Australian Income Tax Rates & Thresholds 2025–26
Complete guide to Australian individual income tax rates, tax brackets, offsets, and Medicare levy for the 2025–26 financial year. Updated for confirmed ATO rates.
Australia taxes residents on a progressive scale: the more you earn, the higher the rate — but only the income that falls within each bracket is taxed at that bracket's rate. Here are the rates for the 2025–26 financial year (1 July 2025 to 30 June 2026).
2025–26 resident income tax rates
| Taxable income | Tax rate on this band |
|---|---|
| $0 – $18,200 | 0% (tax-free threshold) |
| $18,201 – $45,000 | 16% |
| $45,001 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| $190,001 and over | 45% |
These rates do not include the 2% Medicare levy, which is covered below.
How the brackets actually work
A common myth is that moving into a higher bracket taxes all your income at that higher rate. It doesn't. Each rate applies only to the income within its band — so your average (effective) rate is always lower than your top marginal rate.
Tax is built up band by band:
- First $18,200: nil.
- Next $26,800 (to $45,000) at 16%: $4,288.
- Remaining $15,000 (to $60,000) at 30%: $4,500.
- Income tax: $8,788 — an effective rate of about 14.6%, well under the 30% "bracket".
Add the 2% Medicare levy (about $1,200) and the total is roughly $9,988. This ignores any offsets like the Low Income Tax Offset.
What about the Medicare levy?
Most residents pay an extra 2% of taxable income as the Medicare levy, on top of the income tax above. Low-income earners pay a reduced levy or none, depending on annual thresholds. It is separate from — and additional to — the bracket rates.
The tax-free threshold and LITO
The first $18,200 you earn is tax-free. Combined with the Low Income Tax Offset (up to $700), most people can earn around $22,575 before any income tax is payable. Claim the tax-free threshold with one employer on your TFN declaration so the right amount is withheld.
Heads up: from 1 July 2026 the 16% band is legislated to drop to 15% (and to 14% from 1 July 2027), so the 2026–27 rates will differ slightly from the table above.
Frequently Asked Questions
What are the income tax rates in Australia for 2025-26?
For 2025-26, Australian residents pay: 0% on the first $18,200, 16% on $18,201–$45,000, 30% on $45,001–$135,000, 37% on $135,001–$190,000, and 45% on income over $190,000. These are marginal rates — each applies only to the income within that band. The 2% Medicare levy applies on top for most taxpayers.
What is the tax-free threshold in Australia?
The tax-free threshold is $18,200 for the 2025-26 financial year. If you earn below this amount, you pay no income tax. You should claim the tax-free threshold with your employer on your TFN declaration.
What is the Low Income Tax Offset (LITO)?
The LITO provides a tax offset of up to $700 for individuals earning up to $37,500. It reduces by 5 cents for every dollar earned between $37,500 and $45,000, and by 1.5 cents per dollar between $45,000 and $66,667.