How is income tax calculated in Australia?

Understand how income tax is calculated for individuals using marginal tax rates.

Summary

Australian resident individuals pay income tax at a series of marginal rates. Different portions of taxable income are taxed at different rates, with lower rates applying to lower portions of income.

What this means

Australia uses a progressive income tax system for individuals. The first portion of income up to the tax-free threshold is not taxed. Income above the threshold is taxed in tiers, and each tier's rate only applies to the portion of income that falls within that tier — not to your entire income.

The Medicare levy is generally added on top of income tax. Rates and thresholds are updated by the ATO. Foreign residents, working holiday makers and minors have different rates that apply to their situation.

Typical actions

  • Work out your assessable income for the year.
  • Subtract allowable deductions to determine your taxable income.
  • Check the current individual income tax rates on the ATO website.
  • Consider using the ATO's tax calculators to estimate the tax that may apply.
  • Speak to a registered tax agent if your situation is complex.

Official ATO sources

Last checked: 24 August 2026

Tax rates – Australian resident
Current and historical income tax rates for Australian resident individuals.

Tax rates and codes
Main ATO hub for tax rates, thresholds and codes.

Your tax return
Main hub for lodging and managing individual tax returns.

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Important notice: Tax Clarity is an independent information tool. This page provides general information based on official sources. It does not provide tax, legal, financial, or accounting advice. Tax rules can change, and how they apply depends on your circumstances. For advice about your situation, speak with a registered tax agent or qualified professional.

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