300
• Total deductions: $11,588
• Effective tax rate: 17.8%
• Take-home pay: $53,412 ($4,451/month, $2,054/fortnight)
• Employer super (12%): $7,800 paid into super fund on top

Example 2 — Mid-career professional earning $110,000:

• Tax-free portion: $0
• 16% on $18,201 – $45,000: $4,288
• 30% on $45,001 – $110,000: $19,500
• Total income tax: $23,788
• Medicare Levy (2%): $2,200
• Total deductions: $25,988
• Effective tax rate: 23.6%
• Take-home pay: $84,012 ($7,001/month, $3,231/fortnight)
• If they also have a $35,000 HECS debt, a 4.5% repayment on $110,000 = $4,950 compulsory repayment, reducing take-home to $79,062

Example 3 — Senior executive earning $220,000:

• Tax-free portion: $0
• 16% on $18,201 – $45,000: $4,288
• 30% on $45,001 – $135,000: $27,000
• 37% on $135,001 – $190,000: $20,350
• 45% on $190,001 – $220,000: $13,500
• Total income tax: $65,138
• Medicare Levy (2%): $4,400
• Total deductions: $69,538
• Effective tax rate: 31.6%
• Take-home pay: $150,462 ($12,539/month)
• Without private hospital cover, MLS at 1.5% adds $3,300 — making hospital cover (often $1,500–$2,500/year) the better financial choice

Tax-Saving Strategies

Salary sacrifice into superannuation: By directing a portion of your pre-tax salary into super, you replace your marginal tax rate (up to 45%) with the concessional super tax rate of 15%. For someone in the 30% bracket, every $1,000 sacrificed saves $150 in tax. The concessional contributions cap for 2025-26 is $30,000 per year (including employer SG contributions). If you have unused cap amounts from prior years and your super balance is under $500,000, you can carry them forward. See our Superannuation Calculator to model the long-term impact.

Claim work-related deductions: You can deduct expenses directly related to earning your income. Common claims include home office costs (67 cents per hour fixed rate or actual expenses), uniforms and protective clothing, tools and equipment, professional development courses, union fees, and work-related travel. Keep receipts and records — the ATO uses data matching to flag unusual claims. If your total work-related deductions exceed $300, you need written evidence for each claim.

Private health insurance: If you earn above $93,000 (single) or $186,000 (family), holding an eligible private hospital policy eliminates the Medicare Levy Surcharge. At $150,000 income, the MLS at 1.25% costs $1,875, while basic hospital cover typically costs $1,200–$1,800 per year. Beyond the MLS saving, holding cover before age 31 avoids the Lifetime Health Cover loading of 2% per year over age 30, which permanently increases premiums.

Prepay deductible expenses before 30 June: If you have upcoming expenses that are tax-deductible — such as income protection insurance premiums, investment property expenses, or professional subscriptions — paying them before the end of the financial year brings the deduction into the current year. This is especially valuable if you expect to be in a lower bracket next year (e.g., taking parental leave or reducing hours). Similarly, if you plan a tax-deductible donation, making it before 30 June maximises your current-year deduction.

Maximise offsets and rebates: The Low Income Tax Offset (LITO) provides up to $700 for taxable incomes up to $37,500, phasing out at $66,667. The Senior Australians and Pensioners Tax Offset (SAPTO) provides additional relief for eligible older Australians. If you are eligible for the Salary Calculator, use it alongside this tool to understand your full after-tax position.

Changes for 2025-26

The 2025-26 financial year continues the Stage 3 tax cuts introduced on 1 July 2024. Key changes from the pre-Stage 3 system include: the 19% bracket was reduced to 16%, the 32.5% bracket was reduced to 30%, and the upper threshold for the 30% bracket was raised from $120,000 to $135,000. These changes deliver tax relief across all income levels, with the largest dollar savings going to middle-income earners between $45,000 and $135,000.

The Superannuation Guarantee rate increases to 12% from 1 July 2025, up from 11.5% in 2024-25. This is the final scheduled increase under the legislated pathway to 12%. Employers must contribute this percentage of your ordinary time earnings into your super fund. While this does not directly affect your take-home pay (super is paid on top of salary in most cases), it increases your total remuneration package value.

The HECS-HELP repayment threshold rises to $67,000 for 2025-26. The government has also reformed HELP indexation — from 1 June 2025, HELP debts are indexed by the lower of CPI or the Wage Price Index (WPI), backdated to June 2023. This means outstanding HELP debts may be lower than previously projected. Repayment rates remain progressive, starting at 1% at $67,000 and increasing in steps up to 10% for incomes above $151,201. You can estimate your repayments with our HECS-HELP Repayment Calculator.

If you are buying property in Australia, be sure to also check your Stamp Duty obligations by state, as transfer duty can add tens of thousands of dollars to your purchase costs.