What Changed in 2025–26?
The 2025–26 financial year (1 July 2025 – 30 June 2026) sees Australia continuing with the restructured tax brackets introduced by the Stage 3 tax cuts in July 2024. These changes significantly benefit middle-income earners by reducing the 32.5% tax rate threshold and adjusting bracket boundaries.
Here is a complete breakdown of everything you need to know about Australian income tax this year.
Australian Income Tax Brackets 2025–26
Australia uses a progressive tax system, meaning you pay a higher rate only on income above each threshold — not on your entire income.
| Taxable Income | Tax Rate | Tax on This Bracket |
|---|---|---|
| $0 – $18,200 | 0% | Nil — this is the tax-free threshold |
| $18,201 – $45,000 | 19% | 19 cents per dollar over $18,200 |
| $45,001 – $135,000 | 32.5% | $5,092 + 32.5c per dollar over $45,000 |
| $135,001 – $190,000 | 37% | $34,342 + 37c per dollar over $135,000 |
| $190,001+ | 45% | $54,692 + 45c per dollar over $190,000 |
🧮 Calculate Your Exact Tax Bill
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Open Income Tax Calculator →Tax Offsets That Reduce Your Bill
Low Income Tax Offset (LITO)
The LITO reduces your tax payable — it's not a refund, but it can bring your tax bill to zero if your income is low enough.
| Taxable Income | LITO Amount |
|---|---|
| $37,500 or under | $700 (maximum) |
| $37,501 – $45,000 | Reduces by 5c per $1 over $37,500 |
| $45,001 – $66,667 | Reduces by 1.5c per $1 over $45,000 |
| Over $66,667 | $0 — no LITO applies |
Low and Middle Income Tax Offset (LMITO)
The LMITO was a temporary offset introduced during COVID-19. It ended on 30 June 2022 and no longer applies from 2022–23 onward. Do not include it in your 2025–26 calculations.
Medicare Levy 2025–26
Most Australian residents pay a 2% Medicare levy on top of their income tax. This funds Australia's public healthcare system.
Who is exempt from the Medicare levy?
- Individuals with taxable income below approximately $26,000 (the exact threshold is adjusted annually)
- Those who meet specific medical requirements (full exemption)
- Some temporary visa holders (partial exemption)
Medicare Levy Surcharge (MLS)
The MLS is an additional levy for higher-income earners who don't have private hospital cover:
| Income (single) | MLS Rate |
|---|---|
| $0 – $93,000 | Nil |
| $93,001 – $119,000 | 1.0% |
| $119,001 – $151,000 | 1.25% |
| $151,001+ | 1.5% |
If you earn $100,000 with no private hospital cover, the MLS costs you $1,000/year. A basic hospital cover policy typically costs less than this, making it worth comparing.
🏥 Calculate Your Medicare Levy
Find out exactly what Medicare levy and surcharge you owe — including the impact of private health insurance.
Medicare Levy Calculator →HECS-HELP Repayments 2025–26
If you have a university student loan (HECS-HELP), repayments are automatically deducted from your salary when your income exceeds the minimum threshold.
| Repayment Income | Repayment Rate |
|---|---|
| Below $54,435 | Nil |
| $54,435 – $62,990 | 1.0% |
| $62,991 – $66,154 | 2.0% |
| $66,155 – $72,807 | 2.5% |
| $72,808 – $76,619 | 3.0% |
| $76,620 – $87,936 | 3.5% |
| $87,937 – $93,968 | 4.0% |
| Over $93,968 | 4.5% – 10% |
Common Work-Related Deductions
Reducing your taxable income through legitimate deductions is the most effective way to lower your tax bill. You must have spent the money yourself, it must be directly related to earning your income, and you must have records to prove it.
What you can claim
- Home office expenses — 67 cents per hour (fixed rate method) or actual costs
- Vehicle and travel — 88 cents per km (cents per km method, up to 5,000 km), or logbook method
- Tools and equipment — items costing under $300 are an immediate deduction
- Professional development — courses, conferences, and self-education related to your current job
- Work uniform and laundry — compulsory work uniforms with a logo
- Union fees and professional memberships
- Income protection insurance premiums (if not through super)
- Tax agent fees — deductible in the year you pay them
What you cannot claim
- Normal clothes worn to work (even if you only wear them for work)
- Everyday commuting to and from work
- Fines or penalties
- Personal expenses that happen to overlap with work
Real Examples: Tax at Different Income Levels
| Annual Income | Income Tax | Medicare (2%) | Total Tax | Net Take-Home | Effective Rate |
|---|---|---|---|---|---|
| $50,000 | $6,717 | $1,000 | $7,717 | $42,283 | 15.4% |
| $75,000 | $14,842 | $1,500 | $16,342 | $58,658 | 21.8% |
| $100,000 | $22,967 | $2,000 | $24,967 | $75,033 | 25.0% |
| $150,000 | $43,117 | $3,000 | $46,117 | $103,883 | 30.7% |
| $200,000 | $63,667 | $4,000 | $67,667 | $132,333 | 33.8% |
Note: These calculations use 2025–26 ATO tax brackets and LITO. They exclude HECS-HELP, salary sacrifice, work deductions, and other offsets. Use our calculator for a personalised result.
How to Reduce Your Tax Legally
- Maximise pre-tax super contributions — Salary sacrificing into super is taxed at 15% instead of your marginal rate. The concessional contributions cap is $30,000 for 2025–26.
- Claim all eligible deductions — Keep receipts and use the ATO's myDeductions app year-round, not just at tax time.
- Claim home office correctly — The fixed rate of 67c/hr covers electricity, internet, and phone. Track your hours all year.
- Consider income protection insurance — Premiums outside super are fully tax-deductible.
- Time capital gains carefully — Holding an asset for over 12 months entitles you to the 50% CGT discount.
- See a registered tax agent — Their fees are tax-deductible and they may find deductions you missed.
📋 Estimate Your Tax Refund
Enter your income, tax withheld, and deductions to estimate your refund before you lodge.
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