How is income tax calculated in Australia?

Australian income tax is progressive. For 2025-26 you pay nothing on the first A$18,200, then 16% to A$45,000, 30% to A$135,000, 37% to A$190,000 and 45% above that, plus the 2% Medicare Levy for most taxpayers.

What are the Australian tax brackets for 2025-26?

Tax-Free Threshold: A$0–A$18,200 (0%). Then 16% on A$18,201–A$45,000, 30% on A$45,001–A$135,000, 37% on A$135,001–A$190,000 and 45% above A$190,000, plus the 2% Medicare Levy.

Can I claim superannuation contributions as tax relief?

Yes. Salary-sacrificed and personal deductible super contributions are taxed at 15% inside the fund instead of your marginal rate, up to the concessional cap of A$30,000 per year.

What is the HECS-HELP repayment threshold?

From 1 July 2025, HELP repayments use a marginal system: nothing on income up to A$67,000, then 15 cents per dollar between A$67,000 and A$125,000, and 17 cents per dollar above A$125,000. Repayments are collected through the tax system.

Income Tax Calculator Australia

Calculate your annual take-home pay instantly with the 2025-26 ATO brackets, the 2% Medicare Levy and the new HELP repayment system.

Deduct Other Liabilities

Subtract HECS-HELP repayment, pension contributions, and any other deductions.

Understanding Your Tax-Free Threshold (A$18,200)

How the PA works and the high earner taper

Standard PA

The standard Tax-Free Threshold (A$18,200) for 2025/26 is A$12,570. This is the amount of income everyone can earn tax-free.

Example: If you earn A$35,000, only A$22,430 is taxable (A$35,000 - A$12,570).

High Earner Taper

For every A$2 you earn above A$100,000, your Tax-Free Threshold (A$18,200) is reduced by A$1.

At A$125,140: Your PA is completely removed. Higher earners pay tax on all income above this.

HECS-HELP Repayment Thresholds

The marginal repayment system that started on 1 July 2025

Repayment income (2025-26)	Marginal repayment rate	Notes
Up to A$67,000	Nil	No compulsory repayment below the threshold
A$67,001 – A$125,000	15c per dollar	Only the income above A$67,000 is counted
Above A$125,000	17c per dollar	Applies to the portion above A$125,000, on top of the 15c band

Repayment Calculation

You repay 9% (or 6% for postgraduate) of anything you earn above your threshold. It's only owed if you're employed and earning above the threshold.

Repayment = (Salary - Threshold) × 9%

How HELP debt behaves

→ No interest: HELP debts are indexed annually instead of charging interest, capped at the lower of CPI or wage growth
→ No time limit: the debt stays until repaid, but is cancelled on death rather than passing to your estate
→ Voluntary repayments: you can pay extra at any time through the ATO to reduce the balance before indexation

Tips to Reduce Your Tax Bill Legally

Legitimate ways to minimize your tax liability

Maximize Pension Contributions

Pension contributions are deducted from your gross salary before tax, giving you immediate tax relief. Contributing more reduces your taxable income.

Use Your ISA Allowance

Individual Savings Accounts (ISAs) let you save up to A$20,000 per year tax-free. All interest and dividends are tax-exempt.

Claim All Allowances

If you're self-employed, claim all business expenses. Ensure you're receiving all entitled allowances (Marriage Allowance, etc.).

Gift Aid on Donations

When donating to charity, use Gift Aid. The charity recovers tax, and if you're a higher earner, you may claim additional relief.

HECS-HELP Repayment

If earning near your HECS-HELP threshold, consider whether extra income will significantly increase repayments.

Self-Assessment Planning

Work with an accountant or tax advisor to optimize your tax position, especially if you have multiple income sources.

Frequently Asked Questions

Common questions about Australian income tax

If you're employed and your only income is from your salary, you usually don't need to file. However, you must file if you're self-employed, have income from other sources, or your tax isn't covered by PAYG (Pay As You Go).

Yes. Contact ATO if your tax code is incorrect. A wrong code can result in overpaying or underpaying tax. ATO will adjust it and may refund overpayments.

Marriage Allowance lets you transfer unused Tax-Free Threshold (A$18,200) to your spouse if they earn less than you. This can save around A$252 per year in tax. You can apply on the ATO website.

HELP debts have no expiry date: they remain until repaid through the tax system or voluntarily. The balance is indexed each 1 June (capped at the lower of CPI or wage growth) and any remaining debt is cancelled when you die. You only make compulsory repayments once your income passes A$67,000.

Yes. Workplace pension contributions get tax relief automatically. For personal pensions, you claim relief via Self-Assessment or your employer can adjust your code.

Related Tools & Resources

Explore more GST tools and guides:

Reverse GST Calculator TPAR Helper Margin & Markup Calculator Small Business GST Guide GST Threshold Checker

Official Australian tax resources:

ATO – Income Tax Rates ATO – Lodging Tax Returns

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Official sources: ATO: Tax rates