Published: 2026-03-27

The New 30% Tax Bracket: What FY 2025-26 Means for Your Pay

One of the biggest changes to Australia's tax system has arrived with the new 30% tax bracket for the 2025-26 financial year. If you've heard about Stage 3 tax cuts but aren't sure exactly how they affect you, this guide explains everything you need to know about the 30 tax bracket new rates and what they mean for your take-home pay.

The Australian Taxation Office (ATO) has restructured the income tax brackets, replacing the previous 32.5% rate with a lower 30% rate that now covers a much wider range of income. Whether you're earning $50,000 or $130,000, understanding this change is essential for budgeting, salary negotiations, and financial planning throughout the year.

What Is the New 30% Tax Bracket?

The new 30% tax bracket is a reduced marginal tax rate that applies to Australian residents earning between $45,001 and $135,000 for the 2025-26 financial year. This represents a significant change from the previous system, where the 32.5% rate only applied up to $120,000, and a 37% rate kicked in between $120,001 and $180,000.

Under the Stage 3 tax reforms, the government has lowered the rate from 32.5% to 30% and extended the upper threshold from $120,000 to $135,000. This means that millions of Australian workers now pay less tax on a larger portion of their income. The 37% bracket still exists but now only applies to income between $135,001 and $190,000, while the top 45% rate starts at $190,001 instead of the previous $180,001.

FY 2025-26 Tax Brackets with the New 30% Rate

Here's the complete breakdown of Australia's income tax brackets for the 2025-26 financial year, showing exactly where the new 30% rate fits in:

Note: These rates don't include the 2% Medicare Levy. Source: ATO FY 2025-26 resident tax rates.

How Much Will You Save with the 30% Tax Bracket?

The introduction of the new 30% tax bracket delivers real savings for millions of Australian workers. The exact amount you save depends on your income level, with middle-income earners seeing some of the most significant benefits.

Here's a comparison of how the new 30% bracket affects different salary levels compared to the previous 32.5% rate:

As you can see, the savings increase as your income rises within the 30% bracket, with those earning $135,000 saving over $4,000 annually. These figures represent income tax only and don't include the Medicare Levy or other deductions. To get your complete take-home pay calculation including all taxes and levies, use our Take-Home Pay Calculator.

Real Example: How the 30% Bracket Works in Practice

Let's walk through a practical example to show exactly how the new 30% tax bracket affects your tax calculation. Meet Sarah, who earns $85,000 per year as a marketing coordinator in Melbourne.

Under the FY 2025-26 tax rates, Sarah's income tax is calculated as follows:

• Tax-free threshold: First $18,200 = $0 tax
• 16% bracket: $18,201 to $45,000 = $26,800 × 16% = $4,288
• 30% bracket: $45,001 to $85,000 = $40,000 × 30% = $12,000

Sarah's total income tax comes to $16,288. She also pays the Medicare Levy of 2% on her full income, which adds $1,700. Her total tax liability is $17,988, leaving her with a take-home pay of approximately $67,012.

Under the old 32.5% rate, Sarah would have paid $13,000 on that same $40,000 portion, resulting in $1,000 more tax. The new 30% bracket gives her an extra $1,000 per year — money she can put toward savings, investments, or everyday expenses. Want to see how much you'll save? Try our Income Tax Calculator for a personalised breakdown.

Medicare Levy and the 30% Tax Bracket

While the new 30% income tax bracket reduces your tax burden, remember that most Australians also pay the Medicare Levy of 2% on their taxable income. This levy funds Australia's public healthcare system and applies on top of your income tax calculations.

For FY 2025-26, the Medicare Levy exemption threshold has increased to $27,222 for individuals. If you earn below this amount, you won't pay any Medicare Levy. Between $27,222 and $34,027, a reduced rate applies on a sliding scale. Higher-income earners without private hospital insurance may also face the Medicare Levy Surcharge (MLS), which can add an extra 1% to 1.5% to your tax bill.

When calculating your total tax position, it's essential to factor in both income tax and the Medicare Levy. Our Medicare Levy Calculator helps you determine exactly how much you'll need to pay based on your income and circumstances.

HECS-HELP Repayments and Your Tax Rate

If you have a HECS-HELP student loan, the new 30% tax bracket affects more than just your income tax — it also impacts your compulsory repayments. For FY 2025-26, the repayment threshold has increased to $67,000, meaning you won't start making repayments until your income reaches this level.

The HECS-HELP repayment system has also been reformed with a new marginal calculation method. For income between $67,001 and $125,000, you pay 15 cents for every dollar above $67,000. Between $125,001 and $179,285, you pay a base amount of $8,700 plus 17 cents for every dollar over $125,000. For income above $179,286, the repayment rate is 10% of your total income.

Importantly, the 20% debt reduction applied to all historical HECS-HELP debts on 1 June 2025 provides significant relief for current borrowers. To see how your student loan repayments interact with the new 30% tax bracket, check out our HECS-HELP Repayment Calculator.

Salary Sacrifice and Superannuation Considerations

With the introduction of the new 30% tax bracket, salary sacrifice arrangements have become even more attractive for many workers. By contributing pre-tax dollars to your superannuation fund, you can potentially reduce your taxable income and stay within a lower tax bracket while building your retirement savings.

The Superannuation Guarantee (SG) rate remains at 12% for FY 2025-26, meaning your employer must contribute 12% of your ordinary time earnings to your super fund. Additionally, you can make concessional (before-tax) contributions up to the cap of $30,000 per year. These contributions are taxed at 15% within your super fund, which is significantly lower than the 30% income tax rate for most workers.

For example, if you're earning $95,000 and salary sacrifice $10,000 into super, that $10,000 is taxed at 15% ($1,500) instead of 30% ($3,000), saving you $1,500 in tax. Use our Salary Sacrifice Calculator to model different scenarios and find the optimal strategy for your situation. You can also explore how your super grows over time with our Superannuation Calculator.

Who Benefits Most from the New 30% Tax Bracket?

The 30 tax bracket new rates deliver benefits across a wide range of income levels, but some groups benefit more than others. Middle-income earners between $50,000 and $135,000 see the most direct advantage from both the reduced rate and the extended threshold.

Workers earning between $45,001 and $120,000 benefit from the 2.5 percentage point reduction in their marginal tax rate. Those earning between $120,001 and $135,000 benefit even more, as they previously paid 37% on income in this range but now pay just 30%. Even higher earners above $135,000 benefit from the extended 30% bracket, as income that would have been taxed at 37% is now taxed at the lower rate.

However, the changes are less impactful for those earning below $45,000, who were already in lower tax brackets. These workers see modest benefits from the reduction of the 19% rate to 16% on income between $18,201 and $45,000, but the 30% bracket doesn't directly affect their tax calculation.

Summary: Key Points About the 30% Tax Bracket

The introduction of the new 30% tax bracket for FY 2025-26 represents one of the most significant changes to Australia's tax system in recent years. Here are the key takeaways:

• The 30% tax rate now applies to income between $45,001 and $135,000, down from the previous 32.5%
• The threshold for the 37% rate has increased from $120,000 to $135,001
• Middle-income earners can save between $1,000 and $4,000+ annually compared to previous rates
• The 16% rate on income between $18,201 and $45,000 also provides savings for lower-income workers
• Remember to factor in the 2% Medicare Levy on top of income tax calculations
• Salary sacrifice becomes even more attractive with the lower 15% super contribution tax

Understanding how the new tax brackets affect your personal situation is essential for effective financial planning. Whether you're budgeting for the year ahead, negotiating a salary, or planning your superannuation strategy, knowing your tax position helps you make informed decisions.

Ready to see exactly how much tax you'll pay under the new 30% bracket? Use our free calculators to get a complete breakdown of your income tax, Medicare Levy, HECS-HELP repayments, and final take-home pay for FY 2025-26.

⚠️ Disclaimer: All figures are estimates for FY 2025-26 based on current ATO guidelines. Tax laws and rates are subject to change. Always consult a registered tax agent or accountant for personalised advice tailored to your specific circumstances.