Australia Tax Rates 2026-27: Brackets, LITO & Medicare Levy

Australia's FY 2026-27 brings one meaningful change to income tax: the second marginal rate drops from 16% to 15%, effective 1 July 2026. The saving is modest — up to $268 per year — but it follows the Stage 3 restructure of 2024 and is part of a legislated series of cuts that continues in 2027-28.

This guide sets out the full 2026-27 income tax brackets for Australian residents and non-residents, explains the Low Income Tax Offset (LITO), covers the Medicare levy thresholds, and includes worked tax calculations at five income levels so you can see exactly what you'll pay.

2026-27 Income Tax Brackets for Australian Residents

The following rates apply to Australian tax residents for the 2026-27 financial year (1 July 2026 – 30 June 2027), as confirmed by the Australian Taxation Office (ATO):

Australia uses a progressive marginal tax system — only the portion of income that falls within each bracket is taxed at that rate. Your entire salary is not taxed at your highest marginal rate.

The 2% Medicare levy is charged on top of income tax for most residents. It applies from approximately $29,207 for singles in 2026-27 (subject to ATO confirmation — check the ATO Medicare levy page for final figures).

What Changed From 1 July 2026

One rate changed for the 2026-27 financial year: the second bracket dropped from 16% to 15%. This applies to the $18,201–$45,000 income band.

The maximum saving is $268 per year (1% of $26,800, the full width of that bracket). You need to earn at least $45,000 to capture the full saving. If you earn $30,000, your saving is $118 (1% × $11,800 above the $18,200 threshold). Every resident taxpayer earning above $18,200 benefits to some degree.

The full Stage 3+ sequence

This cut is part of a legislated series that began in 2024 and continues through 2028:

• FY 2024-25: Stage 3 restructure — reduced the large 32.5% bracket to 30%, raised the $45k threshold, eliminated the 19% rate
• FY 2025-26: Second bracket at 16% (interim)
• FY 2026-27: Second bracket drops to 15% ← this year
• FY 2027-28: Second bracket legislated to drop again to 14%

For most Australians, the cumulative benefit over the full Stage 3+ sequence is several hundred dollars per year — meaningful but not dramatic.

How Much Tax Do You Pay? Worked Examples

These calculations use the 2026-27 resident brackets, apply the Low Income Tax Offset (LITO) where eligible, and add the 2% Medicare levy. They assume no other offsets and no HECS/HELP debt.

How to read this table

The income tax column is the result of applying the marginal brackets progressively. LITO reduces the tax payable for lower earners and phases out above $66,668 — so from $75,000 upwards, no LITO applies. The Medicare levy is 2% of total taxable income (not just the tax-payable amount).

For a $100,000 salary, you keep $77,480 after tax. For $150,000, you keep $110,430. These are pre-super figures — employers pay Superannuation Guarantee (12% from 1 July 2025) on top of your salary.

Use the Australia tax calculator for a more precise figure including HECS repayments, Medicare Levy Surcharge, and different residency statuses.

Low Income Tax Offset (LITO): The Real Tax-Free Threshold

The statutory tax-free threshold is $18,200 — but the Low Income Tax Offset effectively extends this for most residents. The LITO is a tax reduction (not a rebate) that reduces income tax payable for lower-income earners.

LITO 2026-27

• Maximum offset: $700 (applies at incomes up to $37,500)
• Phase-out rate 1: Reduces by 5 cents per dollar between $37,500 and $45,000 (offset reduces by $375 across this range)
• Phase-out rate 2: Reduces by 1.5 cents per dollar above $45,000
• Offset reduces to zero at: approximately $66,668

Combined with the $18,200 tax-free threshold, the LITO means most residents effectively pay no income tax below approximately $22,575. Above $66,668, the LITO is gone entirely and you pay tax at the full marginal rates on everything above $18,200.

Note: the Low and Middle Income Tax Offset (LMITO) that existed until 2022-23 no longer applies. The LITO remains.

Medicare Levy: The 2% Healthcare Contribution

The Medicare levy is 2% of total taxable income and applies to Australian tax residents. It funds the public Medicare healthcare system and is charged on top of income tax — it is not included in the bracket rates above.

Low-income exemption

Singles with taxable income below approximately $29,207 (2026-27 estimate — ATO confirms annually) are fully exempt from the levy. A shade-in range applies between $29,207 and $36,509, where the levy is charged at 10% of the excess above the threshold rather than the full 2%.

Medicare Levy Surcharge (MLS)

Higher-income residents who do not hold an appropriate private hospital insurance policy are subject to an additional Medicare Levy Surcharge of 1%–1.5%:

• Income $93,000–$108,000 (singles): MLS 1%
• Income $108,001–$144,000: MLS 1.25%
• Income above $144,000: MLS 1.5%

A basic private hospital cover policy typically costs $1,000–$2,500 per year. For most earners above $93,000, taking out cover is more cost-effective than paying the MLS.

Who doesn't pay the Medicare levy

Non-residents, temporary residents (certain visa holders), and low-income earners below the exemption threshold do not pay the Medicare levy. Working Holiday Makers also do not pay Medicare.

Non-Resident Tax Rates 2026-27

Non-residents — those whose main home and centre of life is outside Australia — are taxed differently from residents. The key differences: no tax-free threshold, no LITO, no Medicare levy, and a flat 32.5% rate applies from the first dollar.

The practical effect: a non-resident earning $50,000 of Australian income pays $16,250 in tax (32.5%) — more than double the $6,270 a resident would pay on the same income after LITO and Medicare.

ATO residency status is determined by the resides test, domicile test, 183-day test, and superannuation test. If you're moving to or from Australia during the year, your status can change mid-year — seek qualified advice on the date of change.

What's Legislated for 2027-28

The second bracket rate is legislated to fall again in FY 2027-28 — from 15% to 14%. This will apply to the $18,201–$45,000 band from 1 July 2027. The maximum additional saving will be a further $268 per year (the same as the 16%→15% cut, since the bracket width is unchanged).

Beyond 2027-28, no further cuts are currently legislated, though political developments may change this. The threshold amounts ($18,200, $45,000, $135,000, $190,000) remain unchanged under current law — Australia does not automatically index brackets for inflation, unlike some OECD countries.

For a broader picture of how Australia's rates compare to comparable countries, see the Australia vs UK tax comparison and Australia vs New Zealand comparison.