United States vs Australia taxes (2026): Medicare levy and CGT discount

United States vs Australia tax rates at a glance

Tax	🇺🇸 United States	🇦🇺 Australia
Income tax	Personal income tax: 10% - 37% Social Security: 6.2% Medicare: 1.45% Additional Medicare: 0.9% State income tax: Varies	Tax-free threshold: AUD 18,200 Next band: 16% Middle band: 30% Upper band: 37% Top rate: 45% Medicare levy: 2%
Corporate tax	C corporation tax: 21% CAMT: 15% Pass-through entities: Different State tax: Varies	Base-rate entity rate: 25% General company rate: 30% Franking credits: Available GST: 10%
Capital gains tax	Long-term capital gains: 0% - 20% Short-term capital gains: 10% - 37% Qualified dividends: 0% - 20% NIIT: 3.8%	Inclusion method: Marginal rates Individual discount: 50% after 12 months Effective top individual rate on discounted gain: About 22.5% before levy Company treatment: Generally no discount
Dividend tax	Qualified dividends: 0% - 20% Ordinary dividends: 10% - 37% NIIT: 3.8% State tax: Varies	Resident taxation: Marginal rates Franking credit benefit: Offsets company tax paid Domestic non-resident WHT: Often 30% on unfranked Treaty rates: Often lower
Wealth tax	Net wealth tax: 0% Property tax: Varies Estate tax: Up to 40% Gift tax: Up to 40%	Net wealth tax: 0% Annual federal asset tax: 0% Land tax / stamp duty: State rules apply
Inheritance / estate tax	Federal inheritance tax: 0% Federal estate tax: Up to 40% Federal gift tax: Up to 40% Basic exclusion: $15,000,000	Estate / inheritance tax: 0% General gift tax: 0% Super death benefits: Can apply Later CGT on inherited assets: Possible
VAT / GST / sales tax	Sales tax: Varies by state	GST: 10%
Extra personal levy	State income tax and payroll tax vary	2% Medicare levy on top of income tax
CGT design	Separate federal long-term rates; short-term is ordinary income	Gains included in income tax, often with a 50% individual discount

Who wins on each tax

Personal income taxUnited States

The U.S. federal top rate is 37% before state tax; Australia reaches 45% plus a 2% Medicare levy.

Corporate taxUnited States

U.S. C corporations pay 21% federally plus possible state tax; Australia charges 25% for qualifying base-rate entities and 30% otherwise.

Capital gains taxUnited States

U.S. long-term federal rates are 0% to 20%; Australia taxes gains at marginal rates, often after a 50% discount for individuals holding more than 12 months.

Inheritance / estate taxAustralia

Australia has no federal inheritance or estate tax; the U.S. federal estate tax can reach 40%.

GST / sales taxUnited States

The U.S. has no federal VAT, though state sales tax varies; Australia's GST is 10%.

The verdict

Australia's personal headline is 0% to 45% plus a 2% Medicare levy for most residents, so high salary is taxed hard. The United States tops at 37% federally before state income tax and payroll tax. A zero-state-income-tax U.S. resident usually looks lighter; a high-tax-state resident can close much of the gap.

Capital gains are designed differently, not just rated differently. Australia brings gains into income tax and then often allows a 50% discount for individuals who hold assets more than 12 months. The United States uses separate federal long-term rates of 0%, 15% or 20%, taxes short-term gains as ordinary income, and can add 3.8% NIIT.

Choose Australia for an Australian career, franked dividends or a property-and-super life. Choose the United States for a lower federal company rate and deeper capital markets. U.S. citizens remain on worldwide U.S. tax after they become Australian residents.

How to read this comparison

Australia and the United States are both high-tax, high-compliance English-speaking systems. The interesting difference is how each country splits the extra layer. Australia uses a national Medicare levy. The United States uses states.

Resident Australian individuals are taxed on worldwide income at 0% to 45%, and the Medicare levy of 2% usually sits on top. That 47% combined top is the number a U.S. founder should compare with 37% federal plus California, New York or no state tax at all. Foreign residents are taxed on Australian-source income, so a remote contractor with Australian clients can create Australian tax without becoming a local.

Company tax is not close. Australia charges 25% if the company qualifies as a base-rate entity and 30% under the general rate. A U.S. C corporation pays 21% federally, then possibly state corporate or franchise tax. Pillar Two and CAMT can matter for large groups on both sides, but the ordinary operating-company comparison still favours the United States on the headline.

Capital gains are the planning topic people get wrong. Australia does not publish a separate flat CGT rate for individuals. Gains go into the income-tax system. Hold for more than 12 months as an individual and a 50% discount is commonly available, so a 45% taxpayer can face an effective 22.5% on the discounted gain before Medicare. The United States instead uses holding-period brackets: long-term federal rates of 0%, 15% or 20%, short-term gains as ordinary income, and 3.8% NIIT for many investors. A one-year Australian discount is not the same as a U.S. long-term sale, and franking credits then change dividend results in a way the U.S. qualified-dividend rate does not.

GST is 10% in Australia. The United States has no federal VAT, only state and local sales taxes. Australia has no general net wealth tax and no federal estate tax, which is a genuine advantage against a U.S. taxable estate that can face up to 40%. Super death benefits and later CGT on inherited assets still need work.

A U.S. citizen who takes Australian residence does not drop off the IRS. Medicare levy, state-versus-federal modelling, the CGT discount and franking are the Australian details; citizenship-based worldwide tax is the U.S. detail that survives the flight.

Which one fits you

🇺🇸 Choose United States if you're a…

High earners who can live in a low-tax U.S. state
C corporations that want a 21% federal rate
Investors who prefer federal long-term gain brackets

🇦🇺 Choose Australia if you're a…

People building Australian super and franked-dividend portfolios
Families who value the absence of federal estate tax
Founders whose customers and staff are in Australia

Frequently asked questions

Is Australia higher tax than the United States?

For high salary, usually yes because of the 45% top rate and Medicare levy. The United States can still be expensive in a high-tax state, and U.S. citizens keep worldwide U.S. tax after moving.

How does the Australian CGT discount compare with U.S. long-term rates?

Australia often includes only half of a discounted individual gain in income taxed at marginal rates. The United States uses 0%, 15% or 20% federal long-term rates. Which is lower depends on your bracket, holding period, NIIT and state tax.

Does Australia have estate tax?

There is no federal inheritance or estate tax. Superannuation death-benefit tax, stamp duty and later CGT on inherited assets can still create transfer costs.