For 2025-26, Australian residents pay no tax on the first $18,200 earned, then 16% up to $45,000, 30% up to $135,000, 37% up to $190,000, and 45% on income above $190,000. These are marginal tax rates, so each rate applies only to the income that falls inside that bracket, and the 2% Medicare levy is charged on top.

That single paragraph answers the question most people are actually asking. The rest of this page shows you how the Australian income tax rates work in practice, what your tax payable looks like once you run the numbers, how the levy fits in, what has changed this year, and the tax cuts that are already law for 2026 and 2027.

General information only. This article is not personal tax advice. Speak to a registered tax agent about your own situation.

Australian resident tax rates 2025-26: the tax brackets at a glance

Here are the resident tax rates and income tax brackets for the current income year (July 2025 to June 2026). They apply if you were an Australian resident for tax purposes for the full year and entitled to the full tax-free threshold, and they determine how much income tax you pay based on your taxable income.

Taxable income	Tax on this income
$0 – $18,200	Nil
$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	$51,638 plus 45c for each $1 over $190,000

The figures in this table show tax payable before the 2% Medicare levy.

If the 2024-25 figures look identical, that is because they are. The big change came in July 2024, when the lowest rate dropped from 19% to 16% and the 32.5% rate was cut to 30% with a wider band. For the current year the brackets were held steady, so anyone comparing the resident tax rates against last year will find the same table applies.

How marginal tax actually works

The single most common misunderstanding about tax brackets is the fear that a higher wage will “push you into a higher bracket” and leave you worse off. That does not happen. Australia uses a marginal income tax system, which means each slice of your income is taxed only at the rate for the bracket it falls into. Moving into a higher bracket only ever affects the dollars above that threshold, and you pay tax only on the amount over each step, never on the dollars below it.

Think of your income as water filling a set of buckets. The first bucket ($0 – $18,200) is free. The next bucket is taxed at 16%, the one after at 30%, and so on. You never pay the top rate on your whole income, only on the part that spills into the top bucket.

Worked example: $90,000 taxable income

Say your taxable income this year is $90,000. Here is how the tax is built up, bracket by bracket:

• First $18,200: taxed at 0% = $0
• Next $26,800: 16c for each $1 over $18,200 = $4,288
• Remaining $45,000: 30c for each $1 over $45,000 = $13,500

Total tax payable = $17,788 before the 2% levy.

Your average rate here is about 19.8% of your income, even though your marginal rate (the rate on your next dollar earned) is 30%. That gap between the two is why a pay rise never leaves you with less take home pay. It also explains why quoting your “tax bracket” overstates what you actually pay across your whole income.

Add 2% of your taxable income for Medicare, which is $1,800, and the total comes to roughly $19,588.

Don’t forget the Medicare levy

The Medicare levy is 2% of your taxable income and it sits on top of the income tax in the table above. It is not built into the bracket rates, so it is easy to forget when you estimate your own bill.

A few points worth knowing:

• Low income earners can pay a reduced amount or none at all, depending on income and family circumstances.
• Higher income earners who do not hold an appropriate level of private hospital cover may also pay the Medicare Levy Surcharge, which ranges from 1% to 1.5% on top of the standard 2% levy. This is separate and is designed to encourage private health cover.

For most working Australians, the practical takeaway is simple: budget for your marginal tax plus the 2% levy, and check whether the surcharge applies to you.

What changed this year, and the cuts coming in 2026 and 2027

For 2025-26, the resident tax rates and brackets are unchanged from 2024-25. But two further tax cuts are now law, announced in this year’s Federal Budget and aimed at returning bracket creep.

• In 2026-27: the 16% rate on the $18,201 – $45,000 bracket drops to 15%.
• In 2027-28: the same rate drops again to 14%.

Both changes are already legislated, with the first taking effect from 1 July 2026. The thresholds are not moving under this measure, only the rate on that first taxable band, so every taxpayer above it gets a benefit. There is no need to do anything now. The rates in the table above are the ones that apply to income you earn this year.

For context, here is how the lowest marginal rate has moved and will move:

Financial year	Lowest marginal rate (on $18,201 – $45,000)
2023-24	19%
2024-25	16%
2025-26	16%
2026-27	15%
2027-28	14%

Foreign resident and working holiday maker rates

Not everyone is taxed on the resident tax rates above. Two groups are treated differently in Australia.

Foreign residents do not get the tax-free threshold and are not required to pay the Medicare levy. They pay income tax from the first dollar of Australian-sourced taxable income. Their tax rates for this year are:

Taxable income	Tax on this income
$0 – $135,000	30c for each $1
$135,001 – $190,000	$40,500 plus 37c for each $1 over $135,000
$190,001 and over	$60,850 plus 45c for each $1 over $190,000

Working holiday makers on a 417 or 462 visa are taxed on a separate scale. For 2025-26:

Taxable income	Tax on this income
$0 – $45,000	15c for each $1
$45,001 – $135,000	$6,750 plus 30c for each $1 over $45,000
$135,001 – $190,000	$33,750 plus 37c for each $1 over $135,000
$190,001 and over	$54,100 plus 45c for each $1 over $190,000

If you have changed residency status during the year or arrived on a working holiday visa, the rate that applies to you can be genuinely tricky. This is a good moment to find out where you stand rather than guess.

How to legally reduce the tax you pay

Understanding the Australian tax brackets is only step one. The more useful question is how to keep more of what you earn, legally. A few of the levers that make the biggest difference for most people:

• Claim every tax deduction you are entitled to. Work-related expenses, self-education, home office costs, and professional subscriptions all reduce your taxable income, which is the number the tax rates are applied to.
• Make the most of concessional super contributions. Contributions within the cap are generally taxed at 15% inside super rather than at your marginal rate, which can be a large saving for anyone in the 30% bracket or above.
• Keep good records all year. Most missed tax deductions are simply undocumented ones. A shoebox of receipts in June is worth far less than a running log.
• Time income and expenses sensibly where you have any control over it, especially if you are self-employed or run a business.
• Structure income correctly if you have investments, a side business, or a company. The right structure can materially change your effective rate.

This is exactly the sort of planning our team provides day to day. If you want a second set of eyes on your return or help to lower next year’s tax payable, get in touch with BOX Advisory Services and we will map out what applies to your situation.

Frequently asked questions

The bottom line

The 2025-26 resident tax rates are unchanged: nil to $18,200, then 16%, 30%, 37% and 45%, plus the 2% levy. What is genuinely new is what is coming, with the lowest rate stepping down to 15% and then 14% over the next two years. Knowing your bracket tells you what you owe; good planning tells you how to owe less. If you would like help with either, our team is here for it.

General information only. This article does not take your personal circumstances into account and is not a substitute for personal tax advice from a registered tax agent.