How much income tax do I pay in Australia?
Short answer
Australian residents pay no tax on the first A$18,200 of income, then rising marginal rates in steps to 45 per cent, plus a 2 per cent Medicare levy. Only the income within each bracket is taxed at that bracket's rate — earning one dollar more never reduces your take-home pay.
Verified · 4 cited sources
Australia uses a progressive marginal rate system. The first A$18,200 you earn as a resident is tax-free. Income above that is taxed in bands, with each band's rate applying only to the income that falls inside it. This is the point most misunderstood: moving into a higher bracket never reduces your net income, because only the portion above the threshold is taxed at the higher rate.
On top of income tax sits the Medicare levy at 2 per cent of taxable income, with reductions and exemptions for low incomes and certain categories of taxpayer. Higher earners without private hospital cover also pay the Medicare Levy Surcharge of 1 to 1.5 per cent, which is separate and additional.
Foreign residents for tax purposes are taxed differently: there is no tax-free threshold and the first dollar is taxed at a rate applying from zero. Working holidaymakers have their own schedule, with a lower rate applying to an initial band of income.
Bracket thresholds and rates change with legislation, and the rate applying to the lowest taxed bracket was legislated to fall on 1 July 2026 with a further reduction from 1 July 2027. Because of this, the specific figures are best read directly from the ATO rather than from any secondary source, including this one.
Your employer withholds tax from each pay under the pay-as-you-go system, using tables published by the ATO. If too much has been withheld across the year, you receive a refund when you lodge your return; if too little, you owe the difference.
- Tax-free threshold: A$18,200 for Australian residents
- Medicare levy: 2 per cent of taxable income, with low-income reductions
- Only income within a bracket is taxed at that bracket's rate
- Foreign residents get no tax-free threshold
- Working holidaymakers have a separate rate schedule
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Sources & provenance
Facts verified
- 1.Tax rates — Australian residents OfficialAustralian Taxation OfficeUsed for: Resident marginal rates and the tax-free threshold
- 2.Medicare levy OfficialAustralian Taxation OfficeUsed for: 2 per cent levy, reductions and exemptions
- 3.Tax rates — foreign residents OfficialAustralian Taxation OfficeUsed for: Absence of a tax-free threshold for foreign residents
- 4.Working holiday makers OfficialAustralian Taxation OfficeUsed for: Separate rate schedule for working holidaymakers
Rates, thresholds and the levy come from the ATO pages cited. This page deliberately avoids listing the specific bracket figures because they were legislated to change on 1 July 2026 and again on 1 July 2027 — read the current table directly from the ATO. The explanation that moving into a higher bracket never reduces net income is a standard description of marginal taxation, presented here because it is so widely misunderstood.
Facts on this page are taken from the sources listed above — Australian government departments, regulators, statutory bodies and official statistical releases. Comparisons, judgements and "which option suits whom" conclusions are AI-assisted analysis written over those sources; they are marked in the text and listed as an AI-analysis entry in the sources, not attributed to any authority. Rates, thresholds, fees and processing times change, often at the start of a financial year; figures are current as at the review date shown and should be confirmed with the responsible agency before you rely on them for money or legal decisions.