Income Tax Calculator Australia 2026 (with Medicare Levy)

Estimate your Australian income tax for the 2025–26 financial year. Includes the Stage 3 brackets, Medicare levy, Medicare Levy Surcharge thresholds, and the Low Income Tax Offset. Optional inputs for HECS-HELP and salary sacrifice.

How Australian income tax brackets work in 2026

Australia uses a progressive marginal tax system. Each dollar of income is taxed at the rate of the bracket it falls into — not at a single rate based on your total income. So someone earning $100,000 doesn't pay 30% on the whole lot; they pay 0% on the first $18,200, 16% on the next $26,800, and 30% on the remaining $55,000.

The 2025–26 resident brackets (effective from 1 July 2024 under the Stage 3 reforms):

Taxable income	Marginal rate
$0 – $18,200	0%
$18,201 – $45,000	16%
$45,001 – $135,000	30%
$135,001 – $190,000	37%
$190,001+	45%

These rates exclude the Medicare levy (2%) and any HECS-HELP repayment, both of which sit on top.

A useful way to think about marginal rates: every dollar of new income (a pay rise, a side hustle, rental income) is taxed at the marginal rate of the bracket you're in now — not your average rate. That's why salary sacrifice into super becomes increasingly attractive once you cross into the 30% and 37% bands.

Medicare levy and Medicare Levy Surcharge

The Medicare levy is a flat 2% of your taxable income, paid by most Australian residents to fund Medicare. Low-income earners are exempt (full exemption below the published lower threshold — currently around $27,000 for singles, with phased-in ranges above) and the calculator applies the current threshold automatically.

The Medicare Levy Surcharge (MLS) is a separate, additional charge for higher-income earners who don't hold appropriate private hospital insurance for the full financial year. Single-income thresholds were unfrozen in 2023–24 and are now indexed annually to AWOTE. For 2025–26:

• Below $101,000 — no MLS
• $101,001–$118,000 — 1.0% surcharge
• $118,001–$144,000 — 1.25% surcharge
• $144,001+ — 1.5% surcharge

Family thresholds are roughly double, with adjustments for dependants. The surcharge is a blunt instrument — even one day uninsured can trigger the full year's MLS in some cases. Most high earners take out a basic hospital policy specifically to dodge the MLS, since the policy premium is usually less than the surcharge avoided.

The tax-free threshold and LITO

The tax-free threshold of $18,200 means the first $18,200 of your taxable income attracts no income tax. You claim it via the Tax File Number Declaration with one employer. If you have multiple jobs, only one employer should apply the threshold — the others should withhold at the "no threshold" rate to prevent an end-of-year shortfall. This is the single most common cause of unexpected tax bills at lodgement.

The Low Income Tax Offset (LITO) is a non-refundable offset of up to $700 for taxable incomes below $37,500. It phases out:

• 5 cents per dollar between $37,500 and $45,000
• 1.5 cents per dollar between $45,000 and $66,667
• Zero above $66,667

LITO reduces tax payable but cannot create a refund on its own. The earlier Low and Middle Income Tax Offset (LMITO) — the larger one most people remember — was abolished after the 2021–22 financial year and is no longer available.

Negative gearing and rental property income

If you own a rental property, the ATO treats rental income as assessable income and lets you deduct rental expenses against it. Deductible expenses include mortgage interest, property management fees, repairs and maintenance, council rates, water charges, building and contents insurance, and depreciation on the building structure (capital works) and fittings (depreciating assets).

If allowable expenses exceed rental income, the net loss reduces your other taxable income — this is negative gearing. The tax saving equals your marginal rate × the loss: a $12,000 net rental loss at the 37% marginal rate saves $4,440 in income tax.

Negative gearing reduces the after-tax cost of holding a loss-making investment, but doesn't make the underlying investment profitable — that depends on capital growth. For full modelling of an investment property scenario including expected rent, costs, and tax effect, use the Negative Gearing Calculator.

Capital gains tax on property

The principal place of residence (PPR) exemption usually removes CGT on the sale of your main home — provided you've actually lived there as your main home throughout ownership. The exemption can be partly lost if you've:

• Used part of the home to produce income (a home office claimed against business income, a granted-rights bedroom rented out)
• Been absent from the home for more than 6 years while renting it out (the "6-year rule" sets the limit)
• Held it as an investment for any portion of the ownership period

Investment properties do not qualify for the PPR exemption. CGT applies on the difference between sale proceeds and cost base, with a 50% discount if you've held the property for more than 12 months as an individual. CGT is calculated and added to your other income for the year of sale, then taxed at marginal rates — which can push you into a higher bracket for that year only.

Salary sacrifice and super contributions

Concessional super contributions are taxed at 15% inside the super fund (or 30% if your total income including contributions exceeds $250,000 — Division 293 tax). For middle and high earners on a 30%, 37%, or 45% marginal rate, this creates a tax arbitrage: salary sacrificing $10,000 into super saves you up to $3,000 in personal tax, with the trade-off that the money is locked away until preservation age.

The concessional contributions cap is $30,000 per year (2024–25 and 2025–26), counting:

• Employer Superannuation Guarantee contributions (currently 12% — raised from 11.5% on 1 July 2025)
• Salary-sacrificed contributions
• Personal contributions you claim a deduction for

Unused cap from prior years can be carried forward for up to five years if your total super balance was below $500,000 at the start of the financial year — useful for catch-up contributions after a career break or low-income period.

Exceeding the cap triggers excess concessional contributions tax, charged at your marginal rate minus the 15% already paid by the fund — so you don't double-pay, but you also don't capture the arbitrage above the cap.

PAYG withholding vs lodgement

PAYG (Pay-As-You-Go) withholding is the tax your employer deducts from each pay packet using ATO tax tables and your TFN declaration. It's an estimate based on the assumption that your current pay rate continues for the full year.

Lodgement is the formal tax return you file after 30 June (or that your tax agent files on your behalf, with extended deadlines available through registered agents). Lodgement reconciles what was withheld against what you actually owe based on full-year income, deductions, and offsets.

Common reasons employees end up with an unexpected balance owing rather than a refund:

• A second job claiming the tax-free threshold incorrectly
• HECS-HELP not being withheld (didn't tick the box on the TFN declaration)
• Bonus or commission income pushing you across a bracket
• Investment income (bank interest, dividends, rental) not subject to withholding
• Claiming a deduction that wasn't valid

Most salaried employees with one job and no investments end up close to neutral at lodgement. If your refund or balance owing is consistently large, your withholding setup is misaligned and worth fixing for the next financial year.