Marginal tax rate calculator
What you actually keep from a pay rise, and why your average rate is far below the bracket you are told you are in.
Covers 2026–27 income year · rates as at 2026-07-01
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 |
On $88,000 the next dollar is taxed at 32% including the Medicare levy, so a $10,000 rise adds about $6,800 after tax.
Side by side
How this is calculated
Two different rates, both correct
The marginal rate applies to your next dollar — 30% plus the 2% levy at $88,000. The average rate is total tax over total income, about 20% at that salary, because the first $18,200 was untaxed.
average = total tax ÷ income; marginal = rate on the next dollarThe realised rate can exceed the bracket
Between $45,000 and $66,667 the low income tax offset tapers away at 1.5 cents in the dollar, so the effective rate on income in that range is about 1.5 points above the headline 30%.
Testing a real amount beats reading a table
This computes tax twice — before and after the extra income — and reports the difference. Testing a real $10,000 captures bracket crossings and the 1.5-cent offset taper that a single bracket lookup misses entirely.
Worked example: A $10,000 pay rise on $88,000
| Income now | $88,000 |
|---|---|
| Pay rise | $10,000 |
| Extra tax and levy | about $3,200 |
|---|---|
| You keep | about $6,800 |
| Average rate after | about 21% |
The rise is taxed at 32% while the whole salary averages nearer 21% — both true, and only one of them matters when deciding whether to take the extra work.
What this assumes
- Employment income only, no investments.
- Full-year Australian tax resident.
- Private hospital cover held, so no surcharge.
- No HELP debt and no other offsets.
Where this commonly goes wrong
- A HELP debt adds 15% to the effective rate on income above $67,000, which no tax bracket shows and which most pay-rise arithmetic ignores.
- Crossing the Medicare levy surcharge threshold without hospital cover adds 1% to 1.5% of your entire income, not just the amount over the line.
- Family Tax Benefit and childcare subsidy withdrawal can push the true rate on extra income above 60% for households with young children.
Questions
What is my marginal tax rate?
The rate on your next dollar. At $88,000 that is 30% plus the 2% Medicare levy, so 32%. It applies only to income above $45,000 — everything below is taxed at the lower band rates.
Why is my average rate so much lower?
Because the first $18,200 is untaxed and the next $26,800 is taxed at 15%. Those cheap early dollars pull the average down, which is why a 32% marginal rate can sit alongside a 21% average.
Will a pay rise push me into a worse position?
Not from the brackets — only the income above a threshold is taxed at the higher rate, so a rise always leaves you better off. Hard thresholds like the Medicare levy surcharge are the exception worth checking.
How much of a bonus do I keep?
At a 32% marginal rate, about $6,800 of a $10,000 bonus. Employer withholding on bonuses often uses a flat method that over- or under-withholds, and the difference is settled in your return.
Does a HELP debt change this?
Substantially. Above the $67,000 threshold a 15% repayment applies to income in that band, so the true rate on a pay rise can be 47% rather than 32% — a difference no bracket table shows.
Is it worth taking on extra work?
Compare what you keep against what the hours cost you. At 32% an extra $10,000 of work is $6,800 in hand; with a HELP debt it is closer to $5,300, which changes the calculation on a second job.
Related tools
Sources
General estimate based on published ATO rates for the 2026–27 income year. 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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