Over the years, income tax brackets in Australia have evolved. Your taxable income determines your tax bracket – and the tax rate you pay.
As an Australian taxpayer, it’s important to plan ahead and manage your finances wisely using the latest tax rates.
By staying informed, you can make smart decisions that help you save money, ensure you’re paying the right amount of tax, and manage the financial burden of the rising cost of living.
What is Income Tax?
Income tax is a portion of your income paid to the Government. It is calculated based on how much you earn within a financial year (1st July to 30th June), and any deductions or offsets you can claim.
If you overpay your taxes during the financial year, you may be eligible for a tax refund, which is reimbursed by the Australian Taxation Office (ATO) upon submission of your tax returns.
The amount of tax you pay is based on the brackets of tax rates and thresholds provided below called Marginal Tax Rates.
Why do we pay Income Tax?
In Australia, our taxation system relies heavily on personal income tax. Personal Income Tax makes up 39% of Australia’s composition of taxes. This revenue raised is used to reinvest back into infrastructure, social security payments and public services such as health, education, and defence.
Australia’s progressive Income Tax system
Australia has a “progressive” tax system, which means the more you earn the tax rate increases. We also have a high ‘tax free threshold’ at $18,200, which is followed up by increasing tax rates at higher income brackets. This means for example if your taxable income is over $190,000 for the year, as a high income earner, the amount of tax you pay is $51,638 plus a 45 per cent tax rate for every dollar above $190,000.
Upcoming Tax Relief
From 1 July 2026, a legislated tax cut will reduce the 16% rate in the lower tax brackets for Australia to 15% for individual tax rates. This change is set to deliver extra savings of up to $268 per year for taxpayers with taxable income of $45,000 or more, ensuring more of your hard-earned money stays in your pocket as you move up the income ladder. It is a small but welcome boost to your take-home pay, helping the system remain competitive as your earnings grow.
Looking at your tax bracket through a business lens? Smart structuring can reduce personal and business tax exposure – contact us today for strategic guidance.
Individual Income Tax Rates
The tables below show the income tax rates and the amount of tax payable in every dollar for each tax rate and thresholds.
Australian Residents Income Tax Rates 2026–27*
The table below outlines the legislated individual tax rates in Australia and thresholds for residents following the implementation of the tax relief starting 1 July 2026.
| Taxable income | Tax on this income |
| 0 – $18,200 | nil |
| $18,201 – $45,000 | 15c for each $1 over $18,200 |
| $45,001 – $135,000 | $4,020 plus 30c for each $1 over $45,000 |
| $135,001 – $190,000 | $31,020 plus 37c for each $1 over $135,000 |
| $190,001 and over | $51,370 plus 45c for each $1 over $190,000 |
*Excludes the Medicare levy of 2%
Australian Residents Income Tax rates 2024-25 and 2025–26*
| Taxable income | Tax on this income |
| 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 |
| $190,001 and over | $51,638 plus 45 cents for each $1 over $190,000 |
*Excludes the Medicare levy of 2%
Employers must use the updated tax tables to determine withholding amounts for Pay As You Go (PAYG) taxes starting from July 1, 2024.
These changes are part of a broader tax cut initiative aimed at providing financial relief to taxpayers.
Australian Residents Income Tax rates 2023-24*
| Taxable income | Tax on this income |
| 0 – $18,200 | Nil |
| $18,201 – $45,000 | 19 cents for each $1 over $18,200 |
| $45,001 – $120,000 | $5,092 plus 32.5 cents for each $1 over $45,000 |
| $120,001 – $180,000 | $29,467 plus 37 cents for each $1 over $120,000 |
| $180,001 and over | $51,667 plus 45 cents for each $1 over $180,000 |
*Excludes the Medicare levy of 2%
Foreign Residents Income Tax Rates 2024-2025 and 2025–26*
These rates apply to individuals who are foreign residents for tax purposes:
| Taxable income | Tax on this income |
| 0 – $135,000 | 30 cents for each $1 |
| $135,001 – $190,000 | $40,500 plus 37 cents for each $1 over $135,000 |
| $190,001 and over | $60,850 plus 45 cents for each $1 over $190,000 |
*Excludes the Medicare levy of 2%
Foreign Residents Income Tax Rates 2023-2024*
These rates apply to individuals who are foreign residents for tax purposes:
| Taxable income | Tax on this income |
| 0 – $120,000 | 32.5 cents for each $1 |
| $120,001 – $180,000 | $39,000 plus 37 cents for each $1 over $120,000 |
| $180,001 and over | $61,200 plus 45 cents for each $1 over $180,000 |
*Excludes the Medicare levy of 2%
Working holiday makers tax rates 2024-2025 and 2025–2026*
These rates apply to working holiday makers income regardless of residency for tax purposes. You are a working holiday maker if you have a visa subclass:
- 417 (Working Holiday)
- 462 (Work and Holiday).
| Taxable income | Tax on this income |
| 0 – $45,000 | 15% |
| $45,001 – $135,000 | $6,750 plus 30 cents for each $1 over $45,000 |
| $135,001 – $190,000 | $33,1750 plus 37 cents for each $1 over $135,000 |
| $190,001 and over | $54,100 plus 45 cents for each $1 over $190,000 |
*Excludes the Medicare levy of 2%
Working holiday makers tax rates 2023-2024*
| Taxable income | Tax on this income |
| 0 – $45,000 | 15% |
| $45,001 – $120,000 | $6,750 plus 32.5 cents for each $1 over $45,000 |
| $120,001 – $180,000 | $31,125 plus 37 cents for each $1 over $120,000 |
| $180,001 and over | $53,325 plus 45 cents for each $1 over $180,000 |
*Excludes the Medicare levy of 2%
Company Tax Rates 2025–26
Company tax rates apply to entities which include:
- companies
- corporate unit trusts
- public trading trusts.
According to the ATO’s latest information, for the 2025–26 income year:
- Base Rate Entities (typically those with aggregated turnovers below $50 million) are taxed at 25%.
- All Other Companies are taxed at 30%.
These rates are effective from 2023–24 and remain unchanged for 2025, providing a stable environment that supports business investment and reinvestment.
For more details, please visit the ATO’s Tax Rates 2023–24 page.
Key business updates for 2025–26:
- Instant asset write-off — The $20,000 threshold for small businesses (turnover <$10 million) has been extended until 30 June 2026.
- ATO interest charges — From 1 July 2025, interest charges imposed by the ATO, such as GIC and SIC, are no longer tax-deductible.
- Franking rates — Maximum franking credits are based on the company’s corporate tax rate for imputation purposes (generally worked out using prior-year turnover and income mix assumptions).
High-income earner or managing multiple revenue streams? Our team helps business owners and investors optimise their tax outcomes – contact us today.
Help to calculate and determine your Income
If you are an Australian resident for tax purposes, any income worldwide you earn above the tax-free threshold can be taxed, and this includes various types of taxable incomes such as salary, wages, and interest.
Taxable income includes all the below:
- Salary and wages
- Tips and gratuities
- Interest from bank accounts
- Work allowances, such as for travel, clothing, laundry and your vehicle
- Dividends and capital gains from your investments
- Bonuses
- Overtime payments
- Commissions
- Pensions
- Rent
There are a small group of payments which are not taxable. These include:
- Some Government pensions
- Certain overseas payments and allowances for Australian Defence Force and Federal Police employees
- Govt education payments for students under 16
- Some scholarships or grants
- Particular insurance policy payouts
- Child support or child maintenance payments
- Govt super co-contributions
The ATO website also has an Income Tax Estimator to assist you to get an estimate of the amount of tax you need to pay.
How to reduce your taxable income?
There are a few legal ways you can attempt to reduce the amount of tax you pay each financial year.
In short, the main ways to reduce your tax are:
- Timing of your taxable income and allowable deductions
- Tax deductions
- Tax offsets
- Salary packaging
You can read more about these measures in our article: How to reduce taxes in Australia.
Tax planning
It is always a good idea to seek professional advice from your Accountant at tax time.
The rules around the ways you can legally reduce your income tax can be complex and if you knowingly claim a deduction that you are not entitled to you may be penalised by the ATO.
The right tax planning can free up cashflow and accelerate growth. Whether you’re expanding your business or managing private wealth, Bishop Collins can help you get ahead – contact us today.
FAQs
What is a Tax Bracket?
A tax bracket is a range of taxable income that’s taxed at a specific marginal rate. In the Australian tax brackets, your income is split according to a set scheme, so you don’t pay one flat rate on your entire income. Instead, each portion of your income is taxed at the rate that applies to that bracket.
What are the highest and lowest income tax brackets in Australia?
Australia’s lowest tax bracket is the tax-free threshold, which means you may pay no income tax up to a set amount of taxable income (eligibility depends on your residency and circumstances).
The highest tax bracket is the top marginal rate of 45%, which applies to taxable income above $190,000 as of 2026–2027 (not including the Medicare levy).
What is the tax-free threshold?
The tax-free threshold is the amount of income you can earn before you start paying income tax in Australia. For most Australian residents, the first $18,200 of taxable income is tax-free in a financial year.
Once your taxable income goes above the threshold, you’ll pay tax only on the amount that exceeds it, based on the marginal rates that apply to each income range.
How is income tax calculated?
Calculating your income tax is a step-by-step process that starts with your total earnings and ends with your final tax bill. Here is the standard formula used by the ATO and certified accountants:
Step 1: Determine your assessable income — This is the total amount of money you earn during the financial year, including your salary or wages, business income, investment interest and capital gains.
Step 2: Subtract allowable deductions — You can reduce your assessable income by claiming work-related expenses (such as tools, uniforms or home office costs), charitable donations and the cost of managing your tax affairs.
Step 3: Calculate your taxable income — Once you subtract your deductions from your assessable income, the remaining figure is your “taxable income.” This is the number the ATO uses to decide which tax brackets you fall into.
Step 4: Apply the marginal tax rates — Your taxable income is then divided into segments according to the official tax brackets. You pay the applicable rate for each income segment.
Step 5: Adjust for offsets and levies — Finally, any tax offsets (which reduce the tax you owe) are subtracted, and the 2% Medicare levy is added (with possible reductions or exemptions) to reach your total tax payable for the year.