🧾 Income Tax Calculator
Australian income tax for 2025–26. Includes Medicare levy, LITO, and LMITO offsets.
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How Australian income tax works
Australia uses a progressive tax system — the more you earn, the higher the rate on each additional dollar. Importantly, only the income in each bracket is taxed at that rate, not your entire income. This is a common misconception.
The federal government introduced income tax in 1915 to fund World War 1, taking over from the states. The system has changed dramatically since then — rates have been as high as 75% in the 1950s, compared to a 47% effective top rate today (45% + 2% Medicare levy).
- Tax-free threshold: The first $18,200 of income is tax-free. Above that, you pay progressively higher rates.
- Medicare levy: An additional 2% applies to most taxpayers to fund the public health system. Low-income earners may be exempt or pay a reduced rate.
- Low Income Tax Offset (LITO): Reduces the tax payable for lower-income earners — effectively extending the tax-free threshold to around $21,884 for most people.
- No inheritance or gift tax: Australia abolished inheritance tax in 1979. There's no gift tax either. Capital gains tax may apply to inherited assets when eventually sold.
🦘 Fun fact: In the early 1950s, Australia's top marginal tax rate was 75%. Today it's 45% (plus Medicare levy). Meanwhile, Australia has no estate tax, no gift tax, and no net wealth tax — making it unusually light on taxes for wealthy asset holders compared to many other countries.