ToolboxKit

Australia Income Tax 2026-27: Resident Tax Rates, the Medicare Levy and a Worked Example

Last reviewed October 8, 2026. Rates come from the Australian Taxation Office (ATO). The example is our own calculation for a resident taxpayer with no other offsets. Sources are at the end.

Australia's income year runs from 1 July to 30 June, and the 2026-27 year brings a reduction in the second tax rate. This guide sets out the resident rates for 2026-27, adds the Medicare levy, and walks through a worked example so you can see how a salary becomes a tax bill.

The 2026-27 resident rates

For Australian residents, the ATO lists these rates for 2026-27 (they do not include the Medicare levy):

Taxable income Tax on this income
$0 to $18,200 Nil
$18,201 to $45,000 15 cents for each $1 over $18,200
$45,001 to $135,000 $4,020 plus 30 cents for each $1 over $45,000
$135,001 to $190,000 $31,020 plus 37 cents for each $1 over $135,000
$190,001 and over $51,370 plus 45 cents for each $1 over $190,000

The first $18,200 is the tax-free threshold. The ATO notes that from 1 July 2026 the 16% rate is reduced to 15%, and that a further cut to 14% is legislated from 1 July 2027.

The Medicare levy

On top of income tax, most residents pay the Medicare levy of 2% of taxable income, which helps fund the public health system. Some low-income earners pay less, and some high-income earners without private hospital cover can pay an additional surcharge.

A worked example: $90,000 taxable income

Take a resident with a taxable income of $90,000 in 2026-27.

Step 1: income tax. The income falls in the $45,001 to $135,000 band:

  • Tax = $4,020 + 30% × (90,000 − 45,000) = 4,020 + 13,500 = $17,520

Step 2: Medicare levy. 2% × 90,000 = $1,800.

Total = $17,520 + $1,800 = $19,320.

What the numbers mean.

  • Average rate: 19,320 ÷ 90,000 = 21.5% of taxable income.
  • Marginal rate: 32%, which is the 30% tax rate plus the 2% levy on each extra dollar.
  • Take-home before other deductions: 90,000 − 19,320 = $70,680.

What changed from 2025-26

In 2025-26, the second rate was 16% rather than 15%. For the same $90,000 income:

  • 2025-26 income tax: $4,288 + 13,500 = $17,788
  • 2026-27 income tax: $17,520
  • Saving: $268 a year

Everyone with taxable income of $45,000 or more gets the full $268 a year, because the cut applies to the $26,800 band between $18,200 and $45,000 (26,800 × 1% = $268). Those earning between $18,200 and $45,000 receive 1% of the amount above $18,200.

Superannuation

In addition to your pay, your employer must contribute to superannuation, the compulsory retirement savings system. The rate has been set by law at 12% of ordinary time earnings from 1 July 2025. This is paid on top of your salary, not out of it, but check whether your contract quotes a salary "including super". The super guarantee is separate from income tax, and the ATO publishes the current rate and rules.

Other things that affect the bill

  • Deductions: work-related expenses and some other costs reduce taxable income. Keep records.
  • Tax offsets: for example, the low-income tax offset and other credits can reduce tax directly.
  • Medicare levy surcharge: higher earners without appropriate private hospital cover can pay an extra amount.
  • HELP or other study loan repayments: compulsory repayments are collected through the tax system once income passes a threshold.
  • Foreign residents and working holiday makers: different rates apply.

The ATO's tax calculators and tax tables are the right tools for an exact figure, since this simplified example leaves out offsets, deductions and surcharges.

PAYG withholding

If you are an employee, your employer withholds an estimate of your tax from each payment, which is called PAYG withholding. At the end of the year, you lodge a tax return, and the ATO compares your actual tax with what was withheld, and you receive a refund or owe the difference. The 2026-27 changes update the ATO withholding schedules and tax tables from 1 July 2026.

Common mistakes

  1. Forgetting the Medicare levy. The tax table does not include it.
  2. Using the wrong year's rates. Rates differ between 2025-26 and 2026-27.
  3. Applying the marginal rate to the whole income. Each rate applies only to the slice in its band.
  4. Confusing "salary including super" with a salary plus super.
  5. Ignoring deductions. Eligible expenses can reduce taxable income.

Quick answers

What is the tax-free threshold? $18,200 for residents. The first $18,200 of taxable income has no income tax.

Is the 2026-27 cut automatic? Yes, it is built into the rates and the withholding tables from 1 July 2026.

Does my employer handle this? Employers withhold tax from your pay, but you are responsible for your tax return.

How we checked these numbers

We read the 2026-27 resident rates and the 15% change from the ATO's tax rates page, then calculated the example by hand and with a script. If a rate or threshold differs from the ATO, tell us through the contact page.

This article is general information and an illustration of the arithmetic, not tax advice. Your circumstances will change the result. Use the ATO's resources or a registered tax agent.

Sources