Australian Tax Brackets & Rates (2026-27)

Understanding the Australian tax brackets and rates is the difference between being surprised by your tax bill and planning for it. The rates decide how much of every extra dollar you keep, whether a pay rise is worth it after tax, and how much to set aside as a business owner. Here are the current tax rates in Australia for 2026-27, how the brackets actually work, and how to use them to plan.

Australian tax brackets and rates for 2026-27

These are the resident individual income tax rates. The Medicare levy is charged separately (more on that below).

How marginal tax rates actually work

This is the single most misunderstood thing about the Australian tax system: you never pay your top rate on your whole income. The brackets are marginal, meaning each rate applies only to the slice of income that falls inside it. Moving into a higher bracket only taxes the dollars above the threshold at the higher rate — it never reduces your take-home pay overall.

Take someone earning $80,000. They pay nothing on the first $18,200, 15% on the income between $18,201 and $45,000, and 30% only on the income between $45,001 and $80,000. That works out to about $14,520 in income tax, plus the 2% Medicare levy — an effective tax rate of roughly 20%, well below the 30% top bracket they sit in. Understanding this stops the common mistake of turning down work or a raise because it "pushes you into a higher bracket."

The Medicare levy: on top of these rates

The tax brackets above cover income tax only. Most taxpayers also pay the Medicare levy of 2% of their taxable income, which funds the public health system. Higher earners who don't hold an appropriate level of private hospital cover may also pay the Medicare levy surcharge, on top again. When you estimate your total tax, always add the 2% levy to the bracket figures — it's a common reason people under-set their tax savings.

What changed this year

The Australian tax rates have been stepping down under legislated cuts. The rate on income between $18,201 and $45,000 fell to 16% in 2025-26 and to 15% from 1 July 2026, with a further reduction to 14% legislated for 1 July 2027. The other brackets and thresholds are unchanged. In practical terms it means a small tax cut for almost every worker, and it's worth checking your take-home pay reflects the current rate.

Tax rates for sole traders and business owners

If you run a business as a sole trader, you don't pay a separate "business tax rate" — your business profit is added to your personal income and taxed at the individual brackets above. That has two consequences. First, as profit grows you move through the same marginal rates, so a strong year can lift your effective rate. Second, and more usefully, every legitimate business deduction reduces the income taxed at your top marginal rate, which is exactly why accurate bookkeeping is one of the highest-return things a sole trader can do. Companies are taxed differently, at a flat company rate, which is one reason growing businesses eventually look at their structure.

How to use the brackets to plan your tax

Once you know your marginal rate, tax planning gets concrete. Claiming every legitimate deduction is worth your marginal rate in cash — for someone in the 30% bracket, a $1,000 deductible expense is $300 back. Concessional super contributions are taxed at 15% inside super rather than your marginal rate, which is why they're a common lever near the top of a bracket. And setting aside a percentage of every payment for tax, based on your effective rate rather than guesswork, is the simplest way to never be caught short at BAS or tax time. A bookkeeper who keeps your numbers current can tell you your real position through the year, not just after it.

What about non-residents and working holiday makers?

The brackets above are for Australian tax residents. If you're a foreign resident for tax purposes there's no tax-free threshold — you're taxed from the first dollar, starting at 30% up to $135,000, then 37% and 45% on the higher brackets. Working holiday makers have their own schedule, taxed at 15% up to $45,000 and the resident rates above that. Residency for tax depends on your circumstances, not just your visa, so check your status if you're unsure — it materially changes what you owe.

What happens when your income crosses a bracket

Nothing dramatic, and that's the point. Because the rates are marginal, crossing into a new bracket only changes the rate on the dollars above the threshold — the income below it is still taxed exactly as before. A pay rise from $44,000 to $46,000 doesn't suddenly tax your whole income at 30%; only the $1,000 above $45,000 is taxed at the higher rate. The idea that earning more can leave you worse off is a myth for standard income tax. Where it can genuinely bite is at specific thresholds tied to family benefits, surcharges or study-loan repayments — the kind of thing worth a quick word with your bookkeeper before a big income change.

How much should you set aside for tax?

A simple rule for sole traders and business owners: set aside your effective tax rate on every payment, not your top bracket. For many small business owners that lands somewhere around 20–30% once deductions are counted, but the only accurate number is the one based on your real figures. Moving it into a separate account as you go — rather than finding it at BAS or tax time — is the single habit that turns tax from a yearly shock into a non-event.

Want to stop guessing what to set aside for tax and know your real position all year? Book a free discovery call, or download the free Margin Map to see how much of your income is actually profit before tax.