What is the Australia Income Tax?
Australian income tax is progressive with a generous tax-free threshold of $18,200. For 2026–27 the rates then run 15%, 30%, 37% and 45%. On top sits the Medicare levy of 2%, and HECS-HELP repayments for graduates are collected through the same system.
Unlike many countries, Australia allows broad work-related deductions — home office, tools, professional development, and vehicle expenses among them.
Formula & worked example
$45,001–$135,000: 30% · $135,001–$190,000: 37% · above: 45%
Plus 2% Medicare levy
Worked example: $95,000 income with $2,500 of deductions gives $92,500 taxable. Tax is $4,020 on the 15% band plus $14,250 on the 30% band = $18,270, plus a $1,850 Medicare levy → about $20,120 total, an effective rate of 21.2%.
How to use this australia income tax calculator
- Enter your taxable income from all sources.
- Add work-related deductions — Australia is generous here, so claim everything legitimate.
- Flag HECS-HELP if you have a study debt; repayment is income-contingent.
- Private health insurance can exempt higher earners from the Medicare Levy Surcharge.
Smart tips
- Keep receipts for work-related expenses; the ATO allows deductions many other countries do not.
- Above the ATO single income threshold for the Medicare Levy Surcharge — indexed each year, so check the current figure — you pay the surcharge if you have no private hospital cover; insurance is often cheaper.
- Salary sacrificing into super converts income taxed at 30–45% into contributions taxed at 15%.
- The tax-free threshold applies to one employer only — claim it from your main job to avoid a bill at year end.
- Investment property losses can offset salary income under negative gearing rules.
Frequently asked questions
What is the tax-free threshold in Australia?
$18,200. Income below this attracts no income tax, though the Medicare levy may still apply above a separate threshold.
What are the Australian tax brackets?
For 2026–27: 15% from $18,201, 30% from $45,001, 37% from $135,001 and 45% above $190,000, plus a 2% Medicare levy.
What is the Medicare Levy Surcharge?
An extra 1–1.5% for higher earners without private hospital cover. Taking out insurance is often cheaper than the surcharge.
Can I claim work from home expenses?
Yes. The ATO offers a fixed rate per hour or an actual-cost method — both require records of hours worked from home.
Want the theory behind the numbers? Browse the Money Blog for worked guides.
Written by Gurjeet Singh, Sharpen Solutions. Last reviewed 15 Oct 2026. Sources: Federal Register of Legislation — Income Tax Rates Act 1986, Schedule 7 Part I (resident rates, current compilation). How we check these numbers.