From 1 July 2026, the 16% tax bracket for Australian residents drops to 15% — the second step in the government’s legislated three-stage income tax reduction. This means someone earning $70,000 sees roughly $192 more in their pocket across the year compared to 2025-26, while a $45,000 earner saves about $109. The Medicare Levy remains 2% on top, and the tax-free threshold holds at $18,200. This article runs through every bracket for FY2026-27, explains how the marginal system works, and provides take-home-pay examples — all sourced from ATO figures as at July 2026.
Australian Resident Tax Rates for 2026-27
The ATO publishes five brackets for resident taxpayers. Below are the full rates for the year starting 1 July 2026, excluding the Medicare Levy:
- $0 to $18,200: No tax payable (the tax-free threshold).
- $18,201 to $45,000: 15 cents for each dollar over $18,200. This bracket fell from 16% to 15% on 1 July 2026 — already passed into law.
- $45,001 to $135,000: $4,020 plus 30 cents for each dollar over $45,000.
- $135,001 to $190,000: $31,020 plus 37 cents for each dollar over $135,000.
- $190,001 and above: $51,370 plus 45 cents for each dollar over $190,000.
On 1 July 2027 the 15% bracket is legislated to fall again to 14%, reducing the $4,020 base in the third bracket to $3,752. This article focuses on the 2026-27 year.
How Marginal Tax Rates Work in Practice
Australia uses a progressive (marginal) system: you do not pay a single rate on your entire income. Only the portion inside each bracket attracts that bracket’s rate. For example, a resident earning $90,000 pays $0 on the first $18,200, 15% on the next $26,800 ($4,020), and 30% on the remaining $45,000 ($13,500). Total tax before Medicare: $17,520. Your average tax rate — total tax divided by total income — is always lower than your top marginal rate. At $90,000 the average is about 19.5%, even though the marginal rate is 30%.
Take-Home Pay: Worked Examples (2026-27)
All figures below add the 2% Medicare Levy. Actual take-home pay depends on your individual deductions, HELP debt, and any MLS liability; these are separate calculations covered in our companion articles.
$45,000 salary: Tax on $18,201–$45,000 at 15% = $4,020. Medicare Levy = $900. Net tax $4,920. Annual take-home ≈ $40,080.
$70,000 salary: Tax = $4,020 (brackets 1–2) + $7,500 (30% of $25,000 in bracket 3) = $11,520. Medicare Levy = $1,400. Net tax $12,920. Take-home ≈ $57,080.
$100,000 salary: Tax = $4,020 + $16,500 (30% of $55,000) = $20,520. Medicare Levy = $2,000. Net tax $22,520. Take-home ≈ $77,480.
$150,000 salary: Tax = $4,020 + $27,000 (bracket 3 up to $135,000) + $5,550 (37% of $15,000 in bracket 4) = $36,570. Medicare Levy = $3,000. Net tax $39,570. Take-home ≈ $110,430.
These are examples only. Actual liabilities depend on personal circumstances and should be confirmed with a tax professional.
Non-Resident and Working Holiday Maker Rates
Non-residents do not receive the tax-free threshold or the 15% resident bracket. FY2026-27 non-resident rates are: 30% on $0–$135,000; 37% on $135,001–$190,000; 45% above $190,000. Non-residents do not pay the Medicare Levy.
Working Holiday Makers (subclass 417 or 462) pay 15% on the first $45,000, then 30% to $135,000, 37% to $190,000, and 45% above — a separate schedule distinct from both resident and non-resident rates.
Frequently Asked Questions
When does the 15% rate take effect?
1 July 2026. Employers should already be withholding at the new rate; if you are on an annual salary and your payslip shows a slight increase from July onwards, that is the bracket change flowing through.
Will there be another tax cut after this one?
Yes. The legislation already provides for the 15% rate to drop to 14% from 1 July 2027. All other brackets remain unchanged under current law.
Does the Medicare Levy apply on top of these rates?
Yes. Most resident taxpayers pay an additional 2% of taxable income as the Medicare Levy. Low-income earners may qualify for a reduction or exemption. If you do not hold eligible private hospital cover and earn above the MLS threshold, a further surcharge of 1.0%–1.5% may apply.
How do I check if my employer is withholding the right amount?
The ATO provides a tax withheld calculator at its website. Your payslip should include the tax withheld (PAYG) line. Compare it against the brackets above for your pay period. If the amount looks materially wrong, speak to your payroll team.
Are there offsets or deductions that reduce my tax?
Yes. The Low Income Tax Offset (LITO) can reduce tax for incomes below $66,667. Common deductions include work-related expenses, charitable donations, and the cost of managing tax affairs. Consult the ATO’s Deductions guide or a registered tax agent.
Data Sources and Currency
All tax bracket figures in this article are drawn from the Australian Taxation Office’s published “Individual income tax rates” for 2026-27, legislated under the Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024 and subsequent amendments. The 16%→15% cut took effect from 1 July 2026. Non-resident and WHM rates are from the ATO’s “Foreign resident tax rates” schedule. Medicare Levy thresholds are published separately by the ATO.
- ATO — Individual income tax rates: https://www.ato.gov.au/tax-rates/individual-income-tax-rates
- ATO — Medicare Levy: https://www.ato.gov.au/individuals-and-families/medicare-and-private-health-insurance/medicare-levy
- ATO — Low Income Tax Offset: https://www.ato.gov.au/individuals-and-families/your-tax-return/offset-and-rebates/low-income-tax-offset
- Treasury — Budget 2024-25 Tax Cuts: https://treasury.gov.au/
Data current as at July 2026. Tax legislation can change; verify with the ATO or a registered tax professional before making financial decisions.
Disclaimer
This article provides general information only and does not constitute financial, tax, or legal advice. Individual tax outcomes depend on your personal circumstances. You should confirm all figures with the Australian Taxation Office or a licensed tax agent.