Australia Income Tax Brackets 2024-25: What You Need to Know

Understanding how income tax brackets work in Australia can feel confusing — but once you see how the system is structured, it's actually quite straightforward. This guide breaks down the FY 2025-26 tax rates and shows you exactly what you'll pay on your income.

How Australia's Progressive Tax System Works

Australia uses a progressive tax system, meaning you don't pay the same rate on your entire income. Instead, different portions of your income are taxed at different rates. You only pay the higher rate on the income that falls within that bracket — not on everything you earn.

For example, if you earn $90,000, you don't pay 32.5% on all of it — only on the portion above $45,001.

FY 2025-26 Income Tax Rates (Resident Individuals)

Source: ATO FY 2025-26 resident tax rates. These rates do not include the 2% Medicare Levy.

The Tax-Free Threshold

Every Australian resident is entitled to a tax-free threshold of $18,200. This means you pay zero income tax on your first $18,200 of earnings each financial year. If you earn below this amount, you generally won't owe any income tax at all.

Make sure you claim the tax-free threshold with your employer via your Tax File Number (TFN) declaration. If you have multiple jobs, you can only claim it from one employer.

Real Example: Tax on a $75,000 Salary

Let's calculate the income tax on a $75,000 annual salary for FY 2025-26:

• $0 – $18,200 → $0 tax
• $18,201 – $45,000 → $26,800 × 19% = $5,092
• $45,001 – $75,000 → $30,000 × 32.5% = $9,750
• Total income tax: $14,842
• Plus Medicare Levy (2%): $1,500
• Total tax payable: $16,342

Want to calculate your exact take-home pay? Use our Take-Home Pay Calculator to see your net income after all taxes and Medicare Levy.

Medicare Levy and Other Deductions

On top of income tax, most Australians pay the Medicare Levy of 2% on their taxable income. Higher earners without private hospital cover may also face the Medicare Levy Surcharge (MLS).

Check your Medicare Levy and potential surcharge with our Medicare Levy Calculator.

If you have a HECS-HELP student loan, repayments are also deducted from your pay once you earn above the repayment threshold. See our HECS-HELP Repayment Calculator for details.

Low Income Tax Offset (LITO)

If you earn under $66,667, you may be eligible for the Low Income Tax Offset (LITO), which can reduce your tax bill by up to $700. The offset phases out gradually for incomes between $37,500 and $66,667.

This offset effectively raises the tax-free threshold for low-income earners above the standard $18,200.

Summary

Australia's progressive income tax system for FY 2025-26 means most workers pay between 19% and 32.5% on the bulk of their income. Key things to remember:

• First $18,200 is tax-free
• Rates increase gradually — you're never taxed at the top rate on all income
• Medicare Levy (2%) applies on top
• Offsets like LITO can reduce your actual tax

For a personalised calculation, try our Income Tax Calculator or get your full payslip breakdown with the Take-Home Pay Calculator.