Australian Taxation Rates

Australia’s income tax uses a sliding scale. Under Australian taxation rates, tax rises or falls with what you earn. When you calculate your tax, check every deduction you can claim and each offset available to you, as both can change the amount due.

Australian Taxation Rates for Residents

Australian residents aged 18 and over should refer to the resident table for the financial year they are checking. It shows the income tax rates that apply and will exclude the 2% Medicare levy.

Australian residents have a $18,200 tax-free threshold. When your taxable income goes above $18,200, progressive rates apply only to the portion above it.

Income Tax Rates 2025-26

The 2025-26 financial-year income tax rates for residents are shown below

Each band is taxed progressively once taxable income passes the tax-free threshold.

Income Tax Rates 2026-27

From 1 July 2026, the rate on taxable income between $18,201 and $45,000 will fall to 15%, from 16%. For historical context, compare earlier taxation rates.

The 2026-27 resident income tax rates appear in the following table

This cut lowers the rate for taxable income in the $18,201 to $45,000 range.

Taxation Rates Australia for Other Residency Statuses

When you meet one of the ATO’s four residency tests, including the 183-day test or the CSS/PSS schemes superannuation test, you may count as an Australian resident for tax purposes that year. Your visa or citizenship doesn’t settle this. Check the tests first.

1. The resides test looks at whether you live in Australia, considering your family location, employment, property and lifestyle together.

1. Under the domicile test, you are a resident when your domicile is Australia, unless your permanent place of abode is outside Australia.

1. If you are in Australia for more than half the income year, from July, June, continuously or with breaks, the 183-day test can apply. Arrival and departure days count unless your usual place of abode is overseas and you do not intend to take up residence.

1. Only Australian government employees working overseas (and covered by CSS/PSS schemes) can meet the superannuation test.

Start with the ATO tool. Use Work out your tax residency to check your Tax residency. If things are less clear, compare your position with TR 2023/1. A registered tax agent can help when you moved between countries during the year, hold overseas income or assets affected by a tax treaty, or have mixed resides or domicile factors.

Foreign residents don’t receive the tax-free threshold. In most cases, they don’t pay the Medicare levy either, provided they hold a Medicare entitlement statement.

Non-Resident Tax Rates

The ATO’s non-resident rates are set out below

• $0, $135,000
• $135,001, $190,000
• $190,001 and over, Start with the ATO’s Work out your tax residency tool. compare circumstances with TR 2023/1. registered tax agent for moves, overseas income/assets, treaties, or mixed factors.

As non-residents miss the tax-free threshold, these rates apply from the very first dollar of taxable income.

Working Holiday Maker Tax Rates

The ATO treats 417 (working holiday) and 462 (work and holiday) visa subclass holders as working holiday makers.

• 417 (working holiday)
• 462 (work and holiday)

The rates for working holiday makers appear in the table below 👇

The taxable income you earn determines which rate applies to you.

How Income Tax is Calculated

Income tax payable uses a fixed calculation.

Assessable income − deductions = taxable income → apply rates = gross tax − offsets = net tax + Medicare levy − credits and refundable offsets = amount owing or refund.

Start with your assessable income and take off allowable deductions — that gives the taxable income everything else is based on. Apply the tax rates to it for your gross tax, subtract any offsets, add the Medicare levy, then take off tax credits and refundable offsets. What’s left is your bill or your refund.

Assessable Income

Declare your Assessable income on the tax return each year.

Assessable income can include:

• Employment income
• Super pensions and annuities
• Government payments
• Investment income
• Business, partnership and trust income
• Foreign income
• Crowdfunding income

Put Government payments, such as the Age Pension or carer payments, in your tax return. Declare tax-exempt payments too, as they can affect other government benefits and tax offsets.

Investment income can come from interest in bank and financial institution accounts, share dividends, managed-fund returns, rent from an investment property, plus capital gains when an asset is sold.

You must declare Business income. If you run a partnership, add your share of its income or loss to your assessable income.

Trust income belongs here too. Trustees must include their share in a tax return, even if it stayed in the trust and they never received it.

If you’re an Australian resident for tax purposes, report Foreign income, even where it was already taxed overseas. Crowdfunding income from a business or profit-making scheme may be taxable too.

Some amounts are not taxed:

• lottery winnings and other prizes
• some government grants and payments
• child support
• the tax-free portion of your redundancy payment
• government super co-contributions

Tax Deductions

Allowable deductions lower your taxable income, which can cut your tax.

Common claims include:

• work-related expenses
• union fees
• charitable donations
• the cost of managing your tax affairs (for example, paying an accountant)

Taxable Income

The amount you pay tax on is your taxable income.

Cutting Assessable income or adding deductions can bring it down. If you complete your return, use the control number in it: tax calculations, levies and offsets use that figure, rather than your gross salary.

The numbers make the point clearly: in the 2022/23 example, $60,000 of total income drops to $55,000 after $5,000 in deductions, which cuts tax payable by $1,745, from $11,167 without deductions to $9,422 with them. Current rates give different dollar amounts.

Additional Levies, Surcharges, and Offsets

Medicare Levy

Medicare gives Australian residents access to universal health care.

In 2024-25, no Medicare Levy applies under $27,222; a reduced levy cuts out at $34,027.

The corresponding family limits use matching thresholds of $45,907 and $57,383.

SAPTO shifts those levy limits. If you receive the Seniors and Pensioners Tax Offset (SAPTO), no levy is charged below $43,020, with a reduced levy that cuts out at $53,775.

SAPTO family thresholds are $59,886 and $74,857.

In 2025-26, the Medicare Levy is nil under $28,011; a reduced levy applies from $28,011 and cuts out at $35,013.

Family limits change: no levy applies below $47,238 for families; with SAPTO, the levy-free point is $44,268, with the reduced rate cutting out at $55,335.

Medicare Levy Surcharge

The Medicare Levy Surcharge (MLS) may apply once your income passes certain levels. Without adequate private health insurance, you may owe the surcharge.

This is meant as a financial nudge: higher-income earners may find private hospital cover costs less than the extra tax.

Check these three points before calculating it.

1. Find your surcharge income, rather than only your taxable income.
2. Compare that figure with the individual or family tier in the table.
3. Check whether you and relevant family members held appropriate private hospital cover for the relevant period.

The usual Medicare Levy and Medicare Levy Surcharge are separate charges. Even if you expect the standard levy, meeting surcharge conditions can alter your final amount.

Your surcharge income decides whether the MLS is 1%, 1.25% or 1.5% of these amounts:

• Taxable income
• Total reportable fringe benefits
• Any amount on which family trust distribution tax has been paid
• Total net investment losses (e.g. negative gearing deductions)
• Reportable super contributions

This table sets out 2025-26 MLS tiers, Tier 0, Tier 1, Tier 2 and Tier 3, plus individual and family limits and surcharge rates.

Whether you face a surcharge, and its rate, comes down to surcharge income and qualifying health insurance.

Low Income Tax Offset (LITO)

The Low Income Tax Offset (LITO) is available to Australian residents with annual taxable income not more than $66,667.

LITO’s maximum is $700 below $37,500, then it tapers away to nil.

As a non-refundable offset, LITO can bring your tax bill down to zero, though it can’t create an extra cash refund. LITO has no further effect once the bill reaches zero.

In 2025-26, the $18,200 tax-free threshold together with LITO means income up to $22,575 attracts no income tax.

Seniors and Pensioners Tax Offset (SAPTO)

SAPTO depends on age, pension and income. You must have reached Age Pension or Service Pension age, then check if you qualify for the Age Pension or a DVA pension. A payment may not follow the income or assets test, but you still must meet the pension rule or include certain government pensions in your assessable income.

SAPTO isn’t available when rebate income exceeds the cut-out threshold. For a couple, total rebate income must be below $87,620, or $100,104 where you were separated by illness. Each person’s offset is worked out from their own rebate income.

Singles may qualify for the maximum SAPTO offset below $34,919. For every dollar above the shade-out threshold, it drops by 12.5 cents until the cut-out threshold of $52,759 leaves it at nil. At rebate income of $40,000, the offset is reduced by 0.125 × $5,081, leaving approximately $1,595 as the remaining offset under that calculation. SAPTO is non-refundable, so it can reduce tax to nil but cannot create a refund.

A single person qualifies for the full $2,230 SAPTO offset in the lower rebate-income range. It then falls by $0.125 for every additional dollar, cutting out at the upper threshold. At $39,000 of rebate income, SAPTO has fallen to approximately $1,720. Each member of a couple living together may receive up to $1,602 of SAPTO in the lower individual rebate-income range below $30,994. Qualifying for as little as $1 of SAPTO opens the higher Medicare Levy low-income threshold.

When applying australian taxation rates, start with the bracket figure, then factor in levies, the Medicare Levy Surcharge and eligible offsets for a closer tax-payable estimate. Residency, Taxable income, surcharge income, qualifying health insurance and rebate income can all alter it. Check the thresholds for your year and family position, then apply available offsets. You can then see the amount to report more clearly.