Income Tax Calculator

How the Calculator Works

Enter your annual gross income and the calculator returns:

• Your total income tax liability (using current ATO marginal rates)
• Medicare Levy (2% for most Australian residents)
• Low Income Tax Offset (LITO), where applicable
• Total tax payable
• Net (take-home) annual, monthly, and fortnightly income
• Your effective tax rate – the percentage of total income paid in tax

The result is the income figure you actually have available to service a home loan – which is what lenders work from when assessing your repayment capacity.

Australia’s 2025–26 Income Tax Brackets

The calculator uses the ATO’s current rates for the financial year ending 30 June 2026:

*Medicare Levy of 2% applies separately to most resident taxpayers. The Low Income Tax Offset provides up to $700 for eligible lower earners. Figures exclude HECS-HELP repayments.

These rates reflect the Stage 3 tax cuts that took effect on 1 July 2024, which reduced the 19% bracket to 16%, cut the 32.5% bracket to 30%, and raised the 37% threshold from $120,000 to $135,000. Further changes are scheduled for 1 July 2026, when the 16% rate is set to reduce to 15% under current legislation.

Marginal Rate vs Effective Rate: The Distinction That Matters

A common source of confusion in tax conversations: your marginal rate is the rate applied to the last dollar you earn. Your effective rate is the percentage of your total income paid in tax – and it’s always lower than the marginal rate, because your income fills each bracket progressively from the bottom.

At a $100,000 salary in 2025–26, the marginal rate is 30% – but the effective tax rate (including Medicare Levy) is approximately 24%. Someone who says “I’m on 30%” is describing their bracket, not their actual tax burden on total income.

For borrowers using the Borrowing Power Calculator or the Budget Planner, it’s the effective rate – and the resulting net income – that tells you what you actually have to work with.

What the Numbers Look Like at Common Perth Income Levels

Perth’s median household income sits around $100,000–$115,000 annually for dual-income couples, with individual incomes commonly ranging from $65,000 for entry-level professional roles to $130,000+ across mining, healthcare, and government sectors.

*Figures are estimates for Australian resident taxpayers in 2025–26, including LITO where applicable. HECS-HELP repayments not included. Source: ATO individual income tax rates.

How Tax Affects Your Borrowing Capacity

Lenders assess serviceability on gross income – so a higher gross salary doesn’t automatically mean proportionally higher borrowing power. As income increases, a growing share is paid in tax and Medicare levy, which reduces the net surplus available to service debt.

This is why joint applications often produce better outcomes than expected: two $70,000 incomes combined produce a lower effective tax rate than a single $140,000 income, leaving more net income after tax relative to the same total gross figure.

For Perth borrowers considering investment property loans, understanding your marginal tax rate matters directly: the tax benefit of negative gearing – where property expenses exceed rental income – is larger at higher marginal rates. An investor on a 37% marginal rate captures more of the tax deduction than one on 16%.

HECS-HELP and Borrowing Capacity

HECS-HELP repayments are not included in standard tax bracket calculations but do affect take-home pay and home loan serviceability. From 2025–26, repayments are calculated on a marginal basis – applying only to income above each threshold. Repayments begin at $67,000 of repayment income and increase with income.

Lenders include your compulsory HECS repayment as a committed expense when calculating how much you can borrow. For borrowers in the $80,000–$120,000 range carrying a significant HECS debt, this can reduce borrowing capacity by $30,000–$60,000 depending on the lender. The Income Annualisation Calculator can help you verify the gross income figure that feeds into this calculation.

Medicare Levy Surcharge: A Note for Higher Earners

Australian residents earning above $93,000 (singles) or $186,000 (families) who do not hold eligible private hospital cover are subject to the Medicare Levy Surcharge of 1–1.5% on top of the standard 2% Medicare Levy. For borrowers in this bracket weighing up the cost of private health insurance against the surcharge, the difference can range from $930 to over $2,800 per year – worth factoring into a budget.

Frequently Asked Questions

1. Do I pay tax on my superannuation contributions?

Super Guarantee contributions (currently 12% of gross income in 2025–26) are taxed at 15% within the super fund – not at your marginal rate. This is one of the reasons salary sacrificing into super is a common strategy for higher earners.

2. How does the tax-free threshold work?

Australian resident taxpayers do not pay income tax on the first $18,200 of annual income. If you earn below this amount from a single employer, you can claim the tax-free threshold on your tax file number declaration, reducing the amount of PAYG withheld from each pay.

3. I have two jobs. How is my tax calculated?

Each dollar earned across all sources is counted toward your total taxable income. With two jobs, your second employer withholds tax at the highest marginal rate applicable to the additional income – but your total tax liability is reconciled through your annual tax return, where you’ll receive any overpayment back as a refund.

4. How do investment property deductions affect my tax?

Deductible expenses on an investment property – including interest, depreciation, and property management fees – reduce your taxable income, which reduces your tax liability. The saving is proportional to your marginal tax rate. A registered tax agent can calculate the precise tax benefit for your situation.

5. Will the 2026-27 tax cuts affect my borrowing capacity?

Scheduled changes from 1 July 2026 will reduce the 16% bracket to 15%, increasing take-home pay for most Australian workers. A modest increase in net income slightly improves serviceability, though the impact on borrowing capacity at typical loan sizes is modest. Your broker can model this if you’re planning to apply in the next financial year.

Plan Your Home Loan Around Your Real Income

Understanding your after-tax income is the foundation of a credible home loan strategy. Central Lending Solutions helps Perth borrowers work from accurate numbers – whether that means getting the tax calculation right, identifying how investment deductions affect your tax position, or finding lenders who assess income most favourably for your employment type. Call (08) 9201 8570 or explore our full range of home loan services.