Income Tax Rates Australia 2026-27: Brackets, Cuts & Worked Examples
Every July, Australia’s tax brackets shift a little — and this year the shift puts real money back in your pocket. From 1 July 2026, the tax rate on income between $18,201 and $45,000 dropped from 16% to 15%. It sounds small. It isn’t: everyone earning above $45,000 keeps an extra $268 a year, automatically, through their regular pay.
This guide lays out the complete 2026-27 resident tax rates, shows exactly what you’d pay at $60,000, $90,000 and $200,000, and covers the pieces people forget — the Medicare levy, the surcharge, and what non-residents pay.
Quick answer: For 2026-27, Australian residents pay 0% to $18,200, then 15% to $45,000, 30% to $135,000, 37% to $190,000, and 45% above that. These are marginal rates — each rate applies only to income within its bracket. Add the 2% Medicare levy on top. The 15% rate (down from 16%) is legislated to fall further to 14% from 1 July 2027.
The 2026-27 tax brackets
| Taxable income | Tax rate | Tax on this bracket |
|---|---|---|
| $0 – $18,200 | 0% (tax-free threshold) | Nil |
| $18,201 – $45,000 | 15% | 15c per $1 over $18,200 |
| $45,001 – $135,000 | 30% | $4,020 + 30c per $1 over $45,000 |
| $135,001 – $190,000 | 37% | $31,020 + 37c per $1 over $135,000 |
| $190,001 and over | 45% | $51,370 + 45c per $1 over $190,000 |
Source: ATO individual income tax rates. These rates exclude the Medicare levy.
The change from last year is exactly one cell in that table: the second bracket went from 16% to 15% under the Treasury Laws Amendment (More Cost of Living Relief) Act 2025. Because every bracket above it builds on the tax from the brackets below, the $268 saving flows through to every taxpayer earning above $45,000 — not just people earning under $45,000.
And there’s more coming: the same legislation drops that bracket to 14% from 1 July 2027, which will save earners above $45,000 a total of $536 a year compared to 2025-26.
What “marginal” actually means
The single most misunderstood word in Australian tax. Marginal means each rate applies only to the dollars inside that bracket — not to your whole income. Earn $50,000 and you do not pay 30% on $50,000. You pay:
- $0 on the first $18,200
- 15% on the next $26,800 ($18,201–$45,000)
- 30% on the final $5,000 ($45,001–$50,000)
Your marginal rate is 30% (the rate on your last dollar). Your average rate — total tax divided by total income — is much lower. Confusing the two is how people end up turning down pay rises they think will “push them into a higher bracket.” It doesn’t work like that. You can never lose money by earning more under a marginal system.
Worked examples: what you’d actually pay
These include the 2% Medicare levy, because that’s what actually leaves your pay.
Example 1: $60,000 salary
Income tax: $4,020 + ($60,000 − $45,000) × 30% = $4,020 + $4,500 = $8,520
Medicare levy: $60,000 × 2% = $1,200
Total: $9,720 (average rate 16.2%)
Example 2: $90,000 salary
Income tax: $4,020 + ($90,000 − $45,000) × 30% = $4,020 + $13,500 = $17,520
Medicare levy: $90,000 × 2% = $1,800
Total: $19,320 (average rate 21.5%)
Example 3: $200,000 salary
Income tax: $51,370 + ($200,000 − $190,000) × 45% = $51,370 + $4,500 = $55,870
Medicare levy: $200,000 × 2% = $4,000
Total: $59,870 (average rate 29.9%)
Run your own salary through our free income tax calculator — it handles the brackets, Medicare levy and surcharge for 2026-27 in one go.
The Medicare levy (and the surcharge nobody budgets for)
The 2% Medicare levy applies to your entire taxable income (not just part of it), on top of the rates above. Low-income earners get a reduction or exemption — the thresholds are indexed each year, so check the current year’s figures if you’re near the line.
The Medicare Levy Surcharge (MLS) is the one that bites. If you earn above the MLS thresholds and don’t hold eligible private hospital cover, you pay an extra 1% to 1.5% on top of everything. For 2026-27, the singles tiers start at $105,000 (1%), then $123,000 (1.25%) and $164,000 (1.5%).
Do the maths before you skip private health insurance: at $110,000 income, the 1% surcharge costs you $1,100 a year. A basic hospital policy often costs less than the surcharge — which is exactly the point of the policy. It’s not really a health decision; it’s arithmetic.
What non-residents pay
Different rules, and they catch people out. Non-residents get no tax-free threshold and pay from the first dollar:
| Taxable income (Australian-sourced) | Tax rate 2026-27 |
|---|---|
| $0 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| $190,001 and over | 45% |
Non-residents generally don’t pay the Medicare levy either. If you’re on a temporary visa or split the year between countries, your residency status for tax purposes is the first thing to pin down — it changes everything. Working holiday makers (subclasses 417 and 462) have their own separate rate: 15% on the first $45,000.
How the 2026-27 cuts compare
A quick look at where we’ve come from:
| Year | Second bracket rate | What changed |
|---|---|---|
| 2023-24 | 19% | Pre-reform |
| 2024-25 | 16% | Revised Stage 3: 19%→16%, 32.5%→30%, thresholds lifted |
| 2025-26 | 16% | Held steady |
| 2026-27 | 15% | Cost-of-living relief cut |
| 2027-28 | 14% (legislated) | Final step of the current package |
The direction is clear: the government is steadily flattening the tax paid by low and middle earners. Someone on $60,000 now pays roughly $2,000 less than they would have under the old 2023-24 rates — a meaningful pay rise by another name.
Reducing your taxable income legally
Your taxable income — not your salary — is what the brackets apply to. Common ways Australians legitimately shrink it:
- Salary sacrifice into super — contributions come out pre-tax, taxed at 15% in the fund instead of your marginal rate. See our salary sacrifice guide for the numbers.
- Work-related deductions — for 2026-27 there’s a $1,000 instant deduction for work-related expenses available without receipts.
- Negative gearing — rental losses offset your salary income (controversial, but legal).
- Income splitting — where legitimately available (e.g. spouse contributions to super).
Each of these interacts with the brackets differently. A $5,000 deduction saves someone on the 30% rate $1,500, but saves someone on the 45% rate $2,250. Deductions are worth more the higher your marginal rate — which is why timing them into high-income years (say, the year you sell an investment property and realise a capital gain) can be smart planning.
Don’t forget the admin
Two dates matter as much as the rates. Your employer handles PAYG withholding through the year using the ATO’s updated schedules, so the 15% cut should already be showing up in your payslips — if your payroll hasn’t updated since July, that’s a conversation with your payroll team, not the ATO.
And when you lodge your 2026-27 return, the deadline is 31 October 2027 (or later if you’re with a registered tax agent). Keep your payment summaries, deduction receipts and any investment records together through the year; reconstructing them in October is how deductions get missed.
Frequently asked questions
When do the 2026-27 tax rates apply?
To all taxable income earned from 1 July 2026 to 30 June 2027. Your employer adjusts PAYG withholding automatically — you don’t need to do anything.
Do I need to do anything to get the tax cut?
No. It flows through your pay automatically via updated PAYG withholding schedules. You’ll also see it when you lodge your 2026-27 return.
What’s the difference between marginal and average tax rate?
Your marginal rate is the tax on your next dollar (the bracket you’re in). Your average rate is total tax divided by total income — always lower. A $90,000 earner has a 30% marginal rate but a ~21.5% average rate including Medicare.
Does the Medicare levy apply to all my income?
Yes — 2% on your entire taxable income, with reductions for low-income earners. It’s separate from the bracket rates.
I’m a non-resident — do I get the $18,200 tax-free threshold?
No. Non-residents pay 30% from the first dollar of Australian-sourced income up to $135,000.
Will rates change again next year?
The 15% second-bracket rate is legislated to drop to 14% from 1 July 2027. Beyond that, future changes depend on government policy and legislation.
The bottom line
For 2026-27, the headline is simple: same brackets as last year, but the second rate is now 15% instead of 16%, saving every taxpayer above $45,000 exactly $268. Add the 2% Medicare levy to whatever the table gives you, watch out for the surcharge if you’re over $105,000 without hospital cover, and remember that deductions are worth more the higher your marginal rate.
Want your exact number? Our free income tax calculator does the full 2026-27 calculation — brackets, Medicare levy and all — in under a minute.