Marginal tax rate calculator
What you keep from a pay rise, and the gap between your marginal rate and your average rate.
What you keep from 10,000
Estimate$6,800.00
a realised rate of 32.0% on the extra income
- Marginal rate
- 32%
- Average rate
- 21.23%
- Tax on the extra
- $3,200.00
| Income now | $88,000 |
|---|---|
| Extra income | $10,000 |
| Extra tax and levy | -$3,200.00 |
| Kept | $6,800.00 |
A 32% marginal rate means a $10,000 rise adds about $6,800, while the average rate on the whole income is far lower.
Side by side
How this is calculated
Two different rates, both correct
The marginal rate is what your next dollar is taxed at. The average rate is total tax over total income and is always lower, because earlier bands were taxed at lower rates — often 20% average against a 32% marginal.
average = total tax ÷ income; marginal = rate on the next dollarOffsets and tapers hide inside the bands
Many systems withdraw a low-income offset or credit as income rises. In Australia that taper runs at 1.5 cents in the dollar between $45,000 and $66,667, adding about 1.5 points to the true rate across that range. The headline bracket does not show it.
Test a real amount
Computing tax before and after a $10,000 rise captures bracket crossings and taper effects that reading a single bracket from a table cannot.
Worked example: A $10,000 pay rise on $88,000
| Income now | $88,000 |
|---|---|
| Pay rise | $10,000 |
| You keep | Depends on your bands |
|---|---|
| Average rate | Lower than the marginal rate |
Bands, levies and offset tapers differ by country and each changes the answer. Pick a country above for a figure you can plan against.
What this assumes
- Employment income only, no investments.
- Full-year residency in the selected country.
- No health surcharge applies.
- No study loan or other offsets.
Where this commonly goes wrong
- Study loan repayments can add ten points or more to the effective rate above their own threshold, invisible in any tax bracket.
- Health or social levies with hard thresholds can charge a percentage of your whole income once crossed, not just the excess.
- Means-tested family payments withdraw as income rises, which is the largest hidden marginal rate most households face.
Questions
What is a marginal tax rate?
The rate applied to your next dollar of income, as opposed to the average across everything you earn. It is the rate that matters when deciding whether extra work or a bonus is worth taking.
Why is the average rate lower?
Because progressive systems tax the first slices of income at lower rates or not at all. Those cheap early dollars pull the average down, so a 32% marginal rate often sits with an average nearer 21%.
Can a pay rise leave me worse off?
Rarely from brackets, which only tax the income above each threshold. It can happen at hard cliffs — a levy or a means-tested benefit that switches on at a fixed income — which is why testing a real amount matters.
Related tools
Sources
General estimate based on published ATO rates for the the current period. Not tax advice, and it does not consider your objectives, financial situation or needs. Confirm your position with the ATO or a registered tax agent.
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