Australian tax brackets 2025-26 explained (with take-home pay examples)

How the ATO 2025-26 individual tax brackets work, what changed with the Stage 3 cuts, the Medicare levy, the LITO, and worked take-home pay examples.

Most Australians pay more attention to their gross salary than to their actual take-home pay. The gap between the two is largely down to the individual income tax brackets set by the Australian Taxation Office (ATO), the 2% Medicare levy, and a couple of offsets that flatten the curve at the lower end. This guide walks through the 2025-26 brackets, explains how the Medicare levy works, and shows worked take-home pay examples for $50,000, $100,000 and $200,000 incomes.

The 2025-26 resident tax brackets

For Australian tax residents, the brackets that apply for the financial year ending 30 June 2026 are:

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 + 30c for each $1 over $45,000
$135,001 – $190,000	$31,288 + 37c for each $1 over $135,000
$190,001 and above	$51,638 + 45c for each $1 over $190,000

These rates have been in place since 1 July 2024, after the Stage 3 tax cuts were redesigned in the 2024 Federal Budget. The Government has confirmed they will continue unchanged through the 2025-26 year. (Source: ATO — Tax rates: Australian residents.)

The headline change in Stage 3 was the introduction of a 16% bracket between $18,201 and $45,000 — which used to be 19%. The 32.5% bracket was abolished, and the 37% bracket was lifted from $120,000 to $135,000.

The 2% Medicare levy

On top of income tax, most Australian residents pay a 2% Medicare levy on their taxable income. The levy is designed to help fund the public health system and is calculated on top of (not as part of) the bracket calculation above.

There's a built-in safety net for low earners. For 2025-26 the levy:

Does not apply if your taxable income is below $27,222 (single threshold);
Phases in between $27,222 and $34,027 — a marginal rate of 10c per dollar over the lower threshold, capped at 2% of taxable income;
Applies in full at 2% above $34,027.

Family thresholds are higher. There's also a separate Medicare Levy Surcharge of 1–1.5% for high-income earners without private hospital cover, but that's not modelled by the basic Calcula tax calculator.

The Low Income Tax Offset (LITO)

The LITO is a non-refundable offset that reduces the tax payable for low and middle earners. For 2025-26 it works like this:

Maximum offset of $700 for taxable income up to $37,500;
Phases out at 5c per dollar between $37,500 and $45,000;
Phases out at 1.5c per dollar between $45,000 and $66,667;
Reaches zero at $66,667.

The LITO is applied automatically by the ATO when you lodge your tax return — you don't need to claim it separately.

Three take-home pay examples

The examples below show annual income tax + Medicare levy on a typical resident's salary income, ignoring HELP/HECS, salary packaging, and other personal adjustments. You can replicate any of them in the Calcula income tax calculator.

Example 1 — $50,000 salary

You're $5,000 into the 30% bracket and $4,800 above the LITO peak.

Income tax: $4,288 + ($50,000 - $45,000) × 30% = $5,788
Less LITO: $700 - ($50,000 - $45,000) × 1.5c = −$625
Tax after LITO: $5,163
Medicare levy (2% of $50,000): $1,000
Total tax: $6,163
Take-home pay: $43,837 / year, or ~$3,653 per month

Example 2 — $100,000 salary

You're well into the 30% bracket, past the LITO phase-out.

Income tax: $4,288 + ($100,000 - $45,000) × 30% = $20,788
LITO: phased out, $0
Medicare levy (2%): $2,000
Total tax: $22,788
Take-home pay: $77,212 / year, or ~$6,434 per month

For most families this income level also doesn't trigger the Medicare Levy Surcharge, because singles below $101,000 are in Tier 0.

Example 3 — $200,000 salary

Now you've crossed into the top 45% bracket.

Income tax: $51,638 + ($200,000 - $190,000) × 45% = $56,138
Medicare levy (2%): $4,000
Medicare Levy Surcharge (1% — Tier 1, single, no private hospital cover): $2,000
Total tax: $62,138 (or $60,138 if you have hospital cover)
Take-home pay: $137,862 / year (or $139,862 with private cover), or ~$11,500 per month

The MLS is a strong nudge to take out a basic private hospital policy — the cheapest policies usually cost less than the surcharge they avoid.

What changes from 1 July 2026

The 2025-26 Federal Budget legislated two further small cuts to the lowest bracket:

From 1 July 2026, the 16% rate falls to 15%;
From 1 July 2027, the same rate falls to 14%.

That's worth roughly $268 per year to anyone earning above $45,000, and proportionally more for lower earners. It does not change any other bracket.

How non-residents are taxed differently

If you're a foreign resident for tax purposes, the brackets are flatter and start from the first dollar:

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

There's no tax-free threshold and no Medicare levy (you're not eligible for Medicare). The Calcula tax calculator includes a non-resident toggle that switches to these rates.

Common mistakes to avoid

Confusing "marginal rate" with "average rate". Earning $1 more never reduces your take-home pay — only that extra dollar is taxed at the marginal rate, not your whole income.
Forgetting Medicare. People often quote tax as a percentage and miss the 2% levy, which is roughly $1,000 per $50,000 of income.
Assuming HECS/HELP repayments are tax. They're a separate compulsory repayment based on income thresholds. The Calcula tax calculator does not currently include them.
Ignoring the difference between gross and taxable income. Salary sacrifice into super, deductible expenses, and rental losses all reduce your taxable income — and therefore your tax. The brackets only apply to taxable income, not gross.

Calculate your own take-home pay

Plug your gross salary into the Calcula income tax calculator to see income tax, Medicare levy, LITO and net pay broken down by year, month, fortnight and week. Toggle resident/non-resident to compare.

If you're combining the tax check with a property purchase, the mortgage calculator will show what your repayment looks like as a percentage of net rather than gross — which is the number that actually matters when serviceability gets tight.

A short reminder on advice

This article describes how the ATO rules work in general terms; it is not personal tax advice. Things like family tax benefits, capital gains, share of partnership income, foreign income, HECS, super contributions, and offsets for spouse and dependants can all change your final tax bill significantly. Before you make decisions that depend on a specific tax outcome, talk to a registered tax agent or accountant.

For the official rates, see the ATO — Tax rates: Australian residents page.

This article provides general information only and is not financial advice. Please consult a licensed financial adviser before making any financial decisions. See our full disclaimer.