Take a resident with a taxable income of $90,000 in the 2026-27 financial year. The first $18,200 is tax-free. The next slice, from $18,201 to $45,000, is taxed at 16 percent, which is $26,800 times 0.16, or $4,288. The remaining slice, from $45,001 to $90,000, is taxed at 30 percent, which is $45,000 times 0.30, or $13,500. Adding the two slices gives $17,788 of income tax. Dividing $17,788 by the $90,000 income gives an effective rate of about 19.8 percent, well below the 30 percent marginal rate, because the lower bands and the tax-free threshold drag the average down.
Band
Taxable in band
Rate
Tax
How it is calculated
Australian resident income tax is progressive, so only the income that falls inside each band is taxed at that band's rate. The 2026-27 Stage 3 bands are zero up to $18,200, then 16 percent to $45,000, then 30 percent to $135,000, then 37 percent to $190,000, and 45 percent above that. The calculator walks each band in turn, multiplies the amount of income sitting in the band by the band rate, and sums the results. The marginal rate is the rate on your last dollar, while the effective rate is total tax divided by total income, which is always lower. This figure excludes the 2 percent Medicare Levy and any HECS-HELP repayment, both of which the take-home pay calculator adds on top.
Frequently asked questions
What are Stage 3 cuts?
Stage 3 tax cuts (effective 1 July 2024) lowered the marginal rate from 32.5% to 30% for the $45K-$135K bracket, lifted the top threshold from $180K to $190K, and reduced the top marginal rate from 47% to 45%.
What is the $18,200 tax-free threshold?
Australian residents pay zero income tax on their first $18,200 of taxable income each financial year. This is built into the progressive bracket system, so the calculator automatically applies it without any separate input.
What is the difference between marginal rate and effective rate?
Your marginal rate is the rate applied to your last dollar of income. Your effective rate is total tax divided by total income. Because the lower brackets and the tax-free threshold apply first, the effective rate is always lower than the marginal rate.
Does this calculator include Medicare Levy or HECS-HELP?
No. This calculator computes income tax only. The 2% Medicare Levy and any HECS-HELP repayment are separate obligations. Use the Take-Home Pay calculator for a figure that includes both.