Income Tax Calculator Australia

How Australian income tax works for FY2025-26

Australia uses a progressive tax system where each additional dollar of income is taxed at a higher marginal rate - but only that portion of income, not all income. For FY2025-26, the tax-free threshold is AU$18,200. Above that, the marginal rates are 16% (up to AU$45,000), 30% (up to AU$135,000), 37% (up to AU$190,000), and 45% above AU$190,000. The 2024 Stage 3 tax cuts lowered the second bracket from 19% to 16%, reduced the third bracket from 32.5% to 30%, and widened it from AU$120,000 to AU$135,000. Your effective tax rate (total tax divided by total income) will always be lower than your marginal rate.

On top of income tax, most Australian residents pay the Medicare levy of 2%. Higher income earners without private hospital cover may owe the Medicare Levy Surcharge (MLS) of 1%–1.5% on top of that. The Low Income Tax Offset (LITO) provides a tax reduction of up to AU$700 for individuals earning under AU$37,500, phasing out at AU$66,667. The Low and Middle Income Tax Offset (LMITO) ended after FY2021-22 and no longer applies. Individuals with HELP, VSL, SSL, or other study debt also face compulsory repayments once income exceeds AU$54,435, calculated as a separate percentage applied to repayment income.

This calculator is for estimation purposes only. It does not account for rental income, capital gains, foreign income, trust distributions, deductions, private health rebates, or other individual circumstances. For advice specific to your situation, consult a registered tax agent or use the ATO's myTax. Employers use a separate withholding calculation (see our PAYG withholding calculator) to deduct the right amount from wages each pay period.

Worked example: comparing tax at three income levels

Three employees at different salary points (FY2025-26, no HELP debt, Australian resident):

At AU$55,000, the LITO reduces the total tax bill by AU$175. At AU$95,000, the effective rate (22.3%) is well below the marginal rate (30%) because the lower brackets are taxed at lower rates. The jump from AU$95,000 to AU$160,000 adds AU$21,250 in tax on AU$65,000 additional income, an average marginal rate of 32.7% across that range. For a sole trader or small business owner deciding whether to draw additional income, the marginal rate on the next dollar is the relevant figure for decision-making. Use the PAYG withholding calculator to check what your employer should be deducting each pay run.

How to use this income tax calculator

1. Enter your annual taxable income - this is your gross income minus any deductions (work expenses, super contributions, investment losses, etc.).
2. Select whether you are a resident or non-resident for tax purposes - non-residents do not get the tax-free threshold and face different rates.
3. Indicate whether you have a HELP/HECS debt so the compulsory repayment amount is included in the estimate.
4. Review the breakdown of income tax, Medicare levy, and any offsets - and compare this to the PAYG withheld on your payment summaries to see whether you are likely to receive a refund or owe tax at year end.

Frequently asked questions

What is the difference between marginal tax rate and effective tax rate?

Your marginal rate is the rate that applies to your next dollar of income. Your effective rate is the average rate across all your income (total tax ÷ total income). For example, someone earning AU$90,000 has a marginal rate of 30% but an effective income tax rate of around 19%. The effective rate is what matters for budgeting and comparing take-home pay - the marginal rate matters most for decisions about additional income or deductions.

Do sole traders and company owners use this calculator?

This calculator is for individual tax on personal income. Sole traders pay income tax on their business profit at the individual rates shown here. Companies pay corporate tax at 25% (base rate entity) or 30% (general rate) - not at these individual rates. Trust distributions flow to beneficiaries who pay tax at their individual rates. If you are a director drawing a salary, your salary is taxed at individual rates; any additional company distributions or dividends are a separate calculation.

Will I get a tax refund this year?

You receive a refund if the PAYG withheld from your wages (or instalments paid during the year) exceeds your actual tax liability after deductions and offsets. Common reasons for a larger refund include work-related deductions, investment losses, spouse offset, or a reduced income year. A tax bill at year end typically means your employer under-withheld (common when someone has multiple jobs or a HELP debt not disclosed), or you earned significant additional income outside of employment.

Does the Medicare levy apply to everyone?

Most taxpayers pay the 2% Medicare levy on their entire taxable income. Low-income earners (below approximately $26,000 for singles) may get a reduction or exemption. The Medicare levy surcharge (1-1.5%) applies to higher earners without private hospital cover. You can check the latest thresholds on the ATO website.

FY2025-26 tax brackets

The table below shows the individual income tax rates for Australian residents in FY2025-26. A 2% Medicare levy applies on top of these rates for most taxpayers.

Remember that employer superannuation guarantee (SG) contributions are not included in your taxable income -- they are paid on top of your salary into your super fund. However, salary-sacrificed super contributions above the concessional cap may be taxed at your marginal rate.

Worked example: $85,000 taxable income

For an Australian resident earning $85,000 in FY2025-26 with no HELP debt:

• $0 - $18,200 at nil = $0
• $18,201 - $45,000 at 16% = $26,800 x 0.16 = $4,288
• $45,001 - $85,000 at 30% = $40,000 x 0.30 = $12,000

Total income tax = $0 + $4,288 + $12,000 = $16,288. Add the 2% Medicare levy: $85,000 x 0.02 = $1,700. Grand total tax = $17,988, giving an effective rate of 21.2%.

Your employer should be withholding roughly this amount across the year -- use our PAYG withholding calculator to check. For businesses managing multiple contractor and employee payments, accounts payable automation can streamline the reconciliation process.