How income tax works in Australia
Australian residents are taxed on worldwide income. Foreign residents are generally taxed only on Australian-source income and do not get the tax-free threshold in the same way.
For 2026-27, resident individual rates are 0% up to AUD 18,200, 16% to AUD 45,000, 30% to AUD 135,000, 37% to AUD 190,000 and 45% above that. The Medicare levy of 2% usually applies in addition for residents.
Employees pay through PAYG withholding. Investment income, rental income, foreign income and capital gains are included in the annual return. Offsets, deductions and private health insurance settings can change the final bill.
Income tax brackets in Australia
| Bracket | Rate | Notes |
|---|---|---|
| AUD 0 to AUD 18,200 | 0% | Resident tax-free threshold |
| AUD 18,201 to AUD 45,000 | 16% | |
| AUD 45,001 to AUD 135,000 | 30% | |
| AUD 135,001 to AUD 190,000 | 37% | |
| Above AUD 190,000 | 45% | Plus Medicare levy in most cases |
Tax rates at a glance
- Tax-free threshold
- AUD 18,2002026-27
- Next band
- 16%
- Middle band
- 30%
- Upper band
- 37%
- Top rate
- 45%
- Medicare levy
- 2%
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
EmployeesExpatsContractorsInvestorsHigh earners
Watch out for
- Medicare levy is separate from the income-tax brackets. Many residents should think in terms of 47% at the top, not 45%.
- Foreign residents use different brackets and generally lose the tax-free threshold.
- HECS-HELP repayments, Medicare levy surcharge and private health settings can change cashflow even when the headline bracket looks simple.
- Temporary residents and arriving or departing expats need to check residency commencement and cessation carefully.
Frequently asked questions
What is the top income tax rate in Australia?
The top resident marginal rate is 45% for 2026-27, usually plus the 2% Medicare levy.
Do expats pay Australian income tax?
Yes if they are Australian tax residents or have Australian-source income. Residence status is factual and can change mid-year.
Is salary taxed differently from investment income?
Salary is usually withheld under PAYG. Investment income and capital gains are generally included in the annual assessment at marginal rates, with special CGT discount and franking rules.