Income Tax
Tax levied by the federal government on your taxable income, calculated using progressive tax brackets.
Income tax is a federal tax levied on the taxable income of individuals, companies, and other entities in Australia. For individuals, it is calculated using a progressive rate structure where higher portions of income are taxed at higher rates. For the 2026–27 financial year (the current tax year), the individual tax brackets are: 0% on income up to $18,200 (tax-free threshold), 15% on $18,201–$45,000, 30% on $45,001–$135,000, 37% on $135,001–$190,000, and 45% on income over $190,000.
Your income tax liability is reduced by any applicable tax offsets (such as LITO or SAPTO) and increased by the Medicare levy (2% of taxable income for most taxpayers). The difference between tax withheld by your employer during the year (PAYG withholding) and your final tax liability determines whether you receive a refund or owe additional tax.
Australia's income tax system is progressive, meaning you only pay the higher rate on income above each threshold — not on your entire income. This is a common misconception. For example, if you earn $50,000, you pay 0% on the first $18,200, 15% on the next $26,800, and 30% on the remaining $5,000.
Calculate it yourself
Open calculator →Related Terms
Tax Brackets
The income ranges that determine the rate of tax applied to each portion of your taxable income.
Marginal Tax Rate
The rate of tax applied to each additional dollar of income — determined by the tax bracket your top dollar falls into.
Taxable Income
Your assessable income minus allowable deductions — the figure used to calculate your income tax.
Tax-Free Threshold
The first $18,200 of annual income that is not subject to income tax for Australian residents.
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.