2025-26 Australian Income Tax Brackets
| Taxable Income | Tax Rate | Tax on This Portion |
|---|---|---|
| $0 – $18,200 | 0% | Nil |
| $18,201 – $45,000 | 19% | 19c for each $1 over $18,200 |
| $45,001 – $120,000 | 32.5% | $5,092 + 32.5c for each $1 over $45,000 |
| $120,001 – $180,000 | 37% | $29,467 + 37c for each $1 over $120,000 |
| $180,001+ | 45% | $51,667 + 45c for each $1 over $180,000 |
| Plus Medicare levy 2% on most incomes | 2% of taxable income | |
Worked Example — $95,000 Salary
| Income Bracket | Amount | Rate | Tax |
|---|---|---|---|
| $0 – $18,200 | $18,200 | 0% | $0 |
| $18,201 – $45,000 | $26,800 | 19% | $5,092 |
| $45,001 – $95,000 | $50,000 | 32.5% | $16,250 |
| Medicare levy | $95,000 | 2% | $1,900 |
| LITO reduction | — | — | -$100 approx |
| Total tax payable | $23,142 | ||
| Take-home pay | $71,858 ($5,988/month) | ||
Low Income Tax Offset (LITO) — 2025-26
The Low Income Tax Offset (LITO) reduces the tax payable for lower-income earners. For 2025-26: full offset of $700 for incomes up to $37,500, then the offset reduces by 5c for each dollar between $37,501 and $45,000, then by 1.5c for each dollar between $45,001 and $66,667. Above $66,667, no LITO applies. This effectively increases the tax-free threshold to approximately $21,884 for eligible taxpayers.
Medicare Levy — Who Pays and Who Is Exempt
Most Australians pay a 2% Medicare levy on top of income tax. Low-income earners are exempt or pay a reduced levy: 2025-26 exemption threshold is $26,000 for individuals. The Medicare Levy Surcharge (MLS) adds 1-1.5% for high-income earners without private hospital cover: 1% for $93,000–$108,000, 1.25% for $108,001–$144,000, 1.5% for $144,001+. Having appropriate private hospital cover removes the MLS.
Frequently Asked Questions
What is the tax-free threshold in Australia for 2025-26?
The tax-free threshold is $18,200. With the Low Income Tax Offset (LITO), the effective tax-free threshold rises to approximately $21,884 for eligible individuals.
Do I pay tax on all my income or just the amount above each threshold?
Australia uses a progressive marginal tax system. You only pay the higher rate on the portion of income in each bracket — not on all your income. Earning $120,001 does not mean your entire income is taxed at 37% — only the $1 above $120,000 is taxed at 37%.
How much tax does a casual worker pay in Australia?
Casual workers pay the same income tax rates as permanent employees. The key difference is that casuals typically don't receive leave loading from income tax purposes. Use our income tax calculator to see your exact tax based on your actual earnings.