The 2025-26 financial year will see significant reforms in the Australian income tax brackets, most of which will be as a result of the application of the Stage 3 reforms. With the new tax brackets Australia 2025-26, the big question that the Australian people are asking themselves is: “How much tax will I pay in 2025–26?” It is always beneficial to know your position in matters concerning tax, as it is good for financial planning.
The reforms are aimed at streamlining the system and giving relief to middle-income earners, but it helps to understand how the system works before tax time. Consulting a personal tax accountant can help you navigate these changes efficiently and ensure your income tax return Perth is prepared correctly.
The question many taxpayers are asking is, How do tax brackets work in Australia? The answer lies in the mechanics of the system. The country has a progressive model in which income is divided into bands and each band is taxed at a different rate. This is designed to make the system fair by taxing higher levels of income more, but without penalising the entirety of earnings.
The progressive tax system in Australia is a decades-long pillar of the Australian fiscal system. You are taxed only at the higher rate on the excess of each bracket. For example, if you earn AUD90,000, only the amount over each threshold is taxed at the higher rate. Many people misinterpret this, believing the entire salary is taxed at the higher rate. Consulting an experienced accountant Perth can help you better understand these calculations and plan effectively.
Someone earning AUD80,000 in the 2025-26 year will have their income divided between the various bands. First 18,200 is tax-free, then 26,800 is taxed at 16%, and the next 90,000 bracket covers 35,000 taxed at 30%. The amount to be paid in tax is much lower than the sum that would have been paid by paying the highest marginal tax rate on the full amount of income. This is an example of how the tax brackets are fair without overloading middle-income earners.
Using a second example, to illustrate the point, a person earning AUD50,000 will only pay 16% on the slice between AUD18,201 and AUD45,000, and then 30% on the slice above AUD45,000. Conversely, a worker who earns AUD120,000 would be taxed proportionately on every slab but would not have all his income taxed at the higher marginal rate. These instances explain why an accurate interpretation of the tax bracket system can prevent misunderstandings.
In July 2024, tax policy turned a corner when the Stage 3 tax cuts Australia were implemented. The government tried to make the system easier by reducing the number of brackets, restructuring thresholds and providing real relief to middle-income households.
The changes also shed light on the future of tax brackets Australia, which may keep on changing as economic pressures like inflation and an increase in wages shift the priorities of the government. The largest beneficiaries of this reform are middle-income earners who have a range of AUD45,000 to AUD135,000. Higher earners still pay at higher rates, but the new design ensures that the marginal jump is less extreme than previously. Consulting a tax agent Perth can help individuals and businesses understand how these changes impact their tax obligations.
The Australian tax brackets 2025–26 reveal the fully implemented Stage 3 structure. Comparing these with the previous year reveals how the adjustments simplify the framework and make it easier to estimate personal liabilities.
| Taxable Income (in AUD) | 2025-26 Rates | Previous Rate |
| 0-18,200 | 0% | – |
| 18,201-45,000 | 15% | 19% |
| 45,001-135,000 | 30% | 32.5% or 37% |
| 135,001-190,000 | 37% | – |
| 190,001+ | 45% | – |
These income tax rates Australia 2025–26 show a streamlined approach, with the 32.5% bracket eliminated and the 37% threshold adjusted to higher levels. For most Australians, the difference will mean more take-home pay and a greater incentive to accept higher-paying roles.
Residents benefit from the Australian income tax bracket system by accessing the tax-free threshold and progressive rates. With brackets applying in stages, the actual amount of tax payable is much lower than a flat percentage applied to the whole income. This is particularly useful for middle-income earners who make up the majority of Australia’s workforce.
The non-resident tax brackets Australia are a different story altogether. Non-residents do not get the tax-free threshold, so tax starts from the first dollar. Their rates are higher on lower levels of income, which is something international workers, expats, and temporary visa holders need to know before lodging returns.
The resident vs non-resident tax rates comparison makes it clear that knowing your tax residency status is essential. Access to offsets and the tax-free threshold will ensure that an Australian resident on $60,000 will pay significantly lower tax than a non-resident on the same income. This particularly applies to new migrants, international students and temporary workers on a visa.
Bracket creep Australia, which occurs when inflation or an increase in wages moves people into higher tax bands without a gain in purchasing power, is one of the biggest fears of many taxpayers. Since wages are increasing at a very slow rate per year, people may be paying higher taxes without getting richer.
The relationship that exists between inflation and tax brackets is that governments are always under pressure to move thresholds. This effect can decrease disposable income and strain household budgets without intervention, and debate exists as to whether or not thresholds should be indexed automatically to inflation.
Smart planning can assist you in reducing your taxable income Australia and avoiding unnecessary movement into higher brackets. This can be done through
Salary packaging allows you to buy certain lifestyle items such as cars, laptops, or childcare from your pre-tax income. A car novated lease is a popular one, where the lease payments are deducted straight from your salary before tax. It can be legally minimised down to your taxable income in Australia and boost your take-home pay. It’s especially valuable for employees in sectors where fringe benefits tax concessions apply, like health or not-for-profits.
Making extra concessional contributions to your superannuation is one of the most effective ways to stay in a lower tax bracket range. They’re taxed approximately 15% inside your super, which is often significantly below your marginal rate. By directing more income into super, you have less of your income taxed while building long-term retirement funds.
For tax planning purposes under Australian law, you can claim a deduction for genuine work-related expenses like uniforms, personal protective equipment, or union fees. Home office costs, internet, and telecommunications bills for work are deductible. Deductions for small business owners could be equipment, depreciation, or expenses on travel. Correct claiming of deductions lowers your taxable income, so you pay less.
If you have a low-income partner, you can take a spouse tax offset. This strategy is employed to allow greater incomes to be tax-free through economically subsidising the spouse. It is a beneficial strategy to balance family income and potentially slot into a lower tax bracket. Spouse offsets or super contributions to your partner can also lower the taxable income in Australia for the family.
Strategic management of deductions can enable you to remain in lower tax bracket ranges. Eligible claims include work-related expenses, home office expenses, and education fees related to your profession.
Successful tax planning Australia often involves
These strategies not only lower liability but also assist with long-term financial security. Having a tax accountant Perth ensures you take advantage of every legitimate strategy while remaining within ATO rules.
Knowing the income tax rates that Australia imposes for the new financial year enables individuals to properly predict their take-home pay. Low-income earners still enjoy offsets like the Low Income Tax Offset (LITO) and the Seniors and Pensioners Tax Offset (SAPTO).
Middle-income families are the largest group of taxpayers and will benefit most from the Stage 3 reforms. Knowing what tax bracket I am in Australia simplifies planning for investments, retirement savings, and family budgets.
Businesses and individuals often look for accounting services Perth to make compliance and reporting easier. Professional assistance ensures obligations are fulfilled while maximising legitimate deductions.
Also read: What is the Income Tax Threshold in Australia in 2025?
The 2025-26 fiscal year will become a simpler system with updated tax brackets in Australia, as Stage 3 changes will transform how Australians contribute. The greatest beneficiaries are the low and middle-income earners, although the high earners contribute more.
The secret of successful planning is knowing the system. With simple smart tricks, getting the help of a accountant Perth and being aware of your bracket, you can maintain a healthy budget.
Need expert tax advice? Our experienced tax accountants in Perth can assist you in planning smarter, saving on tax, and increasing savings. Contact Palladium Financial Group today to plan for the year ahead with confidence.
Many Australians search for reliable Australian tax FAQs during tax season. Here are answers to common concerns:
Ans. The levy is calculated separately. It is often an additional 2% of taxable income, calculated after your income tax has been assessed.
Ans. No, only the portion of your income that falls within the highest range is taxed at that rate. This is how tax brackets explained systems work: income is taxed progressively, not at a single flat rate.
Ans. If your income in 2025–26 is AUD150,000, your income tax is AUD36,838, and there is an extra 2% Medicare levy of AUD3,000. That’s a total of around AUD39,838. It’s a progressive system, so only the portion of income within each range is taxed at that rate, not your entire salary.
Ans. No, tax rates are subject to government policy and may change in future budgets. Adjustments are often made to reflect economic conditions and revenue needs.
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