Guide · updated 2026-10-22
Marginal rate vs effective rate
Being "in the 37% bracket" does not mean you pay 37% of your income. The difference between the two rates, with the actual numbers.
Salary take-home examples use 2026-27 full-year resident employment, the standard work deduction and no additional deductions. Tables explicitly labelled taxable or repayment income start with that amount instead. Methodology and sources.
Your marginal rate is the tax on your next dollar. Your effective rate is the tax on all your dollars, averaged. They are never the same, and confusing them causes people to turn down pay rises for no reason.
| Taxable income | Marginal rate | Effective rate | Total tax |
|---|---|---|---|
| $45,000 | 15% | 9.9% | $4,375.00 |
| $85,000 | 30% | 20.7% | $17,400.00 |
| $135,000 | 30% | 24.9% | $33,400.00 |
| $190,000 | 37% | 29.0% | $54,780.00 |
| $250,000 | 45% | 33.3% | $82,900.00 |
A pay rise can never leave you worse off
Australia has no cliff edges in the income tax scale. Crossing a bracket only means the dollars above the threshold are taxed at the higher rate. Someone earning $135,001 pays 37 cents on exactly one dollar, and their take-home is one dollar higher, not lower.
Where the myth comes from
It used to be true of HECS-HELP. Until 2024-25 crossing a study loan threshold applied a percentage to your whole income, so a small rise really could reduce your take-home pay. That cliff was removed in 2025-26. Some means-tested payments still work that way, which keeps the story alive.
The one place a real cliff still exists
The Medicare levy surcharge. Cross the $105,000 single threshold without private hospital cover and the surcharge applies to your whole taxable income, not just the amount above it. At that threshold the surcharge is about $1,050.00 - which is why it is often cheaper to hold cover than to pay it.
Your marginal and effective rates
Take-home pay
$67,600
a year - $2,600 a fortnight
2026-27 full-year resident employment, standard work deduction, no additional deductions. Assumptions and sources.
| Gross salary | $85,000.00 |
|---|---|
| Income tax | $15,720.00 |
| Medicare levy | $1,680.00 |
| HECS-HELP repayment | $0.00 |
| Super paid on top | $10,200.00 |
Where these figures come from
Every number on this page is computed by the same engines that power our calculators, using 2026-27 rates taken from the tax office and dated on our methodology page. If a rate changes, this page changes with it. General information only, not tax or financial advice.