Australia uses a progressive tax system, meaning different portions of your income are taxed at different rates. As your income increases, higher portions are taxed at higher rates rather than a single flat rate.
Your marginal tax rate is the rate applied to your last dollar of income, while your effective tax rate is the overall percentage of your income paid in tax. The effective rate is usually lower due to the progressive tax system.
To better understand how your income impacts financial decisions, you can estimate borrowing capacity with our mortgage calculator, or plan long-term wealth growth using the compound interest calculator.
Income tax is calculated using progressive tax brackets, where different portions of your income are taxed at different rates.
The Medicare levy is typically 2% of your income and helps fund Australia’s public healthcare system.
HECS/HELP repayments begin once your income exceeds a minimum threshold and are calculated as a percentage of your income.
Because only part of your income is taxed at higher rates, your overall tax percentage is lower than your highest bracket.