Australian Income Tax Rates and Brackets for 2026-27

For the 2026-27 financial year, Australian resident taxpayers pay no tax on the first $18,200 of income, then 15% up to $45,000, 30% up to $135,000, 37% up to $190,000 and 45% on anything above that, with the second bracket's rate having dropped from 16% on 1 July 2026 under legislated tax cuts. The rate falls again to 14% from 1 July 2027.

Current Income Tax Brackets for Australian Residents

Australia's income tax is progressive: the rate rises as income rises, but only on the portion of income inside each bracket. For the 2026-27 financial year, the tax-free threshold remains at $18,200, unchanged from 2025-26.

The current brackets, per the ATO's own tax rates for Australian residents:

• $0 – $18,200: No tax.
• $18,201 – $45,000: Taxed at 15% (down from 16% in 2025-26).
• $45,001 – $135,000: Taxed at 30%.
• $135,001 – $190,000: Taxed at 37%.
• Above $190,000: Taxed at 45%.

The 15% rate is the first of two legislated cuts to the second bracket, with the rate set to fall again to 14% from 1 July 2027.

Legislated Tax Rate Changes for 2026-27 and 2027-28

Following years of stable rates through 2024-25 and 2025-26, the Australian government's legislated tax cuts are now taking effect under the Treasury Laws Amendment (More Cost of Living Relief) Act 2025:

• From 1 July 2026: The marginal tax rate for the $18,201 to $45,000 income bracket decreased from 16% to 15%, and this rate now applies for the 2026-27 income year.
• From 1 July 2027: The rate will drop further to 14% for the 2027-28 income year and beyond.

These adjustments signify significant tax relief, particularly for middle-income earners. For instance, a worker earning $45,000 or more is saving $268 a year in 2026-27, rising to $536 a year from 2027-28.

How Your Tax Is Actually Calculated

Assessable income (wages, salary, business profits) less allowable deductions gives your taxable income. The brackets above apply to that figure, then offsets like LITO reduce the tax payable, and the Medicare Levy, usually 2% of taxable income, is added on top.

Progressive Taxation and Practical Examples

A common misconception about progressive taxation is that taxpayers think their entire income is taxed at the highest marginal rate applicable to them. This is not the case. As an illustrative example, consider an individual earning $50,000 in the 2026-27 income year:

• The first $18,200 is tax-free.
• Income from $18,201 to $45,000 is taxed at 15% resulting in $4,020.
• The remaining $5,000 (from $45,001 to $50,000) is taxed at 30%, yielding an additional $1,500 tax.

The total tax liability for the $50,000 earner is $5,520, which equates to an effective tax rate of approximately 11%. Therefore, understanding the nuances of progressive taxation is crucial for financial planning.

Tax Offsets and Additional Levies

The Australian tax system incorporates various offsets and levies, adding complexity but also certain relief measures:

• Low Income Tax Offset (LITO): A maximum of $700 for individuals earning up to $37,500.
• Medicare Levy: Represents 2% of taxable income, with exemptions for lower earners.
• Medicare Levy Surcharge: Additional charges for high-income earners without private health insurance.
• Seniors and Pensioners Tax Offset (SAPTO): Provides relief for eligible retirees, varying based on income levels.

These components underscore the Australian government’s commitment to providing targeted relief while enforcing a progressive tax system.

Where Your Bracket Starts to Matter More Than the Rate Card

Knowing your bracket is the easy part. What you do once you're in the higher ones is where a rate card stops being useful and structuring starts:

• Property investors holding assets in their own name at the 37% or 45% bracket often find a different structure changes the outcome on negative gearing, CGT and depreciation.
• Family trusts can move income to beneficiaries on lower brackets, within the rules our trust structuring team can walk you through.
• An SMSF's concessional tax rate sits outside this bracket system entirely, which is part of why property inside super gets modelled separately.
• Business owners drawing income from a company or trust have a different set of levers again, covered on our business tax and CFO advisory page.

High-income earners should also review the deductions available to reduce taxable income, given how much of their earnings sit in the top marginal brackets.

Next Step

These brackets are the same for everyone; what you do with your structure once you're in them is not. Book a consultation if you want your position modelled rather than just your bracket calculated.

Disclaimer: This article contains general information only and does not constitute financial, legal or tax advice. It has been prepared without regard to your objectives, financial situation or needs. Tax and superannuation laws change frequently, and the information in this article may not reflect the current law or may become inaccurate over time. Before acting on anything in this article, you should consider its appropriateness to your circumstances and seek advice from a registered tax agent or qualified adviser.