Australian Tax Brackets 2025–26: How It Actually Works

Australia's tax system is progressive, meaning different portions of your income are taxed at different rates. A lot of people misunderstand this — they think earning $1 more could push their whole salary into a higher bracket. That's not how it works. Here's the real story.

The 2025–26 Tax Brackets

These rates apply to Australian residents for the financial year starting 1 July 2025:

$0 – $18,200: 0% (tax-free threshold)
$18,201 – $45,000: 16 cents per dollar over $18,200
$45,001 – $135,000: $4,288 plus 30 cents per dollar over $45,000
$135,001 – $190,000: $31,288 plus 37 cents per dollar over $135,000
$190,001+: $51,638 plus 45 cents per dollar over $190,000

These rates were updated as part of the Stage 3 tax cuts, which broadened the 30% bracket to cover incomes up to $135,000 (previously $120,000) and reduced the rate from 32.5% to 30%.

How Progressive Tax Works — An Example

If you earn $85,000, your tax isn't simply 30% of $85,000. Instead: the first $18,200 is tax-free. The next $26,800 (from $18,201 to $45,000) is taxed at 16% = $4,288. The remaining $40,000 (from $45,001 to $85,000) is taxed at 30% = $12,000. Total tax: $16,288 — an effective rate of about 19.2%, not 30%.

Medicare Levy

On top of income tax, most residents pay a 2% Medicare levy on their taxable income. On $85,000, that's $1,700. If your income is below $26,000, you're exempt. Between $26,000 and $32,500, a reduced rate applies. Non-residents don't pay the Medicare levy.

HELP/HECS Repayments

If you have a student loan, compulsory repayments kick in when your income exceeds $54,435 for 2025–26. Rates range from 1% to 10% of your total income. On $85,000, the HELP repayment rate is 4%, meaning you'd repay $3,400 per year. This is withheld by your employer through PAYG, so you'll see it on your payslip.

What Common Salaries Actually Take Home

$65,000: ~$54,512 take-home ($2,097/fortnight)
$85,000: ~$67,012 take-home ($2,577/fortnight)
$100,000: ~$75,788 take-home ($2,915/fortnight)
$120,000: ~$88,288 take-home ($3,396/fortnight)
$150,000: ~$104,788 take-home ($4,030/fortnight)

These assume an Australian resident with no HELP debt and no private health insurance surcharge.

For a detailed bracket-by-bracket analysis, try our Income Tax Calculator. Or see everything connected on the Financial Snapshot.