Every July, millions of Australians see their payslips shift. Sometimes it is a pleasant surprise. Sometimes, not so much. The 2025-26 financial year has brought some meaningful changes to the way your income is taxed, and understanding them can make a real difference to how you plan your money for the year ahead.
In this guide, we will walk through the key tax changes for 2025-26, explain what they mean in plain English, and show you exactly how to check the impact on your own pay.
The Stage 3 Tax Cuts Are Now Fully In Effect
The big story from the 2024-25 year was the revised Stage 3 tax cuts, and they are now fully baked into the system for 2025-26. If you have not been paying attention to the detail, here is what the current tax brackets look like for Australian residents:
- $0 – $18,200: Tax-free (the tax-free threshold)
- $18,201 – $45,000: 16 cents for every dollar over $18,200
- $45,001 – $135,000: $4,288 plus 30 cents for every dollar over $45,000
- $135,001 – $190,000: $31,288 plus 37 cents for every dollar over $135,000
- $190,001 and above: $51,638 plus 45 cents for every dollar over $190,000
The 16% rate at the bottom end is a real improvement — it used to be 19%. That means everyone earning over $18,200 is keeping a bit more of every dollar. For someone on a typical full-time salary of $75,000, the revised brackets deliver roughly $1,500 to $2,000 more per year compared to the old rates. You can see exactly how this affects your pay using our free Australian salary calculator.
The Medicare Levy: Still 2%, but Thresholds Have Shifted
The Medicare levy remains at 2% of your taxable income. That has not changed. But the income thresholds below which you get a reduction or full exemption have been adjusted upwards to keep pace with inflation.
For singles, you will not pay any Medicare levy if your taxable income is below $26,000 for 2025-26. The phase-in range has also moved up, so if you earn between $26,000 and $32,500, you will pay a reduced amount rather than the full 2%.
For families, the threshold is $43,846 plus $4,027 for each dependent child or student. This means a family of four with two kids can earn up to roughly $51,900 before the full levy kicks in.
If you want to see exactly how much Medicare levy you will pay on your income, our Medicare levy calculator will break it down for you in seconds.
Superannuation Guarantee Goes to 12%
From 1 July 2025, the Superannuation Guarantee (SG) rate has increased to 12% of your ordinary time earnings. This is the final step in a long series of increases that started back in 2021 when the rate was 9.5%.
Now, this is money your employer pays on top of your salary, so it does not come directly out of your take-home pay. But it does affect the total cost of employing you, and some employers factor super increases into their overall remuneration packages. If your employer told you that your "total package" is $100,000 including super, your base salary before super would now be lower than it was when the rate was 11.5%.
It is worth checking whether your pay is quoted as base salary plus super, or as a total package including super. The difference matters. Our superannuation calculator can help you work out exactly what your employer is contributing and what your super balance might look like over time.
The Low and Middle Income Tax Offset Is Gone — And It Is Not Coming Back
If you remember getting a nice little boost in your tax return a few years ago thanks to the LMITO (Low and Middle Income Tax Offset), that ship has sailed. It ended after the 2021-22 financial year and has not been replaced.
The only remaining offset for low-income earners is the Low Income Tax Offset (LITO), which is worth up to $700 for people earning $37,500 or less. It phases out gradually and disappears entirely once your taxable income reaches $66,668. You can check whether you qualify and how much you might receive using our tax offsets calculator.
HECS-HELP Indexation Has Been Reformed
One of the bigger stories in 2025-26 is the change to how HECS-HELP debts are indexed. Following a lot of public pressure after the massive 7.1% indexation rate applied in June 2023, the government has changed the rules so that HECS debts are now indexed at whichever is lower: CPI (inflation) or the Wage Price Index.
This is genuinely good news for anyone with a student loan. It means your debt will not grow faster than wages are rising, which is what caused so much pain in recent years. Compulsory repayments still kick in once your income hits the minimum threshold, and the repayment rates are unchanged. Check where you sit using our HECS-HELP repayment calculator.
What About the Medicare Levy Surcharge?
If you earn above a certain threshold and do not hold private hospital cover, you will cop the Medicare Levy Surcharge (MLS) on top of the standard 2% Medicare levy. The thresholds for 2025-26 are:
- Singles: $93,000 and above
- Families: $186,000 and above
The surcharge ranges from 1% to 1.5% depending on your income tier. For a single person earning $120,000 without private health insurance, that could mean an extra $1,200 a year in tax. In many cases, it is actually cheaper to just get a basic hospital cover policy. It is worth doing the maths — or using our salary calculator to see how MLS affects your overall tax position.
Employer Costs Are Rising Too
With super going to 12% and payroll tax obligations in most states ticking upwards, the total cost of employing someone in Australia continues to rise. If you are a business owner or manager, it is worth running the numbers to understand your total employment costs. Our employer cost calculator gives you a clear picture of what each employee really costs your business.
What Should You Actually Do?
Here are a few practical steps you can take right now:
- Check your take-home pay. Use our salary calculator to see exactly what you should be receiving after tax, super, Medicare, and HECS repayments for 2025-26.
- Review your super. Make sure your employer is paying the correct 12% rate. Log into your super fund and check your contributions are actually landing.
- Consider salary sacrificing. Putting extra into super before tax can reduce your taxable income and boost your retirement savings. It is one of the most effective tax strategies available to everyday Australians.
- Get private health cover if you are near the MLS threshold. If you earn over $93,000 and do not have hospital cover, you are probably paying more in surcharges than a basic policy would cost.
The Bottom Line
The 2025-26 financial year is a relatively settled one compared to the flurry of changes we have seen in recent years. The revised tax brackets from Stage 3 are delivering real savings, super is at its target rate of 12%, and the HECS indexation reform is a genuine win for graduates.
But as always, the details matter. Your personal situation — your income, your deductions, your super arrangements, whether you have HECS, whether you have private health cover — all of these things interact to determine what you actually take home. The best thing you can do is check your own numbers. Head over to our free salary calculator and see exactly where you stand for 2025-26.