Australia uses a progressive income tax system with five brackets, plus a separate 2% Medicare Levy on top. The Stage 3 tax cuts that took effect from 1 July 2024 restructured the brackets significantly — most notably reducing the 32.5% rate to 30% and expanding the 19% bracket threshold, now 16% at the entry point.
Unlike some countries, Australia's income tax is calculated after applying tax offsets — particularly the Low Income Tax Offset (LITO), which effectively reduces tax payable for lower earners before the Medicare Levy is even applied.
| Taxable income | Tax rate |
|---|---|
| $0 – $18,200 | Nil |
| $18,201 – $45,000 | 16c for each $1 over $18,200 |
| $45,001 – $135,000 | $4,288 + 30c for each $1 over $45,000 |
| $135,001 – $190,000 | $31,288 + 37c for each $1 over $135,000 |
| Over $190,000 | $51,638 + 45c for each $1 over $190,000 |
The Medicare Levy is 2% of taxable income for most Australian residents, funding the public health system. A reduction applies for very low earners below $26,000 (single, 2025-26 threshold), and a Medicare Levy Surcharge of 1%–1.5% applies on top for singles earning over $97,000 without private hospital cover.
The LITO reduces the tax payable — not your taxable income — for lower earners. The maximum offset is $700, applying in full below $37,500, then tapering at 5 cents per dollar above $37,500, and at 1.5 cents per dollar above $45,000, phasing out entirely at $66,667.
Your employer must pay 11.5% of your ordinary time earnings into your super fund on top of your salary — not deducted from your take-home, but an additional employer cost. This is the Super Guarantee rate for 2025-26, rising to 12% from 1 July 2025. You can also make voluntary salary sacrifice contributions from your pre-tax pay, reducing your taxable income.
Tax on $80,000: $4,288 (the base for the $45,001–$135,000 bracket) + 30% × ($80,000 − $45,000) = $4,288 + $10,500 = $14,788. Less LITO: nil (income above $66,667). Medicare Levy: $80,000 × 2% = $1,600. Total deductions: $16,388. Take-home: $63,612 per year. Employer super on top: $80,000 × 11.5% = $9,200.