Australia's 2026-27 financial year brought a genuine rate cut for many taxpayers — the second tax bracket dropped, taking effect from 1 July 2026, on top of the usual annual threshold adjustments.
2026-27 resident tax brackets
0%: $0-$18,200 (tax-free threshold). 15%: $18,200-$45,000. 30%: $45,000-$135,000. 37%: $135,000-$190,000. 45%: above $190,000.
What changed for 2026-27
The second bracket's rate dropped from its previous level, effective 1 July 2026 — a genuine tax cut rather than just an inflation-indexed threshold shift, benefiting anyone earning above the tax-free threshold.
The Medicare levy is separate
A 2% Medicare levy applies on top of income tax for most taxpayers, funding Australia's public healthcare system. It phases in gradually for lower incomes — between $29,207 and $36,509, a reduced marginal rate applies before the full 2% kicks in above that range — rather than applying at the full rate from the first dollar.
Marginal rates, not flat rates
Being in the 30% bracket doesn't mean 30% of your whole income goes to tax. Each rate only applies to the portion of income within that specific band — a $90,000 earner pays 0% on the first $18,200, 15% on the next portion to $45,000, and 30% only on the remainder up to $90,000.
What's not included here
The Low Income Tax Offset (LITO) can further reduce tax for lower earners, HECS/HELP student loan repayments are a separate income-tested obligation, and the Medicare Levy Surcharge (different from the standard levy) applies to higher earners without private health insurance. Superannuation Guarantee contributions (12% for 2026-27) are paid by employers on top of salary, not deducted from it.
Calculate your exact income tax plus Medicare levy with the Australia Income Tax Calculator.