Australia
Australia's Tax-Free Threshold and Super Salary Sacrifice, Explained
How the $18,200 tax-free threshold works alongside ATO's resident tax brackets, the Medicare levy, and why salary sacrificing into super can be one of the most effective deductions — with a worked example.
The tax-free threshold
Australian residents pay no tax on the first $18,200 of taxable income. Above that, 2026–27 rates step up progressively to 15%, 30%, 37%, and 45%. On top of income tax, most residents also pay the 2% Medicare levy, which the Taxolase calculator includes.
| Taxable income | Rate |
|---|---|
| $0 – $18,200 | 0% |
| $18,200 – $45,000 | 15% |
| $45,000 – $135,000 | 30% |
| $135,000 – $190,000 | 37% |
| Over $190,000 | 45% |
The Medicare levy
The Medicare levy is a flat 2% of taxable income for most residents. Low-income earners get a reduction: our calculator applies the single-person reduction, where nothing is charged at or below the low-income threshold and the levy then phases in at 10 cents per dollar until the full 2% applies. It does not model the family thresholds or the Medicare levy surcharge.
A worked example without any deductions
Take someone earning A$100,000. The first $18,200 is tax-free, the next $26,800 (to $45,000) is taxed at 15% ($4,020), and the remaining $55,000 is taxed at 30% ($16,500). That is $20,520 of income tax, plus $2,000 of Medicare levy, for $22,520 in total.
Salary sacrificing into super
Voluntary concessional super contributions (on top of employer Super Guarantee payments) are taxed at just 15% inside your fund instead of your marginal rate — up to the annual concessional cap (indexed each year — confirm the current figure with the ATO). For anyone in the 30%+ bracket, this is usually the single most effective deduction available.
Example: sacrifice A$10,000 of that A$100,000 salary into super. Taxable income falls to $90,000, income tax falls to $17,520 and the Medicare levy to $1,800, so the total falls from $22,520 to $19,320, a saving of $3,200. The fund pays 15% contributions tax on the $10,000 ($1,500), so the net benefit is about $1,700, before any effect from caps or the extra tax that very high earners can pay on concessional contributions.
Higher earners gain more
The benefit of salary sacrifice depends on the gap between your marginal rate and the 15% the fund pays. At A$150,000 of income the top slice is taxed at 37%. Sacrificing A$10,000 cuts income tax plus the Medicare levy from $39,570 to $35,670, a saving of $3,900, and after the 15% contributions tax ($1,500) the net benefit is about $2,400. Compare that with about $1,700 at A$100,000. At lower incomes the gap between your rate and 15% is small, so the benefit shrinks.
Watch the cap
The concessional cap includes your employer's Super Guarantee payments as well as any salary sacrifice, so it is easy to overshoot. The cap was $30,000 when we last verified it. Contributions above the cap are added back to your taxable income, which removes most of the benefit, so check your employer contributions before you sacrifice more.
See your bracket and savings
Enter your income and super contributions into the Taxolase calculator to see your taxable income, marginal rate, and how much closer voluntary super contributions get you to a lower bracket. Our estimate excludes tax offsets such as the Low Income Tax Offset and HELP repayments, so it will differ from your final assessment.
Sources
Figures were last checked against these sources on September 19, 2026. See our methodology for how the calculator uses them.
Estimate only. This is an approximation, not a tax return or professional advice, and may not reflect every credit, exemption, or recent law change. Verify with your tax authority or a qualified professional before relying on it. Read the full disclaimer or see how it's calculated.