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Australia Income Tax 2026–27: Brackets, Rates & Calculator

October 19, 2026 · 4 min read · By the DollarWise team
Australia Income Tax 2026–27: Brackets, Rates & Calculator
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Australia’s 2026–27 income year (1 July 2026 – 30 June 2027) brings a small but welcome tax cut: the second bracket rate drops from 16% to 15%. Combined with the $18,200 tax-free threshold and the 2% Medicare levy, here is exactly how much tax you will pay at every income level.

2026–27 resident tax brackets

These are marginal rates for Australian residents for tax purposes who claim the tax-free threshold:

Taxable income Tax rate
$0 – $18,200 0% (tax-free)
$18,201 – $45,000 15%
$45,001 – $135,000 30%
$135,001 – $190,000 37%
Over $190,000 45%

Or in ATO formula form: 15c per $1 over $18,200; then $4,020 + 30c per $1 over $45,000; then $31,020 + 37c per $1 over $135,000; then $51,370 + 45c per $1 over $190,000.

The 2% Medicare levy applies on top of income tax for most residents. Think of your true marginal rate as the bracket rate + 2 — so 32% in the middle bracket, 47% at the top.

Worked examples

On $60,000 taxable income: Tax-free on the first $18,200. 15% on $18,201–$45,000 = $4,020. 30% on $45,001–$60,000 = $4,500. Income tax = $8,520; Medicare = $1,200; total $9,720 (~16.2% effective).

On $100,000: $4,020 + 30% × ($100,000 − $45,000) = $4,020 + $16,500 = $20,520 income tax; Medicare = $2,000; total $22,520 (~22.5% effective). Your marginal rate is 30% (32% with Medicare) — but your average rate is far lower. That is the power of marginal brackets.

On $150,000: $31,020 + 37% × ($150,000 − $135,000) = $31,020 + $5,550 = $36,570; Medicare = $3,000; total $39,570 (~26.4% effective).

The Low Income Tax Offset (LITO)

LITO automatically reduces tax for lower earners — you do not claim it, the ATO applies it:

  • Maximum $700 for taxable incomes up to $37,500.
  • Phases out at 5c per dollar from $37,500 to $45,000, then 1.5c per dollar to $66,667.
  • Gone entirely above $66,667.

Combined with the tax-free threshold, LITO means the effective tax-free point stretches a bit beyond $18,200 for eligible earners.

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Medicare levy details

  • Standard rate: 2% of taxable income for residents.
  • Low-income exemption: no levy below $28,011 (singles), phasing in up to $35,013.
  • Medicare Levy Surcharge (MLS): an extra 1–1.5% if you earn above the surcharge thresholds ($113,000 singles / $226,000 families for 2026–27) and do not hold private hospital cover. This is the one that surprises people — check your cover before June 30.

What changed vs 2025–26

The headline change: the $18,201–$45,000 bracket fell from 16% to 15%, worth up to $268/year for anyone earning above $45,000. Thresholds are unchanged (Australia does not auto-index brackets). And it is already legislated that the same bracket drops again to 14% from 1 July 2027 — another ~$268 saving.

Non-residents: different rules

Non-residents get no tax-free threshold — 30c per dollar from the first dollar earned in Australia, with 45% above $190,000. If you are on a temporary visa, check your residency status carefully; it makes an enormous difference.

Plan your take-home pay

Start by running your income through our free Australia income tax calculator to get your exact 2026–27 tax, Medicare levy, and take-home pay. Once you have estimated your Australian tax, the next step is making that take-home pay work. Plug your after-tax income into our free paycheck budget planner to split it across needs, wants, and savings — it runs entirely in your browser.

Note: brackets verified against ATO-published 2026–27 resident rates (15%/30%/37%/45% with $18,200 tax-free threshold, 2% Medicare levy). Confirm with the ATO or a registered tax agent before lodging.

Frequently asked questions

What are Australia’s income tax brackets for 2026–27? Residents pay 0% to $18,200, 15% to $45,000, 30% to $135,000, 37% to $190,000, and 45% above $190,000 — plus the 2% Medicare levy. The 2026–27 year runs 1 July 2026 to 30 June 2027.

What is the Medicare levy? An extra 2% of taxable income paid by most Australian residents to fund the public health system. It sits on top of income tax — so a 30% marginal rate is really 32% including Medicare.

What changed in Australia’s tax rates for 2026–27? The second bracket rate fell from 16% to 15% (income $18,201–$45,000), saving up to $268 a year. A further legislated cut to 14% applies from 2027–28.

Do I pay the top rate on all my income? No. Australia uses marginal rates — each rate applies only to the slice of income inside its bracket. On $100,000 of taxable income, your effective rate is about 22.5% including Medicare, not 30%.

#tax#australia#income tax
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Written by the DollarWise team

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