• 24 July, 2025

ATO Tax Brackets 2025–26 Explained

Understanding the ATO tax brackets for 2025–26 is essential if you want to know exactly how much tax you’ll pay in Australia.

Australia uses a progressive tax system, which means:
👉 You only pay higher tax rates on the portion of income that falls into each bracket—not your entire income.

With the updated Stage 3 tax cuts (effective from 1 July 2024), most taxpayers benefit from lower rates and simplified brackets.

What Are Tax Brackets in Australia?

Tax brackets divide your income into different ranges, each taxed at a specific rate.

Key Concept: Marginal Tax Rate

Your marginal rate applies only to the income within that bracket, not your total earnings.

👉 This means your effective tax rate is always lower than your highest tax bracket.

ATO Tax Brackets 2025–26 (Residents)

Here are the official income tax rates for Australian residents:

Taxable Income	Tax Rate	Tax Payable
$0 – $18,200	0%	Nil
$18,201 – $45,000	16%	16c per $1 over $18,200
$45,001 – $135,000	30%	$4,288 + 30c per $1 over $45,000
$135,001 – $190,000	37%	$31,288 + 37c per $1 over $135,000
$190,001+	45%	$51,638 + 45c per $1 over $190,000

⚠️ Note: These rates exclude the 2% Medicare Levy, which is added separately.

Stage 3 Tax Cuts – What Changed?

The Stage 3 tax cuts reshaped Australia’s tax system from 1 July 2024.

Key Changes:

• Lowest tax rate reduced from 19% → 16%
• New 30% bracket expanded up to $135,000
• 45% tax rate now starts at $190,001

Who Benefits the Most?

👇 Low-Income Earners (Up to $45,000)

• Benefit from reduced 16% tax rate

👇 Middle-Income Earners ($45,001 – $135,000)

• Biggest winners due to wider 30% bracket

👇 High-Income Earners ($135,000+)

• Still receive tax relief, but less significant

Tax Brackets for Non-Residents (2025–26)

If you’re a non-resident for tax purposes:

Income	Tax Rate
$0 – $135,000	30%
$135,001 – $190,000	37%
$190,001+	45%

❌ No tax-free threshold applies.

Medicare Levy (2%) Explained

Most Australian residents pay a 2% Medicare Levy on taxable income.

Example:

If your income = $80,000
👉 Medicare Levy = $1,600

Some low-income earners may qualify for exemptions or reductions.

How to Calculate Tax (Examples)

Example 1: Income = $80,000

• Tax = $14,788
• Medicare Levy = $1,600

👉 Total Tax = $16,388

Example 2: Income = $200,000

• Tax = $56,138
• Medicare Levy = $4,000
  👉 Total Tax = $60,138

 

How These Changes Impact Your Tax Return

1. Smaller Refunds (Sometimes)

Because tax cuts increase your take-home pay during the year, your refund may be lower.

2. Better Cash Flow

More money in your pocket throughout the year.

3. Easier Tax Planning

Wider brackets make forecasting tax simpler for:

• Employees
• Sole traders
• Small business owners

Smart Tax Planning Tips for 2025

✅ Do This

• Claim all eligible deductions
• Contribute to super (tax-effective strategy)
• Keep accurate records

❌ Avoid

• Overestimating refunds
• Ignoring Medicare Levy
• Missing deductions

FAQs – ATO Tax Brackets 2025

1. What are the tax rates for 2025?

0%, 16%, 30%, 37%, and 45% depending on income.

2. Do I need to update anything?

No—PAYG tax is automatically adjusted by employers.

3. Are these different from 2023?

Yes—lower rates and simplified brackets apply from July 2024.

4. Do tax brackets affect HECS/HELP?

Indirectly—your repayment depends on income, not tax brackets.

Need Help With Tax Planning or Returns?

At Workpaper Accounting Services, we help you:
✔ Maximise your tax refund
✔ Stay compliant with ATO rules
✔ Plan smarter for the financial year

📞 Contact Workpaper Today

Phone: 0485 825 915
Email: info@workpaper.com.au
Website: https://workpaper.com.au/
Address: 7 Bridge St, Werribee, Victoria 3030, Australia