Australian income tax brackets are fixed by legislation. Inflation isn't. So every year your nominal wages rise (often just to keep up with cost of living), more of your income gets taxed at higher marginal rates. Your effective tax rate rises automatically — without any politician voting to raise it. This is "bracket creep" or "fiscal drag".

A worked example

Imagine you earn $130,000 in 2025. You're well within the 30% bracket (which runs to $135,000). Wages rise 3.5%/year. By 2028, your nominal wage is ~$144,500 — now $9,500 falls into the 37% bracket. You pay an extra $1,330+ in tax that year on income that, in real terms, hasn't changed. The government got a tax rise without legislating one.

Where the hit is biggest

If your income is just below a bracket threshold ($45k, $135k, $190k), every wage rise pushes more dollars into the next bracket. If you're well inside a bracket, the hit is small until you approach the next ceiling. Earners around $130k–$135k get hit hardest by the 30%→37% jump; earners around $185k–$195k get hit by the 37%→45% jump.

The Stage 3 cuts already partly absorbed

The 1 July 2024 cuts gave back several years of accumulated bracket creep. Within 4–6 years, normal wage inflation is expected to absorb most of those gains again. That's the cycle: occasional discretionary cuts → bracket creep recoups them → political pressure for the next cut.

What this calculator does

Projects your salary, tax, and effective rate forward at your assumed wage growth. Compares against a counterfactual where the brackets ARE indexed to inflation (the "no creep" scenario). The difference between the two is the bracket creep cost. Wage growth, inflation, and Medicare levy are all configurable. See ATO — Individual income tax rates.