Australian Tax Brackets Explained 2025-26

Understanding the Australian tax brackets 2025 and how they work is essential for planning your finances. For the 2025-26 financial year, Australia uses a progressive income tax system: you pay a higher rate only on the income that falls into each bracket, not on your entire salary. The tax-free threshold and the bracket boundaries are set by the ATO and can change from year to year. This guide explains the 2025-26 rates and how to estimate your tax—or use our free pay calculator for an instant breakdown.

The tax-free threshold

Australian residents don't pay income tax on the first $18,200 of taxable income in 2025-26. This is the tax-free threshold. So if you earn $18,200 or less, your income tax is nil. Above $18,200, only the amount over the threshold is taxed at the rates that apply to each bracket.

2025-26 tax brackets and rates

Income above $18,200 is taxed as follows. From $18,201 to $45,000 you pay 16% on that slice. From $45,001 to $135,000 the rate is 30%. From $135,001 to $190,000 it's 37%, and above $190,000 the rate is 45% on the amount over $190,000. Because the system is progressive, your average tax rate is always lower than your top bracket.

How to work out your tax

You calculate tax by applying each rate to the portion of your income that falls in that bracket, then adding the results. Many people find it easier to use an online calculator. Our Australian pay calculator uses the exact 2025-26 brackets and also includes the Medicare levy and HECS repayments so you see your full take-home pay.

Low income tax offset and other offsets

The government may offer tax offsets for certain groups. Offsets reduce your final tax bill; they don't change the bracket rates. When you lodge your tax return, the ATO applies any offsets you're entitled to. Our calculator gives you an estimate of tax before offsets so you have a baseline.

Why brackets matter for your pay

Knowing the Australian tax brackets 2025 helps you understand why your take-home pay doesn't increase by a flat percentage when you get a raise. As more of your income moves into a higher bracket, a bit more tax is taken from the extra dollars. Use our pay calculator to compare different salary levels and see the impact of bonuses or overtime.