Australia PAYG Withholding Calculator 2025–26 ATO Tax Tables — Stage 3 Cuts, HECS/HELP, Medicare & LITO

PAYG Withholding & Australian Income Tax Guide 2025–26

Stage 3 Tax Cuts — What Changed from 1 July 2024

The most significant change to Australian income tax in a decade came into effect on 1 July 2024 (FY 2024–25), and the same rates apply for FY 2025–26. The Stage 3 tax cuts — originally designed to collapse the 32.5% and 37% brackets — were redesigned by the Albanese Government in January 2024 to provide greater relief to low and middle income earners. The revised rates are: 0% on $0–$18,200; 16% on $18,201–$45,000 (reduced from 19%); 30% on $45,001–$135,000 (the 37% bracket was absorbed here); 37% on $135,001–$190,000; and 45% on $190,001+.

The key beneficiaries of the revised Stage 3 cuts are workers earning between $18,200 and $135,000, who received a larger tax reduction than the original plan. Workers earning above $135,000 received a smaller reduction than originally legislated, though they still benefited from the broader base rate reductions. A person earning $50,000 saves approximately $804 per year compared to pre-Stage 3 rates; a person earning $100,000 saves approximately $2,179 per year.

How PAYG Withholding Works

Pay As You Go (PAYG) withholding is the system by which your employer deducts income tax from your salary before paying you. Employers use ATO tax tables — updated annually — to calculate the correct withholding amount based on your salary, pay frequency, and declarations made on your Tax File Number Declaration form. The ATO tax tables account for the tax-free threshold, LITO, and Medicare levy. Since 2018, most employers use Single Touch Payroll (STP) to report payroll and withholding to the ATO in real time.

It is important that your withholding is accurate throughout the year. If your employer withholds too little (for example, because you failed to account for a second job), you will owe money at tax time and may incur a tax debt. If too much is withheld — common for people who claim additional deductions at lodgement — you receive a refund. The ATO aims for withholding to be as close as possible to your actual tax liability to avoid large refunds or payments.

Medicare Levy — Who Pays and Who Is Exempt

The Medicare levy funds Australia's public health system. For FY 2025–26, the levy is 2% of taxable income for most Australian residents. There is a low-income threshold below which no levy is payable: for singles, no levy applies if taxable income is below approximately $26,000; a reduced levy applies on income between $26,000 and $32,500. Families and pensioners have higher thresholds. You may be entitled to a full or half Medicare levy exemption if you are not entitled to Medicare benefits — typically foreign nationals, certain visa holders, or dual citizens of countries with reciprocal agreements.

The Medicare Levy Surcharge (MLS) is a separate charge of 1% to 1.5% that applies to high earners ($93,000+ for singles, $186,000+ for couples/families) who do not hold eligible private hospital cover. The MLS is designed to encourage higher-income Australians to use private health insurance. Taking out a basic hospital policy ($1,000–$1,500/year) often costs less than the MLS if your income is above the threshold.

HELP/HECS Debt Repayments — Understanding the Compulsory Threshold System

Higher Education Loan Program (HELP, formerly HECS) debts are repaid through the tax system once your repayment income exceeds the annual threshold. For FY 2025–26, repayments begin at $54,435. The repayment rate is applied to your entire repayment income (not just the amount above the threshold), making the system effectively a marginal step at each threshold — crossing a threshold can trigger a significant increase in repayment.

Your HELP debt is indexed to CPI each year on 1 June. In years of high inflation (as in 2023 and 2024), this indexation can add thousands to the outstanding balance. Making voluntary repayments reduces your balance before indexation is applied. If your repayment income is close to a threshold, you may benefit from timing deductions, salary packaging, or voluntary HELP repayments to manage the effective rate you pay. Employers are required to withhold additional amounts for HELP repayment if you declare a HELP debt on your TFN declaration.

Low Income Tax Offset (LITO) — Automatic Reduction in Tax Payable

The LITO provides automatic tax relief to lower-income earners. For FY 2025–26, the maximum LITO is $700, available for incomes up to $37,500. The offset tapers at 5 cents per dollar between $37,500 and $45,000, completely phasing out at $45,000. The LITO is applied against your tax liability by your employer (via ATO PAYG withholding tables) and by the ATO when assessing your tax return — no action is needed to claim it.

The LMITO (Low and Middle Income Tax Offset), which provided up to $1,500 relief for incomes up to $126,000, ended on 30 June 2022 and does not apply from FY 2022–23 onwards. Many workers noticed a reduction in their tax refund from FY 2022–23 — this was because the LMITO was no longer providing an annual offset that had effectively been a temporary refund boost. The Stage 3 tax cuts partly compensated for this, but the LMITO itself is permanently gone.

Employer Obligations — Super, PAYG, and STP

Australian employers have significant obligations: withhold the correct PAYG tax from employee wages; pay employer super contributions (11.5% SG for FY 2025–26) at least quarterly; report payroll via Single Touch Payroll on or before each pay day; and provide employees with access to their income statements via myGov. Employers who fail to meet these obligations face Superannuation Guarantee Charges (interest + penalties) and ATO audits. If your employer is not meeting their obligations, you can report them confidentially to the ATO.

Disclaimer: This calculator uses ATO 2025–26 tax tables and provides estimates for educational purposes only. It does not constitute tax advice. Individual circumstances may differ. Consult a registered tax agent or the ATO (ato.gov.au) for advice specific to your situation.