Australian income tax brackets for 2026–27

The 2026–27 resident rates, and how to read the table

Australian income tax is charged in slices. Each bracket has a rate, and that rate applies only to the part of your income that falls inside that bracket — not to the whole lot. The ATO publishes the table with a running total in the second column so you do not have to add the slices up yourself.

The dollar figures in the middle column are not arbitrary. Each one is the tax already accumulated by the time your income reaches the bottom of that bracket. The $4,020 in the third row is what you owe at exactly $45,000: 15% of the $26,800 between $18,200 and $45,000. The $31,020 in the fourth row is that $4,020 plus 30% of the $90,000 between $45,000 and $135,000. Every row is built from the row above it, which is why the table can never jump.

Tax = base amount for your bracket + rate × (taxable income − bracket floor)

At $95,000:  $4,020 + 30% × ($95,000 − $45,000)
             $4,020 + $15,000 = $19,020

Why a pay rise never leaves you worse off

The most persistent myth in Australian tax is that crossing into a higher bracket can cost you money. It cannot, and the arithmetic of the table above is the reason. When your income moves past $135,000, the 37% rate applies to the dollars above $135,000 and to nothing else. The $135,000 underneath keeps being taxed exactly as it was.

The feeling behind the myth is usually real, though. A rise that arrives mid-year makes your payslip look worse than expected, because PAYG withholding annualises whatever you were paid in that period. A back-paid lump sum or a big overtime fortnight is withheld as though you earn that much every fortnight, so too much tax comes out and it is returned when you lodge. That is a withholding artefact, not a bracket.

Marginal rate, average rate, and the gap between them

Two different numbers get called “my tax rate” and they answer different questions. Your marginal rate is the rate on the next dollar you earn — the right figure for valuing an extra shift, a bonus, or a deduction. Your average rate is total income tax divided by total income, which is the right figure for describing what you actually pay.

Notice how far apart the two columns are. Someone on $200,000 is often described as being “on 45%”, but they hand over about 28% of their income in income tax, or roughly 30% once the levy is included. The tax-free threshold and the lower brackets underneath them do most of that work. This is also why comparing headline top rates between countries tells you very little without the thresholds attached.

The tax-free threshold, and what claiming it actually means

The first $18,200 of a resident’s taxable income attracts no income tax. Spread across a year that is $350 a week or $700 a fortnight of untaxed income. It is an allowance per person, not per employer, which is where the confusion starts.

When you tick the tax-free threshold box on a tax file number declaration, you are not claiming a rebate. You are telling that employer to use the withholding scale that assumes the first $18,200 of the year is untaxed, so it withholds less from each pay. Tick it with two employers and both of them under-withhold, your combined income is taxed correctly at year end, and the shortfall arrives as a bill. The usual advice is to claim it with whichever job pays the most and let the other job withhold at the higher rate.

LITO, and the offset taper that quietly lifts your marginal rate

The low income tax offset reduces income tax for people on modest incomes. It is worth up to $700, and it is an offset rather than a deduction: it comes off the tax you owe, not off your income. It also cannot push your tax below zero and it does not touch the Medicare levy, so it will never appear as a cash payment on its own.

• Taxable income up to $37,500: the full $700.
• Between $37,500 and $45,000: reduced by 5c for each $1 over $37,500, leaving $325 at $45,000.
• Between $45,000 and $66,667: reduced by a further 1.5c for each $1, reaching nil at $66,667.

The taper has a consequence that the bracket table hides. While LITO is being withdrawn, each extra dollar costs you the bracket rate and a slice of the offset. Between $37,500 and $45,000 the statutory 15% rate behaves like 20%, and between $45,000 and $66,667 the 30% rate behaves like 31.5% — before the 2% levy in both cases. Nobody is worse off for earning more, but the effective marginal rate over that stretch is higher than the table suggests.

What the bracket table deliberately leaves out

The rates above are income tax and nothing else. Several other charges are worked out on the same tax return and are easy to forget when you are estimating a salary.

Charges that sit on top

• The Medicare levy, generally 2% of taxable income with a shade-in for low incomes. The Medicare levy guide covers the thresholds and the separate surcharge.
• A compulsory study loan repayment, if you have one. It is worked out on repayment income on its own scale — see HELP and HECS repayments.
• The Medicare levy surcharge, for higher earners without private hospital cover. Unlike income tax, it applies to your whole income rather than the excess over a threshold.

The 2026–27 standard work deduction

From 2026–27, eligible resident workers can receive a standard deduction of up to $1,000 for work-related expenses. It reduces taxable income rather than tax, so its value is that amount multiplied by your marginal rate: about $320 for someone in the 30% bracket once the levy is counted. It is claimed when you lodge, so it does not change what your employer withholds during the year, and it is not a cash payment.

For the full journey from an advertised salary to the number in your account, including how PAYG withholding differs from the year-end assessment, read how Australian take-home pay is actually calculated.

What the OzCalc income tax calculator does and does not model

The income tax calculator applies the bracket table to a taxable income you supply, subtracts LITO, and adds the Medicare levy using the single low-income thresholds. It can switch to the foreign resident table and can add a study loan repayment. The result is a year-end assessment estimate, not a tax return.

What it does not do matters just as much. It assumes the figure you enter is already taxable income — assessable income minus deductions — so entering a gross salary without adjusting for deductions will overstate your tax. It assumes you were a resident, or a foreign resident, for the whole year rather than part of it. It uses the single Medicare thresholds, so a family low-income reduction needs the Medicare levy calculator, and the surcharge needs its own tool. It does not model offsets other than LITO, capital gains, foreign income, or the effect of splitting income across two income years.

If you want to see what a raise is worth rather than what a salary costs, the tax comparison calculator assesses two salaries independently and reports the tax on the slice between them — which is the number the bracket myth gets wrong.

Common questions