How Australian income tax works in 2025-26
Australia uses a progressive tax system, which means your income is split into bands and each band is taxed at a different rate. You only pay the higher rate on the portion of income that falls into that bracket - not on your whole income. Your marginal rate is the rate applied to your last dollar earned, while your effective rate is the average rate across all your income, which is always lower.
On top of income tax, most residents also pay a 2% Medicare levy to help fund the public health system, and possibly a Medicare levy surcharge if they earn over $97,000 (single) without private hospital cover. If you have a HELP/HECS debt from university, a percentage of your income is also withheld to repay it once you earn over $54,435 a year.
2025-26 resident tax brackets
These rates apply to Australian citizens, permanent residents, and most visa holders who have lived in Australia for more than half the tax year. They reflect the stage-3 tax cut changes that came into effect on 1 July 2024.
| Taxable income | Tax on this income | Marginal rate |
|---|---|---|
| $0 - $18,200 | Nil | 0% |
| $18,201 - $45,000 | 16c for each $1 over $18,200 | 16% |
| $45,001 - $135,000 | $4,288 + 30c for each $1 over $45,000 | 30% |
| $135,001 - $190,000 | $31,288 + 37c for each $1 over $135,000 | 37% |
| $190,001 and over | $51,638 + 45c for each $1 over $190,000 | 45% |
Source: ATO - Tax rates for Australian residents.
Working Holiday Makers (subclass 417 and 462)
If you're in Australia on a working holiday visa, you're taxed under a separate flat schedule. The first $45,000 of your income is taxed at a flat 15%, regardless of how little you earn - there's no tax-free threshold for WHMs. Above $45,000, normal resident rates apply. To be taxed at this rate, your employer must be registered with the ATO as a Working Holiday Maker employer; otherwise you'll be taxed at non-resident rates (30%+), and you'll need to claim the difference back at tax time.
Non-residents for tax purposes
Non-residents - people who don't meet Australia's tax residency tests - pay 30% from the first dollar of Australian-sourced income and don't get the tax-free threshold. Whether you're a tax resident isn't always the same as your visa status; it depends on your domicile, the 183-day test, and your intention to stay. The ATO's residency tool can help you check.
Worked examples
Example 1: 482 visa holder earning $95,000
Priya is on a 482 Skills in Demand visa, has lived in Australia for 8 months, and earns $95,000 as a software engineer. She has no HECS debt and is exempt from Medicare (her country has no Reciprocal Health Care Agreement).
- Income tax: $4,288 + 30% × ($95,000 − $45,000) = $19,288
- Medicare levy: Exempt (no Medicare access)
- Take-home pay: $95,000 − $19,288 = $75,712/year (≈$2,912 per fortnight)
Priya can apply for a Medicare Entitlement Statement from Services Australia and claim back any Medicare levy withheld through her tax return.
Example 2: Working holiday maker earning $55,000
Liam is on a 417 visa and works on a farm and in hospitality, earning $55,000 across the year.
- Tax on first $45,000 at 15%: $6,750
- Tax on next $10,000 at 30%: $3,000
- Total tax: $9,750 (no Medicare levy - WHMs are not residents for Medicare)
- Take-home pay: $55,000 − $9,750 = $45,250/year
Example 3: PR holder with HECS earning $80,000
Sam is a permanent resident with a $32,000 HECS debt, earning $80,000.
- Income tax: $4,288 + 30% × ($80,000 − $45,000) = $14,788
- Medicare levy: 2% × $80,000 = $1,600
- HECS repayment: 4% × $80,000 = $3,200
- Take-home pay: $80,000 − $19,588 = $60,412/year
Frequently asked questions
Am I a tax resident if I'm on a temporary visa?
In most cases, yes - if you've been in Australia for more than six months in the financial year and have set up a permanent place of abode (rented an apartment, started work, etc.), the ATO considers you a tax resident. Tax residency is separate from your visa status; you can be a tax resident on a temporary visa and a non-resident as a citizen living overseas.
Why is my actual paycheck different from this calculator?
Employers withhold tax using fortnightly or weekly PAYG tables that estimate your annual tax. Differences can come from: bonuses or overtime pushing you into a higher band temporarily, salary sacrifice arrangements, novated leases, claimed tax-free thresholds, your TFN declaration choices, or end-of-year offsets like the Low Income Tax Offset (LITO). The calculator above shows your total annual liability - your fortnightly payslip is just an estimate that gets reconciled at tax time.
What's the difference between Medicare levy and Medicare levy surcharge?
The Medicare levy is a flat 2% paid by most residents, full stop. The Medicare levy surcharge (MLS) is an extra 1.0-1.5% paid by higher earners (above $97,000 single / $194,000 family in 2025-26) who don't hold an appropriate private hospital cover. Avoiding the surcharge is one of the main reasons high-earning Aussies buy basic hospital insurance.
I'm on a 482 visa - can I get a Medicare levy exemption?
If you're not eligible for Medicare (because your country has no Reciprocal Health Care Agreement with Australia, or you're on a temporary visa not covered by Medicare), you can apply for a Medicare Entitlement Statement from Services Australia. With that statement, you claim the exemption when you lodge your tax return and get the 2% levy refunded. Tick the exemption checkbox above to see your take-home without the levy.
How does the HECS repayment work?
HECS-HELP repayments kick in at $54,435 (2025-26) and step up gradually to 10% of income at $159,664+. Repayments are based on your repayment income, which includes your taxable income plus reportable fringe benefits and reportable super contributions. Your employer withholds the estimated amount each pay, and any shortfall is settled at tax time.
What about superannuation - is that taxed?
Employer super contributions (currently 11.5%, rising to 12% on 1 July 2025) aren't included in your taxable income - they're paid on top of your salary into your super fund and taxed at a concessional 15% inside the fund. You don't pay income tax on super while it's growing, but you may pay tax when you access it before age 60.
What this calculator doesn't include
This tool gives you a clean baseline estimate. To keep the numbers easy to follow, it deliberately ignores:
- Low Income Tax Offset (LITO) - up to $700 if you earn under $66,667. This will reduce the tax shown above for low-income earners.
- Deductions - work-related expenses, donations, self-education, investment property losses, etc. These reduce your taxable income before tax is calculated.
- Medicare Levy Surcharge - the extra 1.0-1.5% high earners pay without private hospital cover.
- Other income - investment income, capital gains, foreign income, rental income, or business income.
- Salary sacrifice and FBT - pre-tax super, novated lease, or other packaged benefits.
- Spouse/family offsets - these can interact with HECS thresholds and Medicare surcharge tiers.
For an actual tax return, the ATO's official income tax estimator takes these into account, and a registered tax agent (you can verify one at the Tax Practitioners Board) can give personalised advice if your situation is complex.