Tax time can feel overwhelming, but understanding how Australian income tax rates work doesn't have to be complicated. If you're planning your budget, considering a novated lease, or looking at other ways to reduce your taxable income, knowing what you'll pay in 2026 helps you make smarter money decisions.
Australian Income Tax Rates for 2025 to 2026
If you're an Australian resident for tax purposes, here's what you'll pay on your taxable income during the 2025-26 financial year:
$0 to $18,200: No tax (this is your tax-free threshold)
$18,201 to $45,000: 16% on each dollar over $18,200
$45,001 to $135,000: 30% on each dollar over $45,000 (plus $4,288)
$135,001 to $190,000: 37% on each dollar over $135,000 (plus $31,288)
$190,001 and above: 45% on each dollar over $190,000 (plus $51,638)
These rates apply before you factor in the Medicare levy, which sits at 2% of your taxable income for most people. The Australian Taxation Office confirms these brackets remain in place through to 30 June 2026.
It's worth noting that these are marginal rates. You don't pay the same percentage on every dollar you earn. Instead, different portions of your income are taxed at different rates as you move up through the brackets.
Australian Income Tax Cuts Coming in 2026 to 2027
The Federal Government has legislated another round of income tax cuts starting 1 July 2026. The rate on income between $18,201 and $45,000 will drop from 16% to 15%, putting roughly $140 back in your pocket annually if you earn $45,000.
According to the Budget 2025-26 factsheet, these cuts build on the stage-three tax changes that kicked in during 2024. There's even talk of a further reduction to 14% in 2027-28, though that's still subject to future budget decisions.
For middle-income earners, these changes add up. Someone on $80,000 will see their income tax bill shrink, leaving more money for everyday expenses or savings goals.
Medicare Levy and Medicare Levy Surcharge
The Medicare levy helps fund Australia's public health system. Most Australian residents pay 2% of their taxable income, which is calculated separately from your income tax.
Low-income earners may qualify for a reduction or exemption. For 2025-26, the Medicare levy low-income thresholds are:
Singles: $27,222
Families: $45,907 (plus $4,216 for each dependent child)
Single seniors and pensioners: $43,020
Senior and pensioner families: $60,008 (plus $4,216 per child)
The Medicare levy surcharge is different. It's an additional charge for higher-income earners who don't have private hospital cover. For 2025-26, the surcharge tiers are:
Base tier (up to $101,000 for singles): 0%
Tier 1 ($101,001 to $118,000): 1%
Tier 2 ($118,001 to $158,000): 1.25%
Tier 3 (over $158,000): 1.5%
Family thresholds are double these amounts. If you're sitting just over one of these thresholds, reducing your taxable income through legitimate deductions or pre-tax arrangements can save you money.
Tax Deductions and Offsets Australians Can Use in 2026
Tax deductions lower your taxable income, while tax offsets (sometimes called rebates) reduce the actual tax you pay. Both can make a real difference to your tax return.
Low Income Tax Offset (LITO)
This provides up to $700 for eligible taxpayers and gradually reduces as your income approaches $66,667. You don't need to apply; the ATO calculates it automatically when you lodge your tax return.
Seniors and Pensioners Tax Offset (SAPTO)
Eligible seniors and pensioners can receive up to $2,230 (for singles). The offset starts to phase out once your taxable income exceeds $34,919 for singles.
If you're thinking about ways to reduce your taxable income, pre-tax arrangements through your employer can be worth looking into. Many Australians use Easi Fleet's services to package their car expenses before tax is calculated, which lowers their assessable income for the year.
Impact of Income Tax Rates on Your Take-Home Pay
Let's look at what these income tax rates mean for your actual pay packet. These figures don't include any deductions or offsets you might be eligible for, so your actual take-home pay could be higher. Here are two examples using the ATO's tax calculator:
$60,000 Salary
Income tax: $7,288
Medicare levy: $1,200
Take-home pay: approximately $51,512
$100,000 Salary
Income tax: $17,288
Medicare levy: $2,000
Take-home pay: approximately $80,712
One smart way to increase your take-home pay is through a novated lease. When you package your car costs before tax, you reduce your taxable income, which means you pay less income tax and Medicare levy. If you’d like to see how much you can save, try the novated lease savings calculator to get a personalised estimate based on your circumstances.
Non-Residents in Australia: What You’ll Pay
If you're a foreign resident or temporary resident working in Australia, different rates apply. For 2025-26, non-residents pay:
$0 to $135,000: 30%
$135,001 to $190,000: 37% (plus $40,500)
$190,001 and above: 45% (plus $60,850)
There's no tax-free threshold for non-residents, and you won't pay the Medicare levy. Capital gains on Australian assets are generally subject to tax, though the rules can be complex depending on your residency status and the type of asset.
Make Your Money Work Harder With Easi’s Novated Leasing
Understanding Australian income tax rates is just the start. With the right strategy and support from Easi, you can legally reduce your tax payable and keep more of what you earn.
If you're looking at cars for a novated lease, Easi makes the process simple and transparent. Explore our range of vehicles, learn how novated leasing works, and get a personalised solution to see exactly how much you could save. Get a quote and see the difference for yourself.
Frequently Asked Questions
At what age do you stop paying tax in Australia?
There's no age at which you automatically stop paying income tax in Australia. Your tax obligations depend on your taxable income and any offsets you're eligible for, such as the Seniors and Pensioners Tax Offset. Even retirees with assessable income above the tax-free threshold may need to pay tax, though offsets can reduce or eliminate the amount payable.
How much money can I have in the bank if I am a pensioner?
Bank savings count towards the Age Pension assets test. As of 20 March 2026, single homeowners can have assets up to $321,500 and still receive the full Age Pension, according to Services Australia. Different thresholds apply for couples and non-homeowners. Assets include bank accounts, investments, and superannuation (once you reach pension age).
What is the current standard deduction for seniors over 65?
Australia doesn't use a standard deduction system like some other countries. Instead, seniors may be eligible for the Seniors and Pensioners Tax Offset (SAPTO), which directly reduces the tax payable rather than reducing taxable income. For 2025-26, the maximum SAPTO is $2,230 for eligible singles.
