Income Tax Calculator Australia 2025-26

How Is Income Tax Calculated in Australia?

Income tax in Australia is calculated using a progressive marginal rate system where each portion of your assessable income is taxed at the rate for that bracket, not at a single flat rate.

The Australian Tax Office applies 4 steps to arrive at your final tax liability. Here is the exact calculation for a gross salary of $80,000 in FY2025-26:

1. Apply the tax-free threshold. The first $18,200 is taxed at 0% — tax on this portion is $0.
2. Calculate tax on each bracket. $18,201–$45,000 at 16% = $4,288. $45,001–$80,000 at 30% = $10,500. Gross income tax totals $14,788.
3. Subtract the Low Income Tax Offset. At $80,000, LITO has fully phased out, so the offset is $0. Net income tax remains $14,788.
4. Add the Medicare levy. 2% of $80,000 = $1,600. Total taxation is $16,388.

Take-home pay on $80,000 is $63,612 per year, or $1,223.31 per week. The effective tax rate is 20.49%, well below the 30% marginal rate. Use our Take-Home Pay Calculator to include HECS repayments and salary sacrifice in the calculation.

What Are the Income Tax Brackets for FY2025-26?

Australia has 5 income tax brackets for resident taxpayers in FY2025-26, ranging from 0% on the first $18,200 to 45% on income above $190,000.

These brackets apply to Australian residents for tax purposes. Non-residents pay 30% from the first dollar with no tax-free threshold. The Stage 3 tax cuts, legislated in July 2024, reduced the 19% bracket to 16% and raised the 37% threshold from $120,000 to $135,000. For the complete breakdown, see our Australian tax brackets guide.

Who Uses This Australian Tax Calculator?

This income tax calculator serves 5 primary user groups across employment types, career stages, and financial planning scenarios.

• Employees negotiating a pay rise — compare take-home pay at different gross salaries to understand the real value of a raise after taxation. A $10,000 raise from $80,000 to $90,000 adds $6,800 to take-home pay, not $10,000.
• Job seekers comparing offers — calculate the after-tax income on competing salary packages. An offer of $95,000 in one role versus $90,000 plus $5,000 in superannuation sacrifice in another produces different net pay outcomes.
• Sole traders and freelancers — estimate quarterly PAYG instalment amounts based on projected annual income. Use the result alongside our Contractor Pay Calculator for GST-inclusive calculations.
• Graduates entering the workforce — understand how income tax brackets interact with HECS-HELP repayments that commence at $67,000 under the new marginal repayment system.
• Financial planners and accountants — quickly model client scenarios across multiple salary levels without manual bracket calculations.

How Does Income Tax Compare to Take-Home Pay at Different Salaries?

Take-home pay increases at a diminishing rate as salary grows because each additional dollar is taxed at a higher marginal rate. The table below compares total taxation and net pay after tax across 9 common salary levels for FY2025-26.

A worker earning $50,000 keeps 87.3% of gross salary. At $200,000, the retention rate drops to 67.7%. Superannuation at 12% is paid on top of these figures by your employer. Use the Superannuation Calculator to see the exact super contribution on your salary.

What Changed in FY2025-26 for Income Tax?

FY2025-26 is the second year of the revised Stage 3 tax cuts. The bracket structure remains the same as FY2024-25, but other payroll settings have changed.

Stage 3 Tax Cut Brackets (Ongoing)

The 19% rate dropped to 16% from 1 July 2024. The 32.5% bracket was replaced with a 30% rate. The 37% threshold lifted from $120,000 to $135,000. These changes delivered a tax cut of $804 to every taxpayer earning between $18,201 and $45,000, scaling up to $4,529 for incomes above $190,000.

Superannuation Guarantee Increase

The SG rate increased from 11.5% to 12% on 1 July 2025. Employers now contribute an additional 0.5% of ordinary time earnings to superannuation. On an $80,000 salary, the employer super contribution rises from $9,200 to $9,600 per year.

HECS-HELP Repayment Overhaul

The HECS repayment system moved from a tiered percentage model to a marginal rate system starting at $67,000. Repayments now apply at 15 cents per dollar earned above $67,000, reducing the cliff-edge effect that previously caused large jumps in repayment obligations. Use the HECS-HELP Calculator to model your repayment under the new system.

What Are the Most Common Income Tax Mistakes?

Australian taxpayers lose money through 5 recurring errors when calculating income tax, claiming deductions, and lodging returns.

1. Confusing marginal rate with effective rate. An employee on $100,000 assumes they pay 30% on their entire salary. The actual effective rate is 23.17%. The 30% marginal rate applies only to income between $45,001 and $135,000.
2. Forgetting to claim the tax-free threshold. Workers with multiple jobs sometimes fail to claim the $18,200 tax-free threshold on their primary employment. This results in over-withholding throughout the year and a large refund at tax time instead of consistent take-home pay.
3. Claiming the tax-free threshold on two jobs. The reverse error: claiming the threshold on both a primary and secondary job leads to under-withholding. The ATO issues a tax debt at the end of the financial year, often $2,000–$5,000 for dual-income earners.
4. Ignoring the Medicare levy in net pay calculations. The 2% Medicare levy adds $1,600 to tax on an $80,000 salary. Employees who budget only for income tax brackets underestimate their total deductions by this amount.
5. Not adjusting for salary sacrifice. Pre-tax salary sacrifice into superannuation reduces assessable income before tax brackets apply. An employee sacrificing $10,000 from a $100,000 salary drops from the 30% bracket ceiling into lower taxable income, saving up to $3,000 in income tax. Use our Salary Sacrifice Calculator to model the savings.

How Does Marginal Tax Work in Australia?

Marginal tax means only the portion of income within each bracket is taxed at that bracket's rate. Your entire salary is never taxed at one single rate. Here is a worked example on $90,000:

The effective rate on $90,000 is 19.76%. The marginal rate is 30%. Each additional dollar earned above $90,000 is taxed at 30 cents until the $135,000 threshold, where the rate increases to 37%.

What Tax Offsets Reduce Your Income Tax?

Tax offsets reduce your final tax bill dollar-for-dollar, unlike deductions which lower assessable income before brackets apply. Two offsets affect most Australian taxpayers.

Low Income Tax Offset (LITO)

Taxpayers earning under $66,667 receive LITO automatically — up to $700 — when lodging a tax return or through PAYG withholding adjustments.

• Income up to $37,500: full $700 offset
• $37,501 – $45,000: reduces at 5c per dollar over $37,500
• $45,001 – $66,667: reduces at 1.5c per dollar over $45,000

Combined with the tax-free threshold, the LITO means you can earn up to $22,575 before paying any net income tax. Full LITO guide →

Seniors and Pensioners Tax Offset (SAPTO)

Australians of Age Pension age who meet income thresholds qualify for SAPTO, which increases the effective tax-free threshold:

• Singles: up to $2,230 offset — effective tax-free threshold increases to approximately $33,532
• Couples (each): up to $1,602 offset — combined tax-free amount is higher than singles
• SAPTO is non-refundable — it reduces tax to zero but does not generate a refund

SAPTO eligibility is based on rebate income, which includes reportable superannuation contributions and exempt foreign employment income.

What Other Deductions Affect Your Take-Home Pay?

Income tax is one of 3 mandatory deductions from your pay. The Medicare levy and HECS-HELP repayments also reduce your after-tax income:

• Medicare Levy — 2% of taxable income. An additional "Medicare Levy Surcharge" of 1–1.5% applies if you earn above $93,000 and do not hold private hospital cover.
• HECS-HELP Repayment — begins at $67,000 under the new marginal system at 15 cents per dollar above the threshold.
• Salary Sacrifice — voluntarily redirecting pre-tax income to superannuation reduces taxable income and the associated income tax.

See your full pay breakdown with every deduction → Or use the Gross Pay Calculator to reverse-engineer net pay to gross salary.

Frequently Asked Questions

Related Calculators

Calculate specific components of your pay using these Australian tax calculators: