Australia Income Tax Rates 2025/26: The Full Guide
The Australia income tax rates for 2025/26 determine how much of your salary you take home. This guide explains the ATO tax brackets, the tax-free threshold, the Medicare levy and the Low Income Tax Offset — with worked examples.
Knowing the Australia income tax rates for 2025/26 is essential for understanding your pay, whether you're a new worker, a migrant on your first Australian salary, or just trying to plan a budget. This guide covers the ATO resident tax brackets, the tax-free threshold, the Medicare levy and the Low Income Tax Offset — all explained in plain English with worked examples at common salary levels.
For your exact take-home pay including HELP debt and salary sacrifice, use our Australia Income Tax Calculator. Read on to understand how the numbers are built.
Australia income tax rates for 2025/26
Australian residents are taxed on a progressive scale set by the ATO. For the 2025/26 financial year, the resident rates are:
| Taxable income | Tax on this income |
|---|---|
| $0 – $18,200 | Nil (tax-free threshold) |
| $18,201 – $45,000 | 16c for each $1 over $18,200 |
| $45,001 – $135,000 | $4,288 plus 30c for each $1 over $45,000 |
| $135,001 – $190,000 | $31,288 plus 37c for each $1 over $135,000 |
| $190,001 and over | $51,667 plus 45c for each $1 over $190,000 |
These figures are for Australian tax residents. Foreign residents are taxed differently — they don't get the tax-free threshold and pay 30% from the first dollar.
The tax-free threshold
The tax-free threshold means the first $18,200 you earn each year is completely free of income tax. You claim it by ticking the box on your Tax File Number declaration with your main employer. If you have two jobs, you generally only claim the threshold once, which is why your second job can feel like it's taxed heavily.
The Medicare levy
On top of income tax, most residents pay the Medicare levy of 2% of their taxable income, which helps fund Australia's public health system. So a resident on $80,000 pays an extra $1,600 in Medicare levy. Low earners may pay a reduced levy or none at all, and high earners without private hospital cover may also pay the separate Medicare Levy Surcharge.
The Low Income Tax Offset (LITO)
The Low Income Tax Offset reduces the tax bill for lower earners. It's worth up to $700 for people earning $37,500 or less, and it tapers away as income rises, disappearing at around $66,667. LITO is applied automatically when you lodge your tax return — you don't claim it separately.
Worked example: tax on an $80,000 salary
Let's calculate the tax on an $80,000 resident salary for 2025/26:
- Income tax: $4,288 + 30% of ($80,000 − $45,000) = $4,288 + $10,500 = $14,788
- LITO: $0 (income is above the $66,667 cut-off)
- Medicare levy: $80,000 × 2% = $1,600
Total tax and levy = $16,388, leaving a take-home pay of approximately $63,612 per year, or about $5,301 per month. That's an effective tax rate of roughly 20%.
Worked example: tax on a $50,000 salary
On a $50,000 salary:
- Income tax before offset: $4,288 + 30% of ($50,000 − $45,000) = $4,288 + $1,500 = $5,788
- LITO: income is over $45,000, so the offset has tapered to about $250, reducing tax to roughly $5,538
- Medicare levy: $50,000 × 2% = $1,000
Take-home pay is approximately $43,462 per year. If you also have a student HELP debt, repayments start above a threshold — see our guide to compound interest for why paying debts down early matters.
Superannuation — the other big number
Separately from tax, your employer must pay superannuation into your retirement fund on top of your salary. This isn't deducted from your take-home pay if your salary is quoted as "plus super", but it's part of your total remuneration. Understanding both tax and super gives you the full picture of your compensation, which complements our take-home pay guides for other countries.
Frequently asked questions
What are the Australian tax brackets for 2025/26?
For residents: nil up to $18,200; 16% from $18,201 to $45,000; 30% from $45,001 to $135,000; 37% from $135,001 to $190,000; and 45% above $190,000. Most residents also pay a 2% Medicare levy.
How much tax do I pay on $80,000 in Australia?
Approximately $14,788 in income tax plus $1,600 Medicare levy, for a total of $16,388 — leaving a take-home pay of around $63,612 per year for the 2025/26 year.
What is the tax-free threshold in Australia?
The tax-free threshold is $18,200. You pay no income tax on the first $18,200 you earn each year, provided you claim it through your Tax File Number declaration.
Do I pay the Medicare levy on top of income tax?
Yes. Most residents pay a 2% Medicare levy on their taxable income in addition to income tax. Reductions apply for low earners, and a surcharge may apply to high earners without private hospital cover.
What is LITO and do I need to claim it?
The Low Income Tax Offset reduces tax for lower earners by up to $700, tapering to zero at about $66,667. It's applied automatically when you lodge your tax return — no separate claim is needed.
This article was last reviewed for the 2025/26 financial year. Figures are for guidance only — always verify with the ATO or a registered tax agent.