Blog

How much of your salary does the tax office actually keep? It’s one of the first questions anyone asks about a pay rise, a new job offer, or the end of the financial year — and it’s exactly what an income tax calculator answers in seconds.

If you earn income in Australia, this guide walks you through everything: how income tax is calculated, what the 2025–26 tax brackets mean, the difference between marginal and effective tax rates, and how to use the income tax calculator to work out your own tax bill.

Our calculator takes your taxable income and instantly shows your income tax payable, your marginal and effective tax rates, and your after-tax income. This guide explains what each of those numbers means, how they’re worked out, and what the calculator deliberately leaves out.

Important

All tax figures in this guide use 2025–26 Australian tax rates and thresholds. This calculator shows income tax only — it does not include the 2% Medicare levy or HECS/HELP repayments, which come on top. This guide is general information, not tax or financial advice.

What Is the Income Tax Calculator?

The Income Tax Calculator Australia is a free online tool that works out how much income tax you pay on your taxable income for the 2025–26 financial year. Enter one number — your taxable income — and it instantly returns your income tax payable, your marginal tax rate, your effective tax rate, and your after-tax income.

Unlike take-home pay calculators, which bundle in the Medicare levy and other deductions, this calculator isolates the income tax component so you can see exactly what the tax brackets alone do to your pay.

Who should use it

• Employees checking how much tax comes out of a salary or pay rise
• Job seekers comparing offers at different salary levels
• Contractors and sole traders estimating their annual tax bill
• Anyone who wants to understand marginal vs effective tax rates
• Migrants and visa holders learning how Australian tax brackets work
• Students and part-time workers checking whether they’ll pay any tax at all

What Does the Income Tax Calculator Do?

The calculator has a single input and five outputs. Here’s exactly what each one means:

Input	Meaning	What to enter
Taxable Income	Your annual income after deductions, before tax	Your gross income minus claimable deductions (see below)

Output	Meaning
Income Tax Payable (hero)	Your total income tax for the year, using 2025–26 brackets
Taxable Income	The figure you entered, echoed back for reference
Income Tax Payable	The same annual tax figure, shown in the results table
Marginal Tax Rate	The tax rate on your next dollar of income
Effective Tax Rate	Your total tax as a percentage of your income
After-Tax Income	Taxable income minus income tax payable (before Medicare/HECS)

The two rates are the most misunderstood part — more on those below.

How to Use the Income Tax Calculator

Step 1: Enter your taxable income

Type your annual taxable income — that’s your gross income minus any tax deductions you claim (work-related expenses, donations, income protection premiums, and the like). If you don’t claim deductions, your taxable income is simply your gross salary.

The field accepts whole numbers in steps of $1,000, starting from $0. There’s no need to enter superannuation, which isn’t part of your taxable income.

Step 2: Review your results

The calculator instantly shows your income tax payable as the headline figure, plus the results table. Compare the marginal rate (what extra income costs you in tax) with the effective rate (your overall tax burden) — the gap between them surprises most people.

Read more: How to Calculate Your Take-Home Pay in Australia: Salary, Tax and Deductions Explained

How Income Tax Is Calculated

Australia’s income tax is worked out in clear steps:

1. Start with your taxable income — assessable income minus deductions.
2. Apply the 2025–26 resident tax brackets progressively: each slice of income is taxed at its own rate.
3. Subtract tax offsets you’re eligible for (such as the Low Income Tax Offset).
4. The result is your income tax payable.

Example

	Example Calculation
Taxable income	$80,000
Tax: $4,288 + 30c × ($80,000 − $45,000)	$14,788.00
Marginal tax rate	30.0%
Effective tax rate ($14,788 ÷ $80,000)	18.5%
After-tax income ($80,000 − $14,788)	$65,212.00

This matches the calculator’s result for $80,000 exactly. Note the gap: your marginal rate is 30%, but your effective rate is only 18.5%.

2025–26 Australian Income Tax Brackets

For Australian residents for tax purposes in 2025–26 (these include the Stage 3 tax cuts):

Taxable income	Tax on this income
$0 – $18,200	Nil
$18,201 – $45,000	16c for each $1 over $18,200
$45,001 – $135,000	$4,288 plus 30c for each $1 over $45,000
$135,001 – $190,000	$31,288 plus 37c for each $1 over $135,000
$190,001 and over	$51,638 plus 45c for each $1 over $190,000

These rates are for income tax only — the 2% Medicare levy is calculated separately. (ATO – Australian resident tax rates)

The tax-free threshold

The first $18,200 of your income is tax-free, but you can only claim the threshold from one payer — usually your highest-paying employer. A second employer withholds tax from your first dollar. The exception: if your total yearly income is $18,200 or less, you can claim it from each payer.

Marginal Rate vs Effective Rate

This is the single most useful concept in Australian tax — and the one the calculator is designed to teach.

• Your marginal tax rate is the rate on your next dollar. Earn $80,000 and your marginal rate is 30%: an extra $1,000 of income costs you $300 in tax.
• Your effective tax rate is your total tax divided by your total income. On $80,000 with $14,788 tax, it’s 18.5%.

The effective rate is always lower than the marginal rate (until very high incomes), because the lower brackets and the tax-free threshold pull the average down. When someone says “I’m in the 30% tax bracket,” they mean their marginal rate — not that they pay 30% of their income in tax.

This also kills the most common tax myth: moving into a higher bracket never taxes all your income at the higher rate. Only the dollars above the threshold are taxed at the new rate. Earning $1 more never leaves you with less after tax.

The Low Income Tax Offset (LITO)

After the brackets are applied, eligible taxpayers get the Low Income Tax Offset — a non-refundable offset the ATO applies automatically when you lodge. You don’t need to claim it separately, and it can’t create a refund on its own. For 2025–26:

Taxable income	LITO
$37,500 or less	$700
$37,501 – $45,000	$700 minus 5c for each $1 over $37,500
$45,001 – $66,667	$325 minus 1.5c for each $1 over $45,000
Over $66,667	Nil

For example, on a $50,000 taxable income the offset is $250 ($325 minus 1.5c × $5,000), which brings the tax down from $5,788 to $5,538. (ATO – Low income tax offset)

Don’t confuse LITO with the old Low and Middle Income Tax Offset (LMITO) — that was a separate, temporary offset that ended after the 2021–22 financial year. And note that seniors and pensioners may instead be eligible for the Seniors and Pensioners Tax Offset (SAPTO), which has its own thresholds.

Example

	Example Calculation
Taxable income	$50,000
Income tax before offsets	$5,788.00
LITO ($325 − 1.5c × $5,000)	−$250.00
Income tax payable	$5,538.00

Read more: Australian Pay Calculator: Complete Guide to Salary, Tax and Take-Home Pay

What the Calculator Doesn’t Include

This is deliberate, and it’s important to understand. The income tax calculator isolates income tax only. Three big items are left out:

Medicare levy (2%)

Almost every taxpayer pays the 2% Medicare levy on top of income tax. For 2025–26, singles pay no levy up to $28,011, a reduced levy to $35,013, and the full 2% above that. (Beware: many websites still show $27,222 and $34,027 — those are the 2024–25 figures.) High earners without private hospital cover may also pay the Medicare levy surcharge of 1–1.5%. Use the Medicare levy calculator for the full picture.

HECS/HELP repayments

Study and training loan repayments aren’t technically tax, but they’re withheld the same way. For 2025–26, nothing is owed below $67,000 of repayment income, then 15c per dollar above that up to $125,000. The HECS calculator estimates these.

Why it matters

On an $80,000 income, the calculator shows $14,788 income tax — but with the $1,600 Medicare levy, your real total is $16,388. The page’s own step-by-step says it plainly: add Medicare levy (2%) and HECS if applicable for total deductions. For the combined figure, the take-home pay calculator does the whole job.

Taxable Income vs Gross Income

The calculator asks for taxable income, not gross salary — and the difference is deductions. Your taxable income is:

Taxable income = Assessable income − Deductions

Common deductions Australians claim include:

Deduction type	Examples
Work-related expenses	Uniforms, tools, professional memberships, work-related travel
Working from home	The fixed-rate method for home office hours
Donations	Gifts of $2+ to registered charities (DGRs)
Income protection	Premiums for income protection insurance held outside super
Tax agent fees	What you paid your accountant to prepare last year’s return

(ATO – Deductions you can claim)

Every $1,000 of deductions saves you $300 in tax if your marginal rate is 30% — which is why keeping receipts matters. For example, if you earn $85,000 and claim $5,000 in work-related deductions, your taxable income is $80,000 — so the calculator’s $14,788 figure applies, not the $16,288 you’d pay on the full $85,000. Salary-sacrificed super contributions also reduce your taxable income, since they come out of pre-tax pay.

Stage 3 Tax Cuts and What Changed

The 2025–26 brackets include the Stage 3 tax cuts, which took effect on 1 July 2024 and were retained for 2025–26. The headline changes were:

• The 19% rate became 16% (for income $18,201–$45,000)
• The 32.5% rate became 30% (for income $45,001–$135,000)
• The 37% threshold rose from $120,000 to $135,000
• The 45% threshold rose from $180,000 to $190,000

For most middle-income earners, the practical effect was a few thousand dollars less tax per year compared with the old brackets. If you’re comparing this year’s tax with an older payslip or article, make sure both use the same year’s brackets.

Example

	Example Calculation
Taxable income	$100,000
Tax under pre-July-2024 brackets	$22,967.00
Tax under 2025–26 brackets	$20,788.00
Annual saving from Stage 3 cuts	$2,179.00

Worked Examples at Common Income Levels

Here are the calculator’s figures at four common incomes (single Australian resident, no HELP debt, LITO applied where eligible — income tax only, before Medicare):

Taxable income	Income tax payable	Marginal rate	Effective rate	After-tax income
$50,000	$5,538	30%	11.1%	$44,462
$80,000	$14,788	30%	18.5%	$65,212
$100,000	$20,788	30%	20.8%	$79,212
$150,000	$36,838	37%	24.6%	$113,162

Notice how the effective rate climbs much more slowly than the marginal rate — that’s the progressive system at work. Someone on $150,000 has a 37% marginal rate but keeps over 75% of their income after income tax.

Example

	Example Calculation
Taxable income	$150,000
Tax: $31,288 + 37c × ($150,000 − $135,000)	$36,838.00
Marginal tax rate	37.0%
Effective tax rate ($36,838 ÷ $150,000)	24.6%
After-tax income ($150,000 − $36,838)	$113,162.00

Add the 2% Medicare levy ($3,000 on $150,000) for the full picture: $39,838 total, or about 26.6% effective.

PAYG Withholding vs Your Actual Tax Bill

The tax the calculator shows is your actual liability — but during the year, your employer withholds an estimate under PAYG withholding, based on each pay period’s earnings annualised. The two often differ, which is why tax time brings refunds or bills:

• Refund: your employer withheld more than you owe — common if you had one job all year, claimed the threshold correctly, and had deductible expenses.
• Bill: you were under-withheld — common with two jobs (threshold claimed twice), HELP debt not declared, or extra untaxed income like bank interest or crypto gains.

The tax refund estimator can give you a sense of which way your return will go before you lodge.

When the calculator is most useful

• Evaluating a pay rise: see exactly how much of the raise you keep once your marginal rate takes its cut.
• Comparing job offers: two salaries, two after-tax figures — the gap is often smaller than the gross gap suggests.
• Sole traders: estimate your annual liability so quarterly PAYG instalments don’t surprise you.
• End-of-financial-year planning: model how extra deductible contributions (such as super) change your tax before 30 June.

Who Pays Different Rates?

Not everyone uses the resident brackets. A quick comparison for 2025–26:

Taxpayer type	Tax-free threshold	Rates
Australian resident	$18,200	0% / 16% / 30% / 37% / 45%
Foreign resident	None	30% to $135,000, then 37% / 45%; no Medicare levy
Working holiday maker (417/462 visas)	None	15% to $45,000, then 30% / 37% / 45%

(ATO – Foreign resident rates; ATO – Working holiday maker rates)

If you’re on a temporary visa, don’t use the resident calculator figures — your tax bill will be higher on the same income.

Common Income Tax Mistakes

Mistake	Do this instead
Thinking a higher bracket taxes all your income	Only income above each threshold is taxed at the higher rate
Entering gross salary instead of taxable income	Subtract your deductions first
Forgetting the Medicare levy isn’t included	Add 2% (and any surcharge) for your real total
Claiming the tax-free threshold with two employers	Claim it once, from your main employer
Comparing this year’s tax with pre-July-2024 figures	The Stage 3 cuts changed the brackets — use 2025–26 rates
Assuming the calculator includes HELP repayments	Add them separately if you have a study loan
Using resident rates as a temporary visa holder	Foreign residents and working holiday makers pay different rates

Practical Tips

• Know your taxable income, not just your salary: deductions are the lever you control — keep receipts all year, not just at tax time.
• Check your marginal rate before overtime or extra shifts: it tells you exactly what each extra dollar is worth after tax.
• Don’t fear the next bracket: earning more always leaves you with more after tax. The math guarantees it.
• Revisit the threshold if you change jobs: claiming the tax-free threshold twice is the most common cause of surprise tax bills.
• Add Medicare and HELP yourself: this calculator shows income tax only — budget with the full deductions picture.
• Use the worked examples as sanity checks: if your own calculation is wildly different from the table above, recheck your inputs before assuming the calculator is wrong.
• Remember HELP uses repayment income: compulsory HELP repayments are worked out on your repayment income, which isn’t always identical to your taxable income — so treat the calculator’s tax-only figure and any HELP estimate as separate moving parts.

Read more: Pro-Rata Salary Calculator Australia: Complete Guide to Part-Time Pay, Tax and Take-Home Salary

Frequently Asked Questions

Final Takeaway

Income tax in Australia is simpler than it looks once you separate its three moving parts: the progressive brackets, the tax-free threshold, and the offsets. Your marginal rate tells you what the next dollar costs; your effective rate tells you what you actually pay overall.

For a quick self-check, the core method is:

Income Tax = Progressive bracket calculation on taxable income − Eligible offsets (e.g. LITO)

After-Tax Income = Taxable income − Income tax payable

Remember what this calculator does and doesn’t do: it nails the income tax component using 2025–26 rates, but the Medicare levy (2%) and any HECS/HELP repayments sit on top. Add those for your true take-home figure — or run the take-home pay calculator for the combined number.

Run your own income through the income tax calculator, compare it with the worked examples above, and you’ll never be surprised by a tax bill again.

Read more: Hourly to Salary Calculator Australia: Convert Your Hourly Rate to Annual Salary

Read more: Salary to Hourly Calculator Australia – How to Convert Your Salary to an Hourly Rate