ATO Tax Rates 2025-26: Key Changes for Workers
Everything you need to know about the Australian tax rates for the 2025-26 financial year and how they affect your take-home pay.
Published 26 June 2025
Overview of the 2025-26 Tax Year
The 2025-26 financial year, running from 1 July 2025 to 30 June 2026, is the second full year under the revised Stage 3 tax cuts that took effect on 1 July 2024. While the major structural changes to the tax brackets occurred last year, the 2025-26 year brings several important updates that affect workers across all income levels. These include a further increase in the superannuation guarantee rate, adjustments to HECS/HELP repayment thresholds, and updated Medicare levy surcharge thresholds.
The Australian Taxation Office published the updated tax tables in June 2025, and employers are required to apply the new withholding rates from the first pay period on or after 1 July 2025. This article explains every change relevant to employees and estimates the impact on take-home pay at different salary levels.
Income Tax Brackets 2025-26
The individual income tax rates for Australian residents for the 2025-26 year remain as set under the revised Stage 3 tax cuts. The tax-free threshold continues at $18 200. Income from $18 201 to $45 000 is taxed at 16 cents per dollar, income from $45 001 to $135 000 at 30 cents per dollar, income from $135 001 to $190 000 at 37 cents per dollar, and income above $190 000 at 45 cents per dollar. These rates are unchanged from 2024-25.
For context, prior to 1 July 2024, the 32.5 percent rate applied from $45 001 to $120 000. The revised Stage 3 cuts reduced this to 30 percent and extended the threshold to $135 000, delivering a meaningful tax reduction for middle-income earners. A worker earning $90 000 saves approximately $1 929 per year compared to the pre-Stage 3 rates, while a worker earning $150 000 saves approximately $3 729. These savings continue to flow through in 2025-26.
Superannuation Guarantee Increase
The superannuation guarantee (SG) rate increases to 12 percent from 1 July 2025, up from 11.5 percent in 2024-25. This is the final scheduled increase under the legislated pathway that has been raising the SG rate by 0.5 percentage points each year since 2021-22, when it stood at 10 percent. The SG rate will remain at 12 percent for subsequent years unless further legislation changes it.
For most employees, the SG increase means your employer contributes more to your superannuation fund, boosting your retirement savings. Whether this comes at the expense of take-home pay depends on your employment arrangement. If your salary is expressed as a "total package" including super, the SG increase may reduce your cash salary slightly. If your salary is expressed as base pay plus super, your take-home pay should remain unchanged while your super balance grows faster. On a $100 000 salary, the extra 0.5 percent equates to $500 more per year going into your super fund.
HECS/HELP Repayment Thresholds
The compulsory repayment thresholds for HECS-HELP, VET Student, and other study loans are indexed annually. For 2025-26, the minimum repayment threshold is expected to increase to approximately $54 435, up from $54 435 in 2024-25. The repayment rates remain tiered, starting at 1 percent for income between $54 435 and $62 850, and increasing progressively to 10 percent for income above $151 201.
An important change that took effect for the 2023-24 year onward is the indexation of HELP debt balances based on the lower of CPI or the Wage Price Index (WPI). This reform ensures that HELP debt does not grow faster than wages, addressing a significant concern for graduates. For the 2025-26 year, the indexation rate applied to outstanding balances on 1 June 2026 will be determined by the lower of CPI and WPI for the year ending March 2026.
Medicare Levy and Surcharge
The Medicare levy remains at 2 percent of taxable income for the 2025-26 year. The low-income thresholds below which the Medicare levy is reduced or not payable are indexed annually. For 2025-26, the threshold for singles is expected to be approximately $26 000, below which the levy is phased in at a reduced rate. The family threshold is approximately $43 846 plus $4 027 for each dependent child or student.
The Medicare levy surcharge (MLS) continues to apply to higher-income earners who do not hold an appropriate level of private hospital cover. The income thresholds for the MLS tiers are expected to be: Tier 1 ($97 000 to $113 000 for singles, 1 percent surcharge), Tier 2 ($113 001 to $151 000, 1.25 percent), and Tier 3 (above $151 000, 1.5 percent). Workers approaching these thresholds should consider whether obtaining private health insurance would be more cost-effective than paying the surcharge.
Tax Offsets and Low-Income Changes
The Low and Middle Income Tax Offset (LMITO) was not extended beyond the 2021-22 year, so it does not apply in 2025-26. The Low Income Tax Offset (LITO) continues at a maximum of $700 for taxable income up to $37 500, phasing out at a rate of 5 cents per dollar from $37 501 to $45 000, and 1.5 cents per dollar from $45 001 to $66 667. The Senior Australians and Pensioners Tax Offset (SAPTO) also continues, providing additional relief for eligible older Australians.
Changes to Working From Home Deductions
The ATO's revised fixed-rate method for claiming working from home expenses, set at 67 cents per hour, continues for 2025-26. Workers who work from home must keep a record of the actual hours worked at home during the year, either through timesheets, rosters, or a diary kept for a representative four-week period. The fixed-rate covers electricity, internet, phone, stationery, and computer consumables. Workers can still choose the actual cost method if they keep detailed records of all expenses.
Net Impact by Salary Level
The main change affecting take-home pay in 2025-26 is the SG increase, which may have no direct payslip impact for most employees (it increases super contributions paid by the employer). The income tax brackets and rates are stable. A single worker earning $70 000 with no HECS debt continues to receive approximately the same net pay as in 2024-25. A worker earning $100 000 likewise sees no material change in their fortnightly take-home amount.
Workers with HECS/HELP debts near the repayment thresholds should check whether the indexed thresholds change their repayment rate. Use our pay calculator to model your specific situation for 2025-26, including super, HECS, and Medicare levy calculations. Our calculator is updated with the latest ATO rates for the new financial year.