When business owners ask us about “tax rates in Australia for 2026”, they are usually trying to answer two different questions:
- What tax rates apply to the 2025 to 26 income year (1 July 2025 to 30 June 2026, lodgements typically due from July 2026 onwards)?
- What can we do now to manage cash flow, reduce avoidable tax, and stay audit-ready with the ATO?
Our view is simple: rates matter, but structure, timing, substantiation, and real-time reporting matter more. With AI-driven workflows, we can keep those levers visible throughout the year, not just at tax time.
The quick context: what “2026 tax rates” usually means
In Australia, individual and business tax is assessed by income year (financial year), not calendar year. In practice:
- “2026 tax rates” typically refers to the 2025 to 26 income year ending 30 June 2026.
- The ATO applies the relevant rates to your taxable income, after deductions and offsets.
Rates can change through legislation or the Federal Budget. The figures below reflect the commonly applied rates as at April 2026, and we recommend confirming any updates against ATO guidance.
Individual tax rates (Australian residents) for 2025 to 26
For most directors, high-income professionals, and sole traders, this table is the starting point for modelling tax outcomes.
| Taxable income (AUD) | Marginal tax rate | Tax on this income (excluding Medicare levy) |
|---|---|---|
| $0 to $18,200 | 0% | Nil |
| $18,201 to $45,000 | 16% | 16c for each $1 over $18,200 |
| $45,001 to $135,000 | 30% | $4,288 plus 30c for each $1 over $45,000 |
| $135,001 to $190,000 | 37% | $31,288 plus 37c for each $1 over $135,000 |
| $190,001+ | 45% | $51,638 plus 45c for each $1 over $190,000 |
These are the marginal rates, meaning only the income in each band is taxed at that band’s rate.
For the ATO reference page, see individual income tax rates.
Medicare levy (and why it changes the real outcome)
Most Australian residents also pay the Medicare levy, generally 2% of taxable income, subject to low-income thresholds and specific exemptions.
If you have private hospital cover and your income exceeds the relevant thresholds, you may also face the Medicare levy surcharge. For many high-income households, this becomes a meaningful planning variable.
Non-resident tax rates (when it matters)
If you are a non-resident for tax purposes, the rates and thresholds differ, including no tax-free threshold in most cases. This commonly arises for:
- founders relocating overseas
- expatriates returning to Australia
- overseas investors earning Australian-sourced income
Residency is a facts-and-evidence analysis. We typically treat this as a strategic review because the downstream effects touch PAYG withholding, capital gains, and reporting.
For background, see the ATO’s non-resident tax rates.
Company tax rates for 2025 to 26
Companies are taxed at a flat rate, but there are commonly two rates depending on eligibility.
| Entity type | Common company tax rate |
|---|---|
| Base rate entity (eligible companies) | 25% |
| Other companies | 30% |
Eligibility for the lower rate depends on tests the ATO publishes (including aggregated turnover and the nature of income). We model this early because it impacts not only tax, but also:
- franking credits on dividends
- group structuring decisions
- the after-tax cost of retaining profits for growth
ATO reference: company tax rates.
Superannuation guarantee (SG) in 2025 to 26
Super is not “just payroll compliance”. It is a material cost line, a workforce retention tool, and an area where ATO enforcement has tightened in recent years.
For 2025 to 26, the legislated super guarantee rate is 12%.
ATO reference: super guarantee rate.
Why we link SG to tax strategy
Super affects:
- wage packaging and total remuneration design
- director cash flow forecasting
- deductibility timing (especially where payments are made close to year-end)
- audit exposure (SG non-compliance can snowball into penalties and disallowed deductions)
This is where automation helps. With AI-supported payroll reconciliations and exception checks, we can identify mismatches early rather than after an ATO nudge.
GST: the rate is simple, the risk is not
The GST rate is 10%, but the complexity sits in:
- cash versus accrual GST reporting
- mixed supplies and apportionment
- adjustments (bad debts, credit notes, change-in-use)
- cross-border and digital supplies
If your business is registered, GST is reported and paid through your BAS. The ATO’s data matching means BAS errors are often detected faster than many directors expect.
FBT: still a strategic pressure point
Fringe Benefits Tax (FBT) applies where benefits are provided to employees (including many owner-managers) outside salary and wages.
The FBT rate is aligned to the top marginal tax rate (commonly 47% including Medicare levy equivalence in the FBT system). The year runs 1 April to 31 March, so FBT planning does not perfectly line up with income tax planning.
We see avoidable FBT exposure most often in:
- vehicle and logbook governance
- meal and entertainment classification
- employee reimbursements without adequate substantiation
Capital gains tax (CGT): rates vs outcomes
Australia does not have a separate “CGT rate” for most taxpayers. Capital gains are generally taxed as part of your income, with key concessions:
- Individuals and trusts may access the 50% CGT discount if the asset is held for at least 12 months (subject to conditions).
- Companies do not get the 50% discount.
- Small business CGT concessions may apply in certain cases, but require careful eligibility work.
For directors and investors, the “taxation rate in australia” question is often really a CGT question in disguise, particularly around property, business exits, and equity events.
A practical view: what drives your effective tax rate in 2026
The marginal rate table is only the beginning. Your effective tax rate is shaped by the interaction of income type, entity type, and timing.
| Lever | What it changes | Common examples |
|---|---|---|
| Entity and structure | Who is taxed, at what rate, and when | Sole trader vs company, trust distributions, group structuring |
| Timing | Which year the income and deductions fall into | Prepayments, asset purchases, provisioning, bonus timing |
| Character | Whether income is ordinary, capital, or concessional | CGT discount eligibility, PSI risk, dividend vs wage mix |
| Substantiation | Whether deductions survive ATO review | Motor vehicle logs, home office basis, travel evidence |
| Reporting quality | Error rates and audit exposure | BAS coding, payroll reconciliations, loan accounts |
This is exactly why we push real-time accounting. When your file is accurate month-to-month, we can make decisions earlier, with evidence.
Strategic examples we see in 2026 planning
Sole trader vs company: when does the company rate help?
The 25% company tax rate can look attractive, but directors need to consider the full chain:
- profits taxed in the company
- funds later extracted as wages, dividends, or via other mechanisms
- the impact on personal marginal rates, Medicare outcomes, and cash flow
We typically model this as a multi-year plan, not a one-year decision, because the benefits often come from retaining profits for growth and managing the timing of distributions.
High-income households: Medicare levy surcharge and contribution planning
For high-income individuals and couples, we often see savings opportunities through:
- reviewing private hospital cover position versus surcharge exposure
- aligning concessional contributions strategy with cash flow and deductibility
- avoiding last-minute decisions that create documentation gaps
The key is that the best tax decisions are usually made before June, not in July.
BAS and payroll: compliance as a growth asset
When BAS, payroll, and super are clean, you gain:
- faster lending readiness (banks increasingly ask for BAS and management reports)
- stronger valuation narrative for buyers and investors
- fewer surprises in due diligence
Our team treats compliance as the foundation layer for Virtual CFO advisory.
How AI-driven accounting improves tax outcomes (without cutting corners)
We are careful with automation. The goal is not to “auto-lodge and hope”. The goal is to reduce human error and improve decision speed.
In practice, AI-enabled workflows can help by:
- flagging anomalous transactions for review (coding, GST treatment, duplicate suppliers)
- accelerating reconciliations so management accounts are timely
- improving document capture and evidence trails (critical for ATO substantiation)
- enabling rolling forecasts, so tax provisioning is visible throughout the year
When the data is current, directors can make strategic calls with confidence, including hiring, capex, distributions, and funding.
Next steps (what we recommend doing now)
If you want to use 2026 tax rates as a planning tool, not just trivia, we suggest:
- Confirm your entity mix (individual, company, trust, SMSF) and whether it still matches your risk profile and growth plans.
- Run a pre-30 June scenario for taxable income, super contributions, and asset purchases, including Medicare impacts.
- Stress-test BAS and payroll accuracy so you are not making strategy decisions off messy data.
- Document your substantiation (especially vehicles, home office, and travel) as you go.
These steps are far easier when your bookkeeping is automated, reconciled, and reviewable in near real time.
Frequently Asked Questions
What are the tax rates in Australia for 2026? The commonly applied resident individual marginal tax rates for the 2025 to 26 income year start at 0% up to $18,200, then 16%, 30%, 37%, and 45%, plus Medicare levy for most taxpayers.
Does “2026 tax rates” mean calendar year 2026 or the 2025 to 26 financial year? In Australia, income tax is assessed by financial year. “2026 tax rates” usually refers to the year ending 30 June 2026 (the 2025 to 26 income year).
What is the company tax rate in Australia in 2026? Many eligible companies (base rate entities) are taxed at 25%, while other companies may be taxed at 30%. Eligibility depends on ATO tests, so we recommend confirming based on your facts.
Is Medicare levy included in the marginal tax rates? No. Medicare levy is generally calculated separately (often 2% for residents), and may materially change the effective tax outcome.
What is the super guarantee rate for 2025 to 26? The legislated super guarantee rate for 2025 to 26 is 12%. Super compliance also affects deductions and ATO risk.
How we can help
Our team at Perfect Accounting & Tax Services supports clients across Australia, with integrated capability in Adelaide, Sydney, and Melbourne. If you want more than a generic tax table, we can help you translate 2026 tax rates into a clear plan that improves cash flow, reduces avoidable tax, and strengthens ATO defensibility.
To discuss your position, contact us for a consultation via Perfect Accounting & Tax Services. We can also walk you through our AI-driven accounting workflows so your compliance data becomes a platform for strategic advisory and growth, not just year-end reporting.
