Marginal Tax Rates in Australia for 2026–27

Marginal tax rates for 2026–27 and 2025–26

From 1 July 2026 the rate on the $18,201 to $45,000 band fell from 16% to 15%. The other brackets are unchanged. Each rate applies only to income inside its band.

Marginal vs average tax rate

Your marginal rate applies to your next dollar. Your average rate is your total tax divided by your total income. On $100,000 in 2026–27, the bracket rate is 30% and the marginal rate with Medicare is 32%. Total income tax and Medicare levy come to $22,520, though, which is an average rate of 22.5%. The first $18,200 is tax-free and the next band is taxed at only 15%, so your average rate is always well below your marginal rate.

Moving into a higher bracket never reduces your take-home pay under the normal rates. Only the dollars above the threshold are taxed at the higher rate. The one real exception, the Medicare levy surcharge for people without private hospital cover, is explained below.

Effective marginal tax rates by income

The effective marginal rate is what you actually lose from an extra dollar once offsets, levies and study-loan repayments are included. The table assumes a resident with private hospital cover (so no surcharge) and no other offsets. It uses the 2025–26 Medicare levy low-income thresholds because the ATO has not yet published the 2026–27 ones. With HELP, the rate includes the compulsory repayment, which is worked out on repayment income.

• $18,201 – $22,866: LITO cancels out the 15% tax, so the effective rate is nil.
• $28,012 – $35,013: the Medicare levy phases in at 10 cents per dollar, which adds 10 points.
• $37,501 – $66,667: LITO tapers away at 5c, then 1.5c per dollar.
• From $69,529: HELP adds 15%, then 17% above $129,717. From $186,051 it becomes 10% of total repayment income.

Where a $1 pay rise can cost you money

The Medicare levy surcharge (MLS) is charged on your whole income, not just the excess, if you do not hold an appropriate level of private hospital cover. In 2026–27 a single person crosses the first tier above $105,000 of income for MLS purposes, where 1% applies. Without cover, tax and levies on $105,000 are $24,120. On $105,001 they are $25,170, so one extra dollar costs $1,050. Private hospital cover removes the cliff. Our Medicare levy surcharge guide compares the cost.

Study loans no longer have a cliff like this. Since 2025–26, compulsory repayments are charged only on repayment income above the threshold, so crossing $69,528 costs 15% of each extra dollar, not a percentage of your whole income. At the top of the scale, $186,051 of repayment income, the ATO switches to 10% of total repayment income. The two formulas give almost the same repayment at that point (about $18,605), so there is no meaningful jump.

Using your marginal rate for real decisions

Pay rises. A $5,000 rise from $80,000 adds $3,400 to annual take-home pay without a study loan, but only $2,650 with one, because HELP repayments go up too.

Deductions. A deduction saves tax at your marginal rate. A $1,000 deduction is worth $320 to someone on $100,000, but nothing to someone whose taxable income is already below $22,866.

Salary sacrifice. Concessional super contributions are taxed at 15% in the fund instead of at your marginal rate. That saves more the higher your rate, but very little in the nil and low-rate bands. Check the effective rate in the table before you sacrifice.

Bonuses. A bonus is not taxed at a special rate. It is added to your income for the year and taxed at your marginal rate. Any over-withholding at the time of payment comes back when you lodge.

How to work out your own marginal rate

You need your expected taxable income for the year, not your salary for one pay period.

• Start with gross salary, add other income such as interest, rent and side-business profit, and subtract expected deductions and salary-sacrificed super.
• Find that figure in the bracket table. That is your bracket rate. Then add the Medicare levy (or the phase-in rate if you are in that zone).
• If you are between $37,500 and $66,667, add the LITO taper. If you have a HELP debt, add the repayment rate for your repayment income, which also counts reportable super and fringe benefits.
• If you have no private hospital cover and are near a Medicare levy surcharge tier, check the cliff before accepting extra income late in the year.

Example: the marginal tax on a bonus

A $5,000 bonus on top of a $90,000 salary adds $1,600 of tax and Medicare levy in 2026–27, an effective 32.0%. In 2025–26 the same bonus cost $1,600. That year is the one most people are lodging returns for now. Both bands are above $45,000, so the 1 July 2026 cut to the first band does not change the marginal cost, only the total tax. If the employer withheld more than this when the bonus was paid, the difference comes back at tax time.

Foreign residents and working holiday makers

Foreign residents have no tax-free threshold. They pay 30% from the first dollar to $135,000, 37% to $190,000 and 45% above. Working holiday makers pay 15% to $45,000 and then the same rates as foreign residents. Foreign residents cannot get LITO, so there is no offset taper to push their effective marginal rate above the bracket rate.