Contents
- What Changed in 2025–26?
- Australian Income Tax Brackets 2025–26
- Income Tax Rates 2026–27
- Tax Offsets That Reduce Your Bill
- Medicare Levy 2025–26
- HECS-HELP Repayments 2025–26
- Common Work-Related Deductions
- Real Examples: Tax at Different Income Levels
- How to Reduce Your Tax Legally
- Why Your Refund Is Not a Bonus
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 cutting the 19% rate to 16% and the 32.5% rate to 30% and adjusting bracket boundaries.
Below is a full breakdown of the brackets, offsets and thresholds that apply 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 | 16% | 16 cents per dollar over $18,200 |
| $45,001 – $135,000 | 30% | $4,288 + 30c per dollar over $45,000 |
| $135,001 – $190,000 | 37% | $31,288 + 37c per dollar over $135,000 |
| $190,001+ | 45% | $51,638 + 45c per dollar over $190,000 |
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Open Income Tax Calculator →Income Tax Rates 2026–27 (1 July 2026 – 30 June 2027)
The sections of this guide above describe the 2025–26 year. For 2026–27 the ATO publishes the following resident tax rates (excluding the 2% Medicare levy):
| Taxable Income | Tax on This Income (2026–27) |
|---|---|
| $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 |
Example (2026–27): on a taxable income of $80,000, income tax before offsets is $4,020 + 30c × ($80,000 − $45,000) = $14,520, and the 2% Medicare levy is $1,600.
Medicare levy surcharge 2026–27 (singles, income for MLS purposes): $105,000 or less — nil; $105,001–$123,000 — 1%; $123,001–$164,000 — 1.25%; $164,001 or more — 1.5%. Family thresholds are $210,000 / $246,000 / $328,000, increased by $1,500 for each MLS dependent child after the first.
Study and training loan repayments 2026–27: nil up to $69,528; 15c for each $1 over $69,528 up to $129,717; $9,028 plus 17c for each $1 over $129,717 up to $186,050; 10% of total repayment income above that.
Concessional super contributions cap: $32,500 from 1 July 2026.
Sources: ATO — Tax rates – Australian resident; Medicare levy surcharge thresholds and rates; Study and training loan thresholds; Contributions caps. Confirm figures with the ATO before relying on them. Our Income Tax Calculator uses the 2026–27 rates.
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 – $101,000 | Nil |
| $101,001 – $118,000 | 1.0% |
| $118,001 – $158,000 | 1.25% |
| $158,001+ | 1.5% |
These are the 2025–26 income-for-MLS-purposes thresholds for singles (source: ATO). For example, a single person with $110,000 of income for MLS purposes and no appropriate private hospital cover pays 1% of that income, or $1,100 for the year. Comparing the surcharge with the cost of hospital cover may be worthwhile; the 2026–27 thresholds are in the section below.
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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 repayment income exceeds the minimum threshold. From 2025–26, compulsory repayments are calculated using marginal rates on the income above each threshold (source: ATO). Thresholds for earlier years differed — see our HECS-HELP repayment guide for the history.
| Repayment Income | Repayment on This Income |
|---|---|
| $0 – $67,000 | Nil |
| $67,001 – $125,000 | 15c for each $1 over $67,000 |
| $125,001 – $179,285 | $8,700 plus 17c for each $1 over $125,000 |
| $179,286 and over | 10% of total repayment income |
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 | $5,788 | $1,000 | $6,788 | $43,212 | 13.6% |
| $75,000 | $13,288 | $1,500 | $14,788 | $60,212 | 19.7% |
| $100,000 | $20,788 | $2,000 | $22,788 | $77,212 | 22.8% |
| $150,000 | $36,838 | $3,000 | $39,838 | $110,162 | 26.6% |
| $200,000 | $56,138 | $4,000 | $60,138 | $139,862 | 30.1% |
Note: These calculations use the 2025–26 ATO resident tax brackets and the 2% Medicare levy, before any offsets (including LITO). They exclude HECS-HELP, the Medicare levy surcharge, 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.
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