Australia's Stage 3 tax cuts, which took effect from 1 July 2024, reshaped the middle of the tax bracket — expanding the 19% bracket, reducing the 32.5% rate to 30%, and cutting the 37% rate entirely for most incomes. Understanding where these brackets now sit, and how the Low Income Tax Offset (LITO) works on top of them, is essential for accurate tax planning.
FY 2025-26 Tax Brackets (Residents)
| Taxable Income | Rate |
|---|---|
| $0 – $18,200 | Nil |
| $18,201 – $45,000 | 16% |
| $45,001 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| Over $190,000 | 45% |
Plus 2% Medicare Levy on most income. Reduced/exempt for low-income earners (see below).
Low Income Tax Offset (LITO)
LITO is a tax rebate — it reduces the amount of income tax you pay, but cannot create a refund if it exceeds your tax liability:
- Maximum LITO: $700 (for taxable income up to $37,500)
- First phase-out: Reduces by $5 per $100 of income from $37,500 to $45,000 (reduces from $700 to $325)
- Second phase-out: Reduces by $1.50 per $100 from $45,000 to $66,667 (reduces from $325 to $0)
- No LITO above: $66,667
Medicare Levy
The Medicare Levy is 2% of your taxable income. It funds Australia's universal healthcare system (Medicare). A Medicare Levy Surcharge (MLS) of 1–1.5% also applies to higher earners who don't have private hospital cover:
- MLS threshold (single): $93,000 (2025-26). If income exceeds this and you have no private hospital cover, you pay 1% extra.
- MLS bands: $93,001–$108,000 = 1%; $108,001–$144,000 = 1.25%; above $144,000 = 1.5%
- Medicare Levy reduction: Low earners pay reduced or no levy. Reduction starts phasing out above ~$26,000 for singles.
Worked Example — $60,000 Income
Taxable Income: $60,000
Nil × $18,200 = $0
16% × $26,800 ($18,201–$45,000) = $4,288
30% × $15,000 ($45,001–$60,000) = $4,500
Gross tax: $8,788
LITO: $0 (income above $66,667? No — wait, $60K < $66,667)
At $60,000: LITO = max $700 − first phase out ($37.5K–$45K, $375 reduction) = $325, then second phase out ($45K–$60K = $225 reduction) → LITO = $100
Tax after LITO: $8,788 − $100 = $8,688
Medicare Levy: 2% × $60,000 = $1,200
Total Tax: $9,888 | Effective rate: 16.5%
Worked Example — $100,000 Income
Taxable Income: $100,000
16% × $26,800 = $4,288
30% × $55,000 ($45K–$100K) = $16,500
Gross tax: $20,788
LITO: $0 (income above $66,667)
Medicare Levy: 2% × $100,000 = $2,000
Total Tax: $22,788 | Effective rate: 22.8%
Worked Example — $180,000 Income
Taxable Income: $180,000
16% × $26,800 = $4,288
30% × $90,000 ($45K–$135K) = $27,000
37% × $45,000 ($135K–$180K) = $16,650
Gross tax: $47,938
Medicare Levy: 2% × $180,000 = $3,600
Total Tax: $51,538 | Effective rate: 28.6%
Superannuation: Tax in Your Super
Super contributions and earnings are taxed separately — not as income tax:
- Concessional contributions (employer SG + salary sacrifice): taxed at 15% within the fund. If your income exceeds $250,000, an extra 15% Division 293 tax applies (total 30%).
- Non-concessional contributions: Made from after-tax dollars, no tax within fund on the way in.
- Investment earnings in super: 15% (accumulation phase), 0% in pension phase.
- Concessional cap: $30,000/year (2025-26). Excess is included in assessable income and taxed at marginal rates.
Calculate your Australian income tax
Open Income Tax Calculator →Source: ATO.gov.au. FY 2025-26 (1 July 2025 – 30 June 2026). Not financial advice.