Tax time doesn’t have to feel like guesswork. The ATO sets clear brackets each financial year, and once you know them, working out your bill takes just a few minutes. Better yet, there’s actually good news for 2026-27. A key tax rate just dropped. Here’s exactly what changed, and what it means for your take-home pay.
What’s New for 2026-27
From 1 July 2026, the second tax bracket fell from 16% to 15%. That’s the only change this year. Every other bracket stays exactly where it was. For most working Australians, that single shift is worth up to $268 a year, as Fenro’s breakdown of the 2026-27 changes confirms. It applies automatically through your payroll. You don’t need to do anything to claim it.
The 2026-27 Resident Tax Brackets
Here’s the full table for Australian residents, as confirmed on the Australian Taxation Office’s official rates page:
| Taxable Income | Tax Rate |
|---|---|
| $0 – $18,200 | 0% (tax-free threshold) |
| $18,201 – $45,000 | 15% |
| $45,001 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| Over $190,000 | 45% |
These rates are marginal. That means you only pay each rate on the income sitting inside that bracket, not on your entire income. And they exclude the Medicare Levy, which we’ll cover next.
Real Example: $80,000 Salary
Let’s calculate a full example.
- Taxable income: $80,000
- First $18,200: taxed at 0% = $0
- Next $26,800 (from $18,201 to $45,000): taxed at 15% = $4,020
- Remaining $35,000 (from $45,001 to $80,000): taxed at 30% = $10,500
Income tax: $4,020 + $10,500 = $14,520
Now add the Medicare Levy, which sits at 2% of taxable income for most residents:
Medicare Levy: $80,000 × 2% = $1,600
Total tax: $14,520 + $1,600 = $16,120 Take-home pay: $80,000 − $16,120 = $63,880/year
That works out to an effective tax rate of just over 20%, even though this earner’s top marginal rate is 30%.
The Tax-Free Threshold Explained
Every Australian resident gets the first $18,200 tax-free each financial year. But there’s a catch if you work more than one job. Only one employer should apply the tax-free threshold to your pay. If two employers both apply it, you’ll likely owe extra tax at year-end, since the ATO only intended the threshold to apply once per person. MoneySmart’s guidance on multiple jobs explains how to set this up correctly through your Tax File Number declaration.
Low Income Tax Offset (LITO)
On top of the brackets, many lower earners qualify for the Low Income Tax Offset (LITO). It provides up to $700 in tax reduction. It applies in full for taxable incomes up to $37,500, then gradually phases out, disappearing entirely at $66,667. This offset reduces the tax payable after the bracket calculation, so it’s worth factoring in if your income sits in that range.
Foreign Residents Pay Different Rates
If you’re a foreign resident for tax purposes, the rules change significantly. You don’t get the $18,200 tax-free threshold at all. Instead, foreign residents are taxed at 30% from the very first dollar up to $135,000, then 37% and 45% above that, matching the resident brackets at the top end. Foreign residents also generally don’t pay the Medicare Levy, since they’re not eligible for Medicare. Full details sit on the ATO’s foreign resident tax rates page.
Estimate your exact 2026-27 tax bill. Use the Australia Income Tax Calculator →
Frequently Asked Questions
How much tax will I pay on $60,000 in Australia for 2026-27?
On a $60,000 salary, you’d pay $0 on the first $18,200, then 15% on the next $26,800 ($4,020), then 30% on the remaining $15,000 ($4,500). That’s $8,520 in income tax, plus a $1,200 Medicare Levy, for total tax of $9,720 and take-home pay of roughly $50,280.
What is the Australian tax-free threshold for 2026-27?
The tax-free threshold is $18,200. You pay no income tax on the first $18,200 you earn in the financial year, provided you’re an Australian resident for tax purposes and only one employer applies the threshold to your pay.
Did Australian tax rates change in 2026?
Yes. From 1 July 2026, the second marginal tax bracket dropped from 16% to 15% on income between $18,201 and $45,000. Every other bracket stayed the same, saving eligible taxpayers up to $268 a year.
What is the Medicare Levy and do I have to pay it?
The Medicare Levy is an additional 2% of taxable income, charged on top of regular income tax to help fund Australia’s public healthcare system. Most residents pay it, though low-income earners may qualify for a reduction or exemption, and foreign residents generally don’t pay it at all.
How is Australian income tax different from US income tax?
Both countries use progressive, marginal tax brackets, but Australia’s financial year runs 1 July to 30 June rather than the US calendar year, and Australia adds a separate 2% Medicare Levy on top of income tax rather than folding healthcare-related taxes into the main bracket structure.
What tax bracket am I in if I earn $100,000?
At $100,000 taxable income, your top marginal rate is 30%, since that income falls within the $45,001–$135,000 bracket. Your effective (average) tax rate will be lower than 30%, since only the portion of income above $45,000 is taxed at that rate.