Marginal Tax Rates Australia 2025-26
Find your marginal tax rate and see exactly how your income is taxed across each bracket. Your marginal rate is the tax you pay on each additional dollar earned.
Enter your annual taxable income (before tax). This is your gross income minus deductions.
Enter your taxable income to see your marginal tax rate.
Your marginal rate is the tax you pay on each additional dollar earned.
Australian tax brackets 2025-26
Australia uses a progressive tax system. This means you pay different rates on different portions of your income, not a single rate on your entire income.
| Taxable income | Tax rate | Tax on this income |
|---|---|---|
| $0 – $18,200 | 0% | Nil |
| $18,201 – $45,000 | 16% | 16 cents for each $1 over $18,200 |
| $45,001 – $135,000 | 30% | $4,288 plus 30 cents for each $1 over $45,000 |
| $135,001 – $190,000 | 37% | $31,288 plus 37 cents for each $1 over $135,000 |
| $190,001 and over | 45% | $51,638 plus 45 cents for each $1 over $190,000 |
Plus: Medicare levy of 2% applies to most taxpayers on all taxable income. Add 2% to find your effective marginal rate.
What is marginal tax rate?
Your marginal tax rate is the rate of tax applied to your last (or next) dollar of income. It's the rate you pay on income at the top of your earnings.
Example: $100,000 income
If you earn $100,000, your income is taxed as follows:
- $0 – $18,200 at 0% = $0
- $18,201 – $45,000 at 16% = $4,288
- $45,001 – $100,000 at 30% = $16,500
Total income tax: $20,788
Marginal rate: 30% (+ 2% Medicare = 32%)
Average rate: 20.79% (total tax ÷ total income)
Notice that even though you're "in the 30% bracket", you don't pay 30% on all your income. The first $18,200 is tax-free, and the next portion is taxed at only 16%.
Marginal rate vs average rate
Marginal rate
Tax on your next dollar of income.
- Used for: Deduction value, salary sacrifice decisions, bonus tax
- Tells you: How much tax you save or pay on changes to your income
Average rate
Total tax divided by total income.
- Used for: Understanding your overall tax burden
- Tells you: What percentage of your total income goes to tax
Key insight: Your average rate is always lower than your marginal rate (unless you earn below $18,200). This is because of the tax-free threshold and lower brackets.
Why your marginal rate matters
1. Tax deductions
Deductions reduce your taxable income at your marginal rate. If your marginal rate is 32% (30% + Medicare), a $1,000 deduction saves you $320 in tax.
2. Salary sacrifice to super
Super contributions are taxed at 15% inside the fund. If your marginal rate is 32%, salary sacrificing saves you 17 cents in tax for every dollar contributed.
3. Bonus and overtime
Extra income is taxed at your marginal rate. A $10,000 bonus to someone earning $100,000 will result in about $3,200 in additional tax (32% marginal rate).
4. Investment income
Interest, dividends, and rental income are added to your other income and taxed at your marginal rate. This is why high-income earners often prefer investments with tax advantages (like super or franked dividends).
Stage 3 tax cuts (2024-25 onwards)
The current tax brackets reflect the Stage 3 tax cuts that took effect from 1 July 2024. Key changes included:
- The 19% tax bracket was reduced to 16%
- The 32.5% bracket was reduced to 30%
- The 37% bracket threshold increased from $120,000 to $135,000
- The 45% bracket threshold increased from $180,000 to $190,000
These rates remain unchanged for 2025-26.
Frequently asked questions
What is a marginal tax rate?
Your marginal tax rate is the rate of tax applied to your last dollar of income. In Australia's progressive tax system, as your income increases, you move into higher tax brackets. Your marginal rate only applies to income above each threshold, not your entire income.
What are the tax brackets for 2025-26?
For 2025-26, Australian residents pay: 0% on income up to $18,200 (tax-free threshold), 16% on $18,201-$45,000, 30% on $45,001-$135,000, 37% on $135,001-$190,000, and 45% on income over $190,000. Plus 2% Medicare levy on most taxable income.
What is the difference between marginal and average tax rate?
Your marginal rate is the tax on your next dollar of income. Your average rate is your total tax divided by total income. Someone earning $100,000 has a 32% marginal rate (30% + Medicare) but pays about 24% average rate because lower brackets apply to the first portions of income.
Does Medicare levy affect my marginal rate?
Yes. The 2% Medicare levy applies to all taxable income above certain thresholds. For most taxpayers, add 2% to your marginal tax bracket rate. Someone in the 30% bracket effectively pays 32% on each additional dollar (30% income tax + 2% Medicare).
Why does my marginal rate matter for tax planning?
Your marginal rate determines the value of deductions, the benefit of salary sacrifice, and the tax on additional income. A $1,000 deduction saves $320 if your marginal rate is 32%. Understanding your marginal rate helps you make informed decisions about super contributions, investments, and claiming deductions.
What is the highest marginal tax rate in Australia?
The highest marginal rate is 45% on income over $190,000, plus 2% Medicare levy = 47%. High-income earners above $250,000 may also pay Division 293 tax (additional 15% on super contributions), and those without private health insurance may pay Medicare Levy Surcharge.
Related tax references
- Tax Tables 2025 Australia — all rates, offsets and thresholds in one page
- Australian Tax Brackets 2025-26 — detailed bracket guide with worked examples