Australian Tax Brackets 2025–26: How It Actually Works

Q: 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%.

Q: What about 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.

Q: What about HELP/HECS Repayments?

Under the new marginal system from 1 July 2025, compulsory HECS-HELP repayments start at $67,000 income. The rate is 15c per dollar above $67,000 (max $8,700 at $125,000), then $8,700 plus 17c per dollar above $125,000 (max $17,928 at $179,285), then 10% of total income above $179,285. On $85,000 salary: 15% × $18,000 = $2,700/year (about $104/fortnight). This is withheld by your employer through PAYG.

Q: 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.

Updated March 2026 · FY 2025–26 rates · 7 min read

JBy Jarrod, Editor · See editorial standards

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%.

Stage 3+ continues: 15% from 1 July 2026, 14% from 1 July 2027. The legislated Stage 3+ cuts step the $18,201–$45,000 bracket down further: from 16% to 15% on 1 July 2026 (saving up to $268/yr), then to 14% from 1 July 2027 (saving up to $536/yr above 2025-26). The Budget 2026-27 also added a $1,000 instant work-expense deduction (from 2026-27) and a $250 Working Australians Tax Offset (from 2027-28). Full breakdown: Federal Budget 2026-27.

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

The HECS-HELP repayment system was overhauled on 1 July 2025. Under the new marginal model, compulsory repayments start at $67,000 income (up from $54,435 under the old system). The rate is 15c per dollar above $67,000 (max $8,700 at $125,000), then $8,700 plus 17c per dollar above $125,000 (max $17,928 at $179,285), then 10% of total income above $179,285.

On $85,000, the marginal calculation is $0 on the first $67,000 plus 15% × $18,000 = $2,700/year (about $104/fortnight). Withheld by your employer through PAYG. Full HECS guide →

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.

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