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 2025–26 financial year, the individual tax brackets are: 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.
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, 16% on the next $26,800, and 30% on the remaining $5,000.