Australian Income Tax Calculator

Q: What are the Australian income tax brackets for 2025-26?

For Australian residents in FY 2025-26: $0-$18,200 tax free, $18,201-$45,000 at 16%, $45,001-$135,000 at 30%, $135,001-$190,000 at 37%, and over $190,000 at 45%. These rates reflect the Stage 3 tax cuts which took effect from 1 July 2024.

Q: How is the Medicare levy calculated?

The Medicare levy is 2% of taxable income for most Australian residents. A reduction applies between $27,222 and $34,028 (singles) where the levy is phased in gradually. Non-residents do not pay the Medicare levy.

Q: What is the difference between effective and marginal tax rates?

Your marginal rate is the rate paid on your next dollar earned (your highest bracket). Your effective rate is your total tax divided by your total income, which is always lower than the marginal rate due to the tax-free threshold and progressive brackets.

Q: Why is my borrowing power based on taxable income?

Lenders calculate your borrowing capacity using net income (after tax). Knowing your tax liability helps you understand what you have left for living expenses and loan repayments. See our Borrowing Power Calculator for a personalised estimate.

Q: What is the Low Income Tax Offset (LITO)?

LITO is a tax offset (not a cash refund) that reduces the income tax payable by lower income earners. The maximum LITO is $700, available to those earning up to $37,500, and it phases down to zero at $66,667. This calculator applies LITO automatically for Australian residents.

Q: Should I consult a tax professional?

Yes, for anything beyond a rough estimate. A registered tax agent can identify deductions, offsets and structures specific to your situation. This calculator is a planning tool, not tax advice. For mortgage planning, David at Rebus Finance can help you understand how your tax position affects your borrowing capacity.

Estimate your annual tax payable, Medicare levy and effective tax rate for FY 2025-26 under the new Stage 3 tax brackets.

Calculate Your Income Tax

Enter your taxable income to estimate income tax, Medicare levy and the effective and marginal tax rates for FY 2025-26 (after Stage 3 cuts).

Taxable Income *

Tax Residency

Tax Year

Total Tax Payable$0

Net Income$0

Effective Tax Rate0%

Tax breakdown

Income tax (before offsets)$0

Medicare levy$0

Marginal tax rate0%

Show calculation working

This calculator applies the Australian Tax Office (ATO) marginal tax brackets for the selected financial year. Marginal tax means each “band” of income is taxed at its own rate, you do not pay the top rate on your whole income.

Disclaimer: This calculator applies the ATO marginal tax brackets for the financial year you select, plus the standard Medicare levy and Low Income Tax Offset (LITO). It does not account for the Medicare Levy Surcharge, HECS-HELP repayments, deductions, salary sacrifice, fringe benefits, franking credits or capital gains. For tax advice, consult a registered tax agent or your accountant.

How Australian Marginal Tax Works

Australia uses a progressive (marginal) tax system. Your income is divided into bands (called “tax brackets”) and each band is taxed at its own rate. You do not pay the top rate on your whole income, only on the portion of income that falls into that bracket.

Worked example: $85,000 income, FY 2025-26

First $18,200 tax-free (0% bracket)$0

$18,201 to $45,000 at 16% ($26,800 × 16%)$4,288

$45,001 to $85,000 at 30% ($40,000 × 30%)$12,000

Subtotal income tax$16,288

Plus Medicare levy (2%)$1,700

Total tax payable$17,988

Marginal vs effective tax rate

The example above shows two different “rates”:

Marginal rate (30%), the rate of the highest bracket your income reaches. It is what you would pay on your next dollar earned, useful for thinking about overtime, bonuses or salary sacrifice decisions.
Effective rate (~21%), your total tax divided by your total income. Always lower than your marginal rate because of the tax-free threshold and progressively-increasing brackets.

Stage 3 tax cuts (from 1 July 2024)

The Stage 3 reform changed three things from FY 2024-25 onwards:

The 19% bracket dropped to 16%
The 32.5% and 37% bands were collapsed into a single 30% band covering $45,001 to $135,000
The 37% bracket now starts at $135,001 instead of $120,001

Try switching the “Tax Year” selector above to FY 2023-24 and re-running the calculator to see what you would have paid before the cuts.

Why this matters for your home loan

Lenders calculate your borrowing capacity from your after-tax (net) income, not your gross. Understanding how much of your gross actually lands in your bank account is the first step in working out what you can afford. Once you know your net, use our Borrowing Power Calculator to see how much a lender would approve, or get in touch with David for a personalised assessment.

Frequently Asked Questions

What are the Australian income tax brackets for 2025-26?

How is the Medicare levy calculated?

What is the difference between effective and marginal tax rates?

Why is my borrowing power based on taxable income?

What is the Low Income Tax Offset (LITO)?

Should I consult a tax professional?

Planning Around Your Tax Position?

Understanding your after-tax income is the foundation of a strong mortgage strategy. David can help you structure your borrowing to suit your circumstances.

Speak with David Borrowing Power Calculator