How Australian income tax works
Australia uses a progressive marginal tax system — you pay more tax as you earn more, but only on the portion of income that falls within each bracket. A common misconception is that earning more can leave you worse off; this isn't possible in a marginal system.
What's deducted from your pay
For most Australian employees, three things are deducted:
- Income tax — withheld by your employer under PAYG and paid to the ATO. Your tax bracket determines the rate on each portion of your income.
- Medicare levy — 2% of taxable income. Funds Australia's public health system. Applies to most taxpayers earning above ~$26,000.
- Low Income Tax Offset (LITO) — technically a reduction, not a deduction. Reduces your tax bill by up to $700 if you earn under $66,667.
HECS/HELP repayments, salary sacrifice arrangements, and private health insurance rebates are not included in this calculator as they vary significantly by individual.
Take-home pay by income (2025–26)
| Gross salary | Income tax | Medicare | Take-home | Effective rate |
|---|---|---|---|---|
| $60,000 | $10,708 | $1,200 | $48,092 | 18.2% |
| $80,000 | $16,258 | $1,600 | $62,142 | 22.3% |
| $100,000 | $22,108 | $2,000 | $75,892 | 24.1% |
| $120,000 | $29,358 | $2,400 | $88,242 | 26.5% |
| $150,000 | $40,258 | $3,000 | $106,742 | 29.5% |
| $200,000 | $60,258 | $4,000 | $135,742 | 32.1% |
What else reduces your take-home pay
The table above shows the baseline — income tax, Medicare levy, and LITO. In practice, several additional factors can reduce what actually hits your bank account:
- HECS/HELP repayments — if you have a student debt, repayments kick in from roughly $54,000 and scale from 1% to 10% of your income. A $100,000 salary with HELP carries an extra $6,000+ annual reduction on top of tax.
- Salary sacrifice — contributing pre-tax dollars to super or a novated car lease reduces your taxable income, which can lower your tax bracket and improve your effective take-home on the same gross pay.
- Private health insurance rebate — higher earners who don't hold private hospital cover pay a Medicare Levy Surcharge (1–1.5%) on top of the standard 2% levy.
None of these are included in this calculator because they vary by individual. If your situation involves HECS or salary packaging, your real net pay will differ from the figure shown.
What does your take-home mean for your budget?
Take-home pay is only useful when you put it against your actual expenses. Two of the most common next questions are whether you can afford a mortgage on your salary, and how your income compares to cost-of-living benchmarks across different cities.
Frequently asked questions
Sources
- Australian Taxation Office – Individual income tax ratesAustralian Taxation Office · Resident individual income tax rates and thresholds.
- Australian Taxation Office – What is the Medicare levy?Australian Taxation Office · Overview of the standard Medicare levy and how it applies.
How this calculation works
This calculator estimates Australian take-home pay by applying current marginal income tax rates and the Medicare levy to gross annual salary.
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Methodology
- Start with gross annual salary.
- Apply the relevant Australian marginal tax brackets.
- Calculate Medicare levy based on standard assumptions.
- Subtract estimated tax and levy from gross income.
- Display estimated annual and periodic take-home pay where supported.
Assumptions
- You are an Australian resident taxpayer.
- Standard Medicare levy applies.
- No deductions or offsets are included.
- No HELP debt is included unless explicitly supported elsewhere on the page.
- Results are estimates only.
Life Calculators provides independent modelling tools based on publicly available data and standard formulas. Results are estimates only and are not financial advice.
Last updated: 17 March 2026
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