- You’re taxed in slices, not at one flat rate. Australia’s progressive tax system means only the portion of your income within each bracket is taxed at that rate, not your entire salary.
- Your marginal rate is not your effective rate. Even at $200,000 income, your effective tax rate is around 30%, despite a 45% top marginal rate.
- Residency status changes your tax outcome. Australian residents, foreign residents, and working holiday makers are taxed under different ATO tax brackets and not everyone receives the $18,200 tax-free threshold.
Understanding the ATO tax brackets for 2026–27 is the first step to figuring out how much tax you’ll actually pay in Australia. A lot of people assume their whole income is taxed at one rate, but that’s not how it works. Australia uses a progressive tax system, which means only the portion of your income that falls into each bracket is taxed at that rate, not your entire salary.
In this guide, we’ll break down the current ATO tax brackets, explain how much tax you pay at different income levels, help you get a clearer picture of what to expect at tax time, and why having a registered tax accountant can be worth it.
If you’re comparing salaries (for example, $100k vs $150k), focus on the additional tax on the extra income, not the full amount. The jump between brackets only affects the income above the threshold.
What are the ATO tax brackets?
Tax brackets are income ranges that determine how much tax you pay on your earnings. Under the ATO tax brackets, Australia uses a progressive tax system. That means your income is taxed in slices, not all at once.
For example,
- If you earn $70,000, part of your income is tax-free, part is taxed at 16%, and the rest is taxed at 30%.
- As your income increases, you move through different brackets but only the portion within each range is taxed at that bracket’s rate.
- You don’t pay the highest rate on your entire income.
This system is designed to make taxation fair, with higher earners paying a higher marginal rate only on the top portion of their income.
Read more: Tax Laws Australia 2026: What Businesses Must Know
What are the current ATO tax brackets in Australia for 2026?
Here are the resident income tax rates, as set by the Australian Taxation Office (ATO). These are the rates used to calculate how much tax you pay in Australia.
Taxable income | Tax payable |
$0 – $18,200 | Nil |
$18,201 – $45,000 | 16 cents for each $1 over $18,200 |
$45,001 – $135,000 | $4,288 plus 30 cents for each $1 over $45,000 |
$135,001 – $190,000 | $31,288 plus 37 cents for each $1 over $135,000 |
Over $190,000 | $51,638 plus 45 cents for each $1 over $190,000 |
Important things to remember
- These ATO tax brackets do not include the Medicare levy, which is generally an additional 2% of your taxable income.
- These rates apply if you’re an Australian resident for tax purposes for the full income year.
- Foreign residents and working holiday makers are taxed at different rates.
What is the tax-free threshold in Australia for 2026?
The tax-free threshold in Australia is $18,200. This means:
- You don’t pay any income tax on the first $18,200 you earn in a financial year if you’re an Australian resident for tax purposes under the ATO tax brackets.
- Once you earn above that threshold, tax applies based on the relevant income bracket.
- If you have multiple jobs, only one employer should apply the tax-free threshold to help avoid a tax bill at the end of the year.
- It’s designed to support lower-income earners and reduce their overall tax burden.
What is the marginal tax rate in Australia for 2026?
Your marginal tax rate is the rate you pay on your highest portion of income, not your entire salary.
For example, if you earn $50,000:
- The first $18,200 is taxed at 0%.
- The portion from $18,201 to $45,000 is taxed at 16%.
- The portion from $45,001 to $50,000 is taxed at 30%.
Only the income within each bracket is taxed at that rate.
How does the progressive tax system in Australia work?
Australia uses a progressive tax system, meaning the more you earn, the higher the marginal rate you pay, but only on the portion of income within each bracket.
For example, if you earn $60,000:
- First $18,200: $0
- Next $26,800 ($18,201–$45,000) at 16% = $4,288
- Remaining $15,000 ($45,001–$60,000) at 30% = $4,500
Total income tax = $8,788
Read more: Tax Minimisation Strategies for Small Business Owners in Australia
How much tax do you pay on $100,000 in Australia? | If you earn $100,000 in the 2026 financial year as an Australian resident, here’s how your income tax is calculated under the ATO tax brackets: Income tax breakdown
Total income tax = $20,788 Medicare levy (2%)2% of $100,000 = $2,000 Total tax payable$20,788 + $2,000 = $22,788 Take-home pay$100,000 − $22,788 = $77,212 Your effective tax rate is about 22.8%, even though your marginal tax rate is 30%. |
How much tax do you pay on $150,000 in Australia? | If you earn $150,000 in 2026, your tax is calculated as follows: Income tax breakdown
Total income tax = $36,838 Medicare levy (2%)2% of $150,000 = $3,000 Total tax payable$36,838 + $3,000 = $39,838 Take-home pay$150,000 − $39,838 = $110,162 Your effective tax rate is about 26.6%, while your marginal tax rate is 37%. |
How much tax do you pay on $200,000 in Australia? | For a taxable income of $200,000 in 2026: Income tax breakdown
Total income tax = $56,138 Medicare levy (2%)2% of $200,000 = $4,000 Total tax payable$56,138 + $4,000 = $60,138 Take-home pay$200,000 − $60,138 = $139,862 Your effective tax rate is about 30.1%, even though your top marginal rate is 45%. |
Income tax comparison: $100k vs $150k vs $200k in 2026
Income | Income tax | Medicare levy (2%) | Total tax payable | Take home-pay | Effective tax rate |
$100,000 | $20,788 | $2,000 | $22,788 | $77,212 | 22.8% |
$150,000 | $36,838 | $3,000 | $39,838 | $110,162 | 26.6% |
$200,000 | $56,138 | $4,000 | $60,138 | $139,862 | 30.1% |
These figures assume you are an Australian resident for tax purposes, have no deductions, and are not liable for the Medicare levy surcharge.
Between $45,001 and $135,000, income is taxed at 30%, which means a large portion of mid-to-upper income earners sit in the same marginal band until they cross $135,000.
What are the ATO tax brackets for foreign residents in 2026?
If you’re a foreign resident for tax purposes, different ATO tax brackets apply for the 2026 financial year.
Taxable income | Tax payable |
$0 – $135,000 | 30c for each $1 |
$135,001 – $190,000 | $40,500 plus 37c for each $1 over $135,000 |
Over $190,000 | $60,850 plus 45c for each $1 over $190,000 |
Important points to consider:
- Foreign residents are not entitled to the $18,200 tax-free threshold.
- They generally do NOT pay the Medicare levy (2%) because they are not eligible for Medicare.
- However, temporary residents with Medicare eligibility may be treated differently.
What are the ATO tax brackets for working holiday makers in 2026?
If you earn income as a working holiday maker, special ATO tax brackets apply. These rates generally apply if you:
- Hold a Working Holiday visa (subclass 417) or
- Work and Holiday visa (subclass 462), whether you are a foreign resident or an Australian resident who is not from a non-discriminatory article (NDA) country.
Taxable income | Tax payable |
0 – $45,000 | 15c for each $1 |
$45,001 – $135,000 | $6,750 plus 30c for each $1 over $45,000 |
$135,001 – $190,000 | $33,750 plus 37c for each $1 over $135,000 |
$190,001 and over | $54,100 plus 45c for each $1 over $190,000 |
Working holiday makers do not receive the tax-free threshold, and different residency rules may affect how other income is taxed.
What income is taxable in Australia?
In Australia, taxable income includes most types of income you earn, not just your salary. If you receive it as income, it’s generally taxable unless specifically exempt.
Here’s what typically counts as taxable income:
- Salary and wages
- Bonuses and commissions
- Business income (if you’re self-employed)
- Rental income
- Capital gains (from selling assets like shares or property)
- Interest from bank accounts
- Dividends from shares
- Some government payments (such as JobSeeker or the Age Pension)
However, certain types of income, like some scholarships, specific government benefits, and genuine gifts may be tax-free. If you’re unsure, the ATO provides detailed guidance, or a registered tax accountant can help clarify your obligations.
Foreign residents and working holiday makers do not receive the $18,200 tax-free threshold, which can significantly increase tax payable at lower income levels.
How Sleek helps you manage ATO tax brackets and compliance
Understanding the ATO tax brackets is one thing, applying them correctly to your salary, business income, and tax planning is another. That’s where Sleek steps in.
With Sleek’s all-in-one accounting and tax support, you’ll get:
- End-to-end tax compliance: From PAYG withholding and BAS lodgements to annual income tax returns, everything managed in one place.
- Accurate, real-time bookkeeping: Your numbers stay up to date and ATO-ready, so there are no surprises at tax time.
- Smart tax planning: We help you structure salary, dividends, and business income efficiently, so you’re not paying more tax than you need to.
- Dedicated accountant support: Real accountants who understand your business and respond fast.
Ready to make tax simpler? Speak to a Sleek tax expert today and get your compliance handled properly.
Answer a few quick questions and get a personalised recommendation.
450,000
businesses worldwide.
from 4,100+ reviews.
satisfaction rate from
16,000 surveyed clients.
Frequently Asked Questions
What is the difference between marginal tax rate and effective tax rate?
Your marginal tax rate is the highest rate applied to the top portion of your income. Your effective tax rate is the average rate you pay across your total income. For example, you might have a 37% marginal rate but only pay around 26% overall.
Does Australia have a flat tax rate?
No. Australia uses a progressive tax system, meaning income is taxed at increasing rates as it moves through different brackets.
Is the tax-free threshold automatically applied?
The $18,200 tax-free threshold is usually applied by your employer if you claim it when completing your Tax File Number (TFN) declaration. If you have multiple jobs, only one employer should apply it to avoid underpaying tax.
