Taxes affect every working Australian, and it’s crucial to stay informed—especially with significant changes planned for the coming year. With the Australian Government announcing adjustments to income tax brackets for 2025, many individuals are set to benefit from reduced tax liabilities.
But what exactly is changing, and how might this impact your finances? Let’s break it down in a clear and practical way.
What Are Tax Brackets and Why Do They Matter?
In Australia, the tax system is progressive, meaning that higher income earners pay a higher percentage of tax. Income is taxed in brackets—portions of your earnings are taxed at different rates. Understanding where your income falls helps you calculate how much tax you owe and how legislative changes will affect your pay.
✅ Tip: Want to know exactly how much tax you’ll pay? Here’s our free Income Tax Calculator based on the latest 2025 rates.
📌 Australian Tax Brackets 2025 (Resident Individuals)
Here’s the official tax schedule for Australian residents for the 2024‑25 financial year—commonly referred to as Tax Year 2025—inclusive of the revised Stage 3 tax cuts introduced from 1 July 2024 (Australian Taxation Office,):
| Taxable Income | Tax on this Income | Marginal Rate |
|---|---|---|
| $0 – $18,200 | Nil | 0% |
| $18,201 – $45,000 | 16c for each $1 over $18,200 | 16% |
| $45,001 – $135,000 | $4,288 + 30c for each $1 over $45,000 | 30% |
| $135,001 – $190,000 | $31,288 + 37c for each $1 over $135,000 | 37% |
| $190,001 and above | $51,638 + 45c for each $1 over $190,000 | 45% |
These rates do not include the 2% Medicare levy, which is applied on taxable income separately (unless you qualify for an exemption) (Australian Taxation Office).
💡 Medicare Levy
Most residents pay a standard 2% Medicare levy on taxable income, in addition to bracket calculations. This levy:
- Is calculated on the entire taxable income, not just the bracket portion.
- Has exemptions or reduced thresholds—for example, low‑income earners may be exempt or pay less.
🔍 Example Tax Calculations
To avoid manual math, use the Take-Home Pay Calculator for fast results.
Example 1: Income of $60,000
- Tax on $0–$18,200 = $0
- Tax on $18,201–$45,000 = ($45,000 – $18,200) × 16% = $4,288
- Tax on $45,001–$60,000 = ($60,000 – $45,000) × 30% = $4,500
- Total tax (before levy): $8,788
- Add Medicare levy (2% of $60,000) = $1,200
- Approx. total tax = $9,988
Example 2: Income of $150,000
- Up to $135,000 = $31,288 + (37% × ($150,000 – $135,000) = $5,550) → $36,838
- Medicare levy: $3,000
- Approx. total tax = $39,838.
📈 What Changed in 2024–25? (Stage 3 Tax Cuts)
Australia’s Stage 3 tax reforms, effective 1 July 2024, reshaped previous bracket design:
- The rate on the $18,201–$45,000 bracket dropped from 19% to 16%.
- The $45,001–$120,000 bracket expanded to up to $135,000, with a flat 30% rate, merging part of the old mid‑range bracket.
- Higher‑income thresholds also shifted upward: the 37% bracket starts at $135,001 instead of $120,001; the 45% bracket now applies from $190,001, not $180,001.
These changes simplify the structure and reduce effective tax for many middle‑income taxpayers.
New Tax Cuts Coming in 2026
Great news! The Government has announced personal income tax cut measures for certain taxpayers. These tax cuts are in addition to previous tax cuts announced in the 2024-25 May Budget.
The measures reduce the tax rate applying to taxable income earned between $18,201 – $45,000. Specifically, the 16% rate will be reduced.
🧾 Summary Table with Medicare Levy
| Taxable Income Range | Marginal Rate | Medicare Levy | Combined Maximum Rate |
|---|---|---|---|
| $0 – $18,200 | 0% | 0% | 0% |
| $18,201 – $45,000 | 16% | 2% | 18% |
| $45,001 – $135,000 | 30% | 2% | 32% |
| $135,001 – $190,000 | 37% | 2% | 39% |
| $190,001 + | 45% | 2% | 47% |
⚠️ Other Considerations & Offsets
- Low‑Income Tax Offset (LITO): May reduce tax liability for those on lower incomes.
- HELP/HECS repayments: May apply if you earn above the repayment threshold.
- Medicare Levy Surcharge: Higher earners without private health insurance may pay additional levy.
- Part-year residency calculation adjusts the tax‑free threshold prorated proportionally.
🧠 Helpful Tools to Plan Your Finances
Here are a few free tools you can use:
These calculators are designed to give you instant tax insights based on your actual income and situation.
✅ Key Takeaways
- The 2025 financial year (1 July 2024 – 30 June 2025) introduces new bracket rates via the revised Stage 3 tax cuts.
- The threshold between the 30% and 37% brackets shifted upward, easing pressure on middle‑income earners.
- A standard 2% Medicare levy applies separately.
- These adjustments aim to simplify the system and reduce tax for many taxpayers, but not all groups—depending on offsets and levies.
Sufiyan, a passionate IT professional and finance enthusiast dedicated to simplifying financial clarity for every Australian. With years of experience in both tech and personal finance, Sufiyan oversees all content to ensure accuracy, usability, and relevance.