Marginal tax rate

Australia uses a progressive tax system: income is taxed in bands, with higher bands taxed at higher rates. Your marginal tax rate is the rate that applies to the last bracket your income reaches.

For FY 2025-26, the bands for residents are: 0% up to $18,200, 16% to $45,000, 30% to $135,000, 37% to $190,000, and 45% above. Most people also pay a 2% Medicare levy on top.

Knowing your marginal rate matters whenever you're weighing a deduction, a salary sacrifice, or a side-hustle — those decisions are priced at your marginal rate, not your average rate.