Your Australian tax bill is not one number. It is a set of brackets that apply to slices of your taxable income, plus a separate 2% Medicare levy, and the result changes depending on whether you are a resident for tax purposes or a foreign resident. This guide sets out the resident brackets, the tax-free threshold, the low income tax offset (LITO), the rates for foreign residents, and the special rates for working holiday makers on a 417 or 462 visa. It is written for people who have just moved to Australia, or are about to, and want to know roughly what they will pay. Rates verified against Australian Taxation Office pages on 14 October 2026.
Key facts at a glance
| Income year | 1 July to 30 June |
|---|---|
| Tax-free threshold (full-year resident) | AUD 18,200 |
| Lowest resident bracket | Nil on the first AUD 18,200 |
| Top resident rate | 45c for each $1 over AUD 190,000 |
| Medicare levy | 2% of taxable income, charged on top of these rates |
| Low income tax offset (LITO) | Up to AUD 700, for taxable income up to AUD 66,667 |
| Foreign residents | 30c for each $1 from the first dollar; no tax-free threshold; no Medicare levy |
| Working holiday makers (417 and 462) | 15c for each $1 on the first AUD 45,000 |
| Last verified | 14 October 2026 |
All amounts in this guide are in Australian dollars (AUD). Where a rate is published for a specific income year, the table names that year.
The Australian income year runs 1 July to 30 June
Before the numbers, the calendar. Australia does not tax you by calendar year. The income year — the ATO calls it the financial year — runs from 1 July to 30 June the following year. The year that started on 1 July 2026 is the 2026–27 income year, and it ends on 30 June 2027.
That matters for two practical reasons. First, when someone says “this year’s tax rates”, they mean the rates for the income year you are in, not the calendar year. Second, your first Australian tax return covers a part-year if you arrived partway through an income year, which changes your tax-free threshold. That is covered below.
You lodge a return for each income year after it ends. For most people the lodgment window is July to October, and the ATO’s myTax service or a registered tax agent handles it.
Resident tax rates and brackets
These are the rates that apply if you are an Australian resident for tax purposes. They are marginal: each rate applies only to the slice of income inside its bracket, not to your whole income.
| Taxable income | Tax on this income |
|---|---|
| 0 – $18,200 | Nil |
| $18,201 – $45,000 | 15c for each $1 over $18,200 |
| $45,001 – $135,000 | $4,020 plus 30c for each $1 over $45,000 |
| $135,001 – $190,000 | $31,020 plus 37c for each $1 over $135,000 |
| $190,001 and over | $51,370 plus 45c for each $1 over $190,000 |
The ATO states plainly that these rates do not include the Medicare levy of 2%.
For comparison, in 2025–26 the second bracket was 16c for each $1 over $18,200 rather than 15c, and the cumulative amounts in the higher brackets were correspondingly larger: $4,288 at the $45,000 step, $31,288 at the $135,000 step, and $51,638 at the $190,000 step. If you are looking at an older payslip or a prior-year notice of assessment, that is the difference you are seeing.
Three things are worth being clear about:
- Marginal, not flat. The top rate of 45c applies only to the dollars above $190,000. Earning $190,001 does not put your whole income on the 45c rate.
- Taxable income, not salary. The brackets apply to your taxable income — what is left after allowable deductions. Deductions move you down the brackets.
- Income tax only. The Medicare levy is added on top, and the low income tax offset is subtracted. The next two sections deal with both.
The tax-free threshold
If you are an Australian resident for tax purposes for the full income year, you pay no tax on the first AUD 18,200 of income. That is the tax-free threshold.
If you became a resident partway through the year — common if you moved to Australia mid-year — your threshold is lower. The ATO works it out in two parts:
| Flat amount | $13,464 |
|---|---|
| Additional amount | $4,736, apportioned by the number of months you were in Australia during the income year, counting the month you arrived |
The ATO’s own example: John became a resident on 17 April, so his threshold is apportioned for 3 of the 12 months. His tax-free threshold is $13,464 + (($4,736 × 3) ÷ 12) = $14,648. He pays no tax on the first $14,648 and starts paying tax on income above that.
Two consequences follow. Your threshold in your first year is lower than a full-year resident’s, so you pay more tax on the same income. From your second year you are a resident for the full year and get the full $18,200.
If you were not a resident at any time during the year, you are not entitled to the tax-free threshold at all. You pay tax on every dollar of Australian income you earn — the foreign resident position described further down.
The low income tax offset (LITO)
The low income tax offset reduces the tax you owe if your income is below a ceiling. You do not claim it separately — the ATO works it out when you lodge your return, and it appears on your notice of assessment under “less non-refundable tax offsets”.
To be eligible you need to be an Australian resident for tax purposes, pay tax on your taxable income, and be under the income thresholds. The offset steps down as income rises:
| $37,500 or less | $700 (the maximum) |
|---|---|
| $37,501 – $45,000 | $700 minus 5c for every $1 above $37,500 |
| $45,001 – $66,667 | $325 minus 1.5c for every $1 above $45,000 |
| Above $66,667 | Nil |
LITO is non-refundable. It can reduce your tax to zero, but it cannot go below zero, and any unused amount is not paid out to you. It is a discount on tax you would otherwise owe, not a payment.
The Medicare levy adds 2%
On top of income tax, most resident taxpayers pay the Medicare levy, which is 2% of taxable income. The ATO’s worked example: a taxable income of $75,000 produces a levy of $1,500.
The levy is calculated when you lodge, and your employer’s withholding during the year generally already includes an amount to cover it. Some people are exempt or pay a reduced levy, and temporary visa holders who are not entitled to Medicare may be able to claim it back. That is a separate topic with its own rules — our guide to the Medicare levy and who can claim an exemption covers it in detail.
One distinction trips people up: the Medicare levy (2%, most people) is not the same as the Medicare levy surcharge (an extra 1% to 1.5% for higher earners without private hospital cover). They are different charges with different tests.
Foreign resident tax rates
If you are a foreign resident for tax purposes for the full year, different rates apply. The ATO’s current table is for 2025–26, which was the most recent year published on that page as at 14 October 2026:
| Taxable income | Tax on this income |
|---|---|
| 0 – $135,000 | 30c for each $1 |
| $135,001 – $190,000 | $40,500 plus 37c for each $1 over $135,000 |
| $190,001 and over | $60,850 plus 45c for each $1 over $190,000 |
Two differences matter more than the numbers themselves. First, there is no tax-free threshold: the 30c rate applies from the first dollar. Second, the ATO states directly that foreign residents are not required to pay the Medicare levy.
Foreign residents also cannot claim the tax-free threshold, and LITO is limited to Australian residents for tax purposes. If you are not sure which side of the line you fall on, residency is a tax test in its own right — it is not decided by your visa subclass.
Working holiday maker tax rates
If you hold a Working Holiday visa (subclass 417) or a Work and Holiday visa (subclass 462), you are a working holiday maker for tax purposes, and special rates apply. The ATO defines a working holiday maker by those two visa subclasses. Again, the current published table is for 2025–26:
| Taxable income | Tax on this income |
|---|---|
| 0 – $45,000 | 15c for each $1 |
| $45,001 – $135,000 | $6,750 plus 30c for each $1 over $45,000 |
| $135,001 – $190,000 | $33,750 plus 37c for each $1 over $135,000 |
| $190,001 and over | $54,100 plus 45c for each $1 over $190,000 |
The headline point is the first row: 15c for each $1 on the first $45,000. Working holiday makers do not get the ordinary tax-free threshold — the 15% rate applies from the first dollar. Above $45,000 the bands line up with the higher resident-style brackets.
Your visa subclass drives this, not your intention. If you are planning a working holiday, our guide to the Working Holiday and Work and Holiday visas covers the visa side; this section is only about how the income is taxed.
Your first year: part resident, part foreign resident
New arrivals often find their first return surprising, because a single income year can be split. Suppose you arrived in March and became an Australian resident for tax purposes on arrival. For the part of the year before you arrived, you were not an Australian resident, so any Australian-sourced income you earned in that period is treated as a foreign resident’s. For the part after, you are a resident, with the adjusted tax-free threshold described above.
In practice the ATO asks you to record your residency dates in your return, and myTax works out the part-year threshold for you. The practical effect is that your first return can show a mix of treatment, and your effective tax rate for that year can look higher than a full-year resident’s on the same annual income.
Residency for tax purposes is its own test, and it is not the same as holding a particular visa. If your situation is complicated, get advice rather than assuming a visa makes you a tax resident or a non-resident.
Step-by-step: how to work out your own tax
- Work out your taxable income: assessable income minus allowable deductions. This is the number the brackets apply to.
- Identify your residency status for the income year — resident for the full year, resident for part of the year, foreign resident, or a working holiday maker. This decides which table you use.
- Apply the brackets to your taxable income. For example, a full-year resident with $60,000 taxable income in 2026–27 pays $4,020 plus 30c for each $1 over $45,000: $4,020 + (0.30 × $15,000) = $8,520.
- Subtract the low income tax offset if you are eligible. At $60,000 that is $325 − (0.015 × $15,000) = $100, so tax drops to $8,420.
- Add the Medicare levy if it applies: 2% × $60,000 = $1,200. Total for the year: $9,620.
- Compare that with the tax your employer withheld. Withholding is a prepayment; lodgment squares the difference and produces either a refund or a bill.
- Lodge your return through myTax or a registered tax agent. You will need a tax file number to lodge — see our guide to applying for a tax file number.
If you are checking whether a salary offer leaves you better off, our breakdown of average salaries in Australia by industry gives you typical gross figures to test against these rates.
Common mistakes
- Assuming the full tax-free threshold in your first year. If you arrived mid-year, your threshold is $13,464 plus a pro-rated share of $4,736, not $18,200.
- Reading the top bracket as your rate. Australia is marginal. The 45c rate applies only to income above $190,000, not to all of it.
- Forgetting the Medicare levy. Budget for an extra 2% of taxable income unless you are exempt or your levy is reduced.
- Treating withholding as your final tax. Your employer’s PAYG withholding is a prepayment. The final figure is settled when you lodge.
- Using resident rates as a foreign resident. Foreign residents pay from the first dollar at 30c, with no tax-free threshold and no Medicare levy.
- Assuming a visa decides your tax residency. Tax residency is a separate test from immigration status.
- Expecting brackets to move with inflation. Tax brackets are set by law, not automatically indexed. The same thresholds applied in 2024–25 and 2025–26, for instance, and only the second-bracket rate changed for 2026–27.
FAQ
Do I pay tax on the first $18,200 I earn in Australia?
If you are an Australian resident for tax purposes for the full income year, no — the first $18,200 is tax-free. If you became a resident partway through the year, your threshold is lower: $13,464 plus a share of $4,736 apportioned by the months you were in Australia.
What is the difference between a resident and a foreign resident for tax?
Residents get the tax-free threshold, the resident brackets and LITO. Foreign residents pay 30c from the first dollar, have no tax-free threshold, and are not required to pay the Medicare levy. Residency is a tax test, not an immigration one.
Are these tax rates inclusive of the Medicare levy?
No. The ATO states that the resident rates do not include the Medicare levy of 2%. You add the levy separately unless you are exempt or your levy is reduced.
Do working holiday makers get the tax-free threshold?
No. On a 417 or 462 visa you are taxed as a working holiday maker: 15c for each $1 on the first $45,000, from the first dollar. That is a lower starting rate than a foreign resident’s 30c, but it is not a tax-free threshold.
What is LITO and do I need to claim it?
The low income tax offset reduces tax for people earning up to $66,667, by up to $700. You do not claim it separately — the ATO calculates it when you lodge. It is non-refundable, so it can reduce your tax to zero but cannot produce a payment.
Will these rates change?
Tax rates and thresholds are set for each income year and can change. The figures here were verified on 14 October 2026. Check the ATO’s tax rates pages before you rely on a number for your own return.
Official sources
- Tax rates – Australian residents — Australian Taxation Office
- Tax rates – foreign resident — Australian Taxation Office
- Tax rates – working holiday maker — Australian Taxation Office
- Tax-free threshold for newcomers to Australia — Australian Taxation Office
- Low income tax offset — Australian Taxation Office
- What is the Medicare levy? — Australian Taxation Office
Tax rates and thresholds are set for each income year. The figures in this guide were verified on 14 October 2026 — always confirm the current rates on the ATO pages linked above before you rely on them.
AU0061 publishes general information, not personal migration advice. Visa rules and fees change, and eligibility depends on your individual circumstances. Always confirm the current requirements with the Department of Home Affairs or a MARA-registered migration agent before you act on anything in this guide.