Effective Tax Rate
Your total tax as a percentage of your total income — the actual overall rate you pay after all brackets, offsets, and levies.
Your effective tax rate (also called the average tax rate) is the total amount of tax you pay divided by your total taxable income, expressed as a percentage. Unlike the marginal rate, which only applies to your highest dollar of income, the effective rate reflects the blended impact of all tax brackets, offsets, and the Medicare levy across your entire income.
For example, on a taxable income of $100,000 in 2025–26, your income tax is approximately $22,788, plus Medicare levy of $2,000, totalling about $24,788. Your effective tax rate is roughly 24.8% — significantly lower than your marginal rate of 30%. At $200,000, the effective rate climbs to about 33%, still below the 45% marginal rate.
The effective rate is a more useful measure of your actual tax burden when comparing tax systems across countries, planning your budget, or evaluating the real impact of a pay rise. Many people overestimate their tax because they confuse marginal and effective rates — believing that moving into the 37% bracket means all their income is taxed at 37%.