Australia Has 14 Effective Marginal Tax Rates, Not 5

Australia publishes 5 statutory tax rates for 2026-27, but a full-year resident actually faces 14 different effective marginal rates between $18,200 and $200,000, and the curve they form is not monotonic: it falls twice as income rises. On the $1,000 above $29,000 the next slice of income is taxed at 25%. On the $1,000 above $35,000 it is taxed at 17.1%. The lower earner keeps less of their next dollar than the higher earner. This page publishes the whole curve, computed at every $1,000, along with the method and the statutory mechanism behind every step in it.

What is an effective marginal tax rate, and how is it different from a bracket rate?

A statutory rate and an effective marginal rate answer two different questions. The statutory rate is the number in the ATO bracket table: the rate the income tax scale applies to a dollar of income in a given band. The effective marginal rate is the share of that dollar you actually lose once every income-tested part of the system has acted on it.

In Australia three things act on the same dollar. The bracket rate charges it. The Medicare levy charges it again, either at the flat 2% or at the 10c-in-the-dollar shade-in rate that applies between the low-income thresholds. And an offset you were receiving can be withdrawn because you earned it, which costs you money just as surely as a tax does. The Low Income Tax Offset is withdrawn at 5c in the dollar from $37,500 and at 1.5c in the dollar from $45,000 until it runs out at $66,667. Every cent of that withdrawal is a cent of the next dollar you do not keep.

Add them and the answer stops matching the bracket table. Someone in the 30% bracket at $50,000 is not facing 30%. They are facing 30% plus 2% plus 1.5%, which the dataset below reports as 33.5%. The gap between the two numbers is not an error in either one. They measure different things. The related question of what you paid across the whole year, rather than on the next dollar, is covered in the guide to marginal versus average tax rates.

Why does the ATO publish only five rates?

Because the five rates are one instrument and the rest are separate instruments. The income tax scale is set by the Income Tax Rates Act. The Medicare levy is a separate charge under separate legislation with its own low-income thresholds. The Low Income Tax Offset is a third instrument again, applied at assessment rather than at withholding. Each has its own ATO page, its own thresholds and its own update cycle.

Nothing here is concealed. All four components are published, and this page cites the page each one comes from. What is not published anywhere is the combined curve, because no single instrument owns it. The curve only exists once you stack the instruments, which is what the calculators on pay-calculator.au do on every request and what this dataset does at every $1,000.

How was this dataset computed?

Every row is the difference in total annual liability across a $1,000 slice of taxable income, divided by 1,000. Liability is defined as income tax on the 2026-27 resident scale, less the Low Income Tax Offset, floored at nil because the offset is non-refundable, plus the Medicare levy:

The slice is $1,000, not $1. A one-dollar step is arithmetically purer but practically worse: it picks up cent-level rounding inside the tax engine and reports jitter that no taxpayer ever experiences. A $1,000 slice is large enough to be stable and small enough to resolve every threshold in the system to within one grid row. The trade-off is that a slice straddling a threshold reports a blend of the rates on either side, which is why a handful of rows in the dataset sit between two clean values rather than on one.

The grid starts at $18,200, the tax-free threshold, then runs at every $1,000 to $200,000, giving 183 rows. The subject is a full-year Australian resident claiming the tax-free threshold, with no study loan, no private health considerations and no deductions. The functions are the same ones behind the income tax calculator, the Medicare levy calculator and the LITO calculator, so no figure here can drift away from what those tools return.

Rates are reported to the nearest 0.1 of a percentage point, and "distinct" below means distinct at that resolution.

What are the 14 distinct effective marginal rates?

There are 14 of them, and they occupy 14 contiguous bands of income. The statutory column shows what the ATO bracket table says about the same dollar. The two columns agree in 1 of the 14 bands, at $23,000 to $27,000, where LITO is fully absorbed and the Medicare levy has not started. Everywhere else the bracket table understates the rate, except at the very bottom where it overstates it.

Each row is a contiguous run of grid incomes sharing one rate to the nearest 0.1 of a percentage point. Bands shown as a single income are one grid row wide, where a $1,000 slice straddles a statutory threshold.

Why does someone on $29,000 face a higher rate than someone on $35,000?

Because the Medicare levy shade-in charges 10c in the dollar, and it stops. Between $28,011 and $35,013 a single resident pays 10c of Medicare levy for every extra dollar earned, which is five times the 2% flat rate that applies above $35,013. Stacked on the 15% bracket rate, that produces 25% on the slice above $29,000. Once income clears $35,013 the shade-in is finished, the levy reverts to a flat 2% of income, and the rate on the next slice falls to 17.1%.

Every income in this table sits in the same 15% statutory bracket. The rate they actually face on their next $1,000 varies from 15% to 25%.

The shade-in itself is not a defect. It exists so that the levy phases in rather than landing as a cliff at $28,011, and phasing anything in over a short band necessarily means a steep rate inside that band. The consequence, which the 2026-27 bracket table cannot show, is that the steepest slope in the whole low-income range sits on people earning under $35,013. The mechanics of the levy itself are covered in the Medicare levy guide. The thresholds used here are the 2025-26 single thresholds, carried forward because the ATO has not yet published the 2026-27 figures.

Why does the rate fall a second time at $66,000?

Because the Low Income Tax Offset finishes withdrawing. From $45,000 the offset is reduced by 1.5c for every extra dollar of income, which sits on top of the 30% bracket rate and the 2% levy and produces 33.5%. The offset runs out completely at $66,667. Above that there is nothing left to withdraw, so the same taxpayer in the same bracket drops to 32%.

This reversal is the smaller of the two. The rate falls from 33.5% to 32%, a drop of 1.5%, against a drop of 7.9% at the shade-in. It affects far more people, though, because the $45,000 to $66,667 range covers a large share of Australian full-time employees. How the offset itself is calculated is set out in the guide to tax offsets and the LITO.

Which mechanism causes each step in the curve?

All of them, decomposed. The four components below sum to the effective marginal rate exactly. The bracket column is the statutory rate on the slice. The LITO column is the offset withdrawn across the slice. The offset-floor column is negative wherever LITO already reduces income tax to nil, so part of the bracket rate is charged on paper but not paid. The levy column is the Medicare levy charged on the slice, at 10c in the dollar inside the shade-in and at 2% above it.

Components sum to the effective rate by construction. Rounding to 0.1 of a percentage point can make a row appear to sum one tenth out.

In words, each band and the statutory rule behind it:

• $18,200 to $21,000, 0%. The $700 offset is larger than the income tax on this slice, so nothing is payable.
• $22,000, 2%. The offset stops covering the tax part-way through the slice.
• $23,000 to $27,000, 15%. Income tax now exceeds the offset, so the full bracket rate is paid. The levy has not started.
• $28,000, 24.9%. The Medicare levy shade-in begins at $28,011, at 10c in the dollar.
• $29,000 to $34,000, 25%. Bracket rate plus the full 10c shade-in on the whole slice.
• $35,000, 17.1%. The shade-in ends at $35,013 and the flat 2% levy takes over.
• $36,000, 17%. Flat 2% levy on the slice. LITO is still at its $700 maximum.
• $37,000, 19.5%. LITO starts tapering at $37,500, at 5c in the dollar.
• $38,000 to $44,000, 22%. Bracket rate plus the full 5c LITO taper plus the 2% levy.
• $45,000 to $65,000, 33.5%. The 30% bracket starts and the LITO taper slows to 1.5c in the dollar.
• $66,000, 33%. LITO is exhausted at $66,667, so only part of the slice loses offset.
• $67,000 to $134,000, 32%. LITO is gone. Bracket rate plus the 2% levy, and nothing else.
• $135,000 to $189,000, 39%. The 37% bracket, plus the 2% levy.
• $190,000 to $200,000, 47%. The 45% bracket, plus the 2% levy.

Three statutory thresholds do all the work: $28,011 and $35,013, which bound the Medicare levy shade-in for a single person, and $66,667, where LITO reaches nil. The two bracket boundaries at $135,000 and $190,000 add steps but no reversals, because a bracket rate only ever rises. Reversals require a phase-out to end, and only the levy shade-in and the offset taper end.

What is the effective marginal rate at every $1,000 of income?

The full dataset follows: 183 rows, from the tax-free threshold to $200,000. It is long on purpose. The table is the study, and the summary above is only a reading of it.

Full-year Australian resident, 2026-27, claiming the tax-free threshold, no study loan. Liability is income tax net of LITO, floored at nil, plus the Medicare levy on the single low-income thresholds. Every row computed from the pay-calculator.au tax engine at page render.

What does this dataset leave out?

Five things, and each one would raise the rate somewhere rather than lower it.

• Study loans. A HECS-HELP or other Study and Training Support Loan adds a further marginal charge above $69,528, which lifts the effective rate well past the top statutory rate. That case has its own dataset: the graduate marginal tax rate study.
• The Medicare levy surcharge. A resident without private hospital cover pays a surcharge of 1% to 1.5% on their whole income once it passes $105,000. Because it is charged on the whole income rather than on the slice, crossing a surcharge tier produces a very large one-off step that a marginal-rate curve cannot sensibly show. See the Medicare levy surcharge calculator.
• Family payments and Centrelink income tests. Family Tax Benefit, childcare subsidy and income-support tapers withdraw at their own rates and can add tens of cents in the dollar for households that receive them. They are means tests on family income, not individual taxable income, so they cannot be added to this curve without changing what it measures.
• Withholding. These are assessment-time rates. Your payslip is computed from ATO withholding schedules that approximate the year in advance, so the deduction on a single pay will not match a row here. See PAYG withholding.
• Residency and other scales. Foreign residents and working holiday makers pay no Medicare levy and get no LITO, so their curve is simply the bracket table. Only the resident scale is modelled here.

One thing the dataset does not show, because it is not there: a rate above 100%. Every value in the table is well under it, so an extra dollar of income always leaves an Australian resident better off than before. A steep effective marginal rate changes how much of a pay rise you keep. It never turns a rise into a loss.

Frequently asked questions

Sources

Every rate on this page is computed at render from the 2026-27 constants in the pay-calculator.au tax engine. Those constants are verified against the documents below. Last verified 5 August 2026.

• ATO, Personal income tax: new tax cuts for every Australian taxpayer (new-legislation), last updated 13 May 2026. Source for the 2026-27 first marginal rate of 15%, set by the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026.
• ATO, Tax rates: Australian residents (tax-rates-australian-residents), last updated 1 June 2026. Source for the $18,200, $45,000, $135,000 and $190,000 thresholds. That page publishes brackets to 2025-26 only, so the 2026-27 base amounts are exact arithmetic from the 15% rate and the unchanged thresholds.
• ATO, Low income tax offset, last updated 8 June 2026. Source for the $700 maximum, the 5c withdrawal from $37,500, the 1.5c withdrawal from $45,000 and the $66,667 cut-out, and for the fact that the offset is non-refundable.
• ATO, Medicare levy, last updated 30 June 2026. Source for the flat 2% rate.
• ATO, Medicare levy reduction for low-income earners, last updated 30 June 2026. Source for the single low-income thresholds of $28,011 and $35,013 and the 10c-in-the-dollar shade-in. These are the 2025-26 values, carried forward because the ATO has not yet published the 2026-27 thresholds.
• pay-calculator.au, methodology: how every constant in the engine is verified and dated.

Reuse is welcome with attribution to pay-calculator.au and a link to this page. If you find an error in the dataset, tell us and it will be corrected on the page.