Australia Tax Rates 2025-26 for Indians & NRIs: Resident vs Non-Resident, Deductions & Superannuation
The question I get asked most often by Indians newly arrived in Australia is not about which visa they hold or where they live — it is about their tax bracket. And the answer almost always surprises them. The Stage 3 tax cuts that took effect from 1 July 2024 changed the Australian tax landscape more significantly than any reform in the preceding decade. The second bracket dropped from 19% to 16%, the third bracket boundary moved from $120,000 to $135,000, and even the top threshold shifted. Many articles still show the old rates — including the previous version of this page. This guide has the correct numbers.
The prior version showed resident tax rates of 19% and 32.5% — both wrong for FY 2025-26. The Stage 3 tax cuts, effective 1 July 2024 and continuing in 2025-26, changed these rates to 16% and 30% respectively. The bracket boundaries also changed. The non-resident rate of 32.5% shown previously is now 30%. The SG rate shown as 11.5% is now 12%. The Medicare Levy Surcharge income threshold of $93,000 is now $101,000. All corrected below.
Australian Tax Residency — The Decision That Changes Everything
Before looking at any rate, you need to know where you sit on the residency spectrum — because it determines whether Australia taxes your worldwide income or only your Australian-sourced income. This is the single most consequential determination in Australian tax for Indians.
The ATO uses four tests, applied in order:
Resides Test (primary): Are you actually living in Australia? Physical presence, family location, settled home, employment arrangements — all weighed together. Most Indians on skilled visas (482, 457, 189, 190) who have set up a home in Australia are tax residents under this test, regardless of visa temporariness.
Domicile Test: Is Australia your legal domicile — your permanent country of residence — unless your permanent place of abode is demonstrably elsewhere?
183-Day Test: Were you present in Australia for 183 or more days during the tax year? If yes, likely a resident — unless your usual home is overseas and you had no intention of taking up residence.
Superannuation Test: Applies only to Commonwealth government employees — not relevant for most NRIs.
Resident Tax Rates FY 2025-26 — Stage 3 Corrected
| Taxable Income (AUD) | Tax Rate | Tax on This Bracket | Cumulative Tax |
|---|---|---|---|
| $0 – $18,200 | Nil | $0 | $0 |
| $18,201 – $45,000 | 16% | Max $4,288 | $4,288 |
| $45,001 – $135,000 | 30% | Max $27,000 | $31,288 |
| $135,001 – $190,000 | 37% | Max $20,350 | $51,638 |
| $190,001 and above | 45% | On every dollar above | $51,638 + 45% |
Add: 2% Medicare Levy on taxable income for most residents. Subtract: Low Income Tax Offset (LITO) of up to $700 for incomes below $66,667.
Old second bracket: 19% on $18,201–$45,000 → Now 16%
Old third bracket: 32.5% on $45,001–$120,000 → Now 30% on $45,001–$135,000 (boundary also moved)
Old fourth bracket: 37% on $120,001–$180,000 → Now 37% on $135,001–$190,000 (boundary moved)
Old top bracket: 45% from $180,001 → Now 45% from $190,001
Net result: most working Australians pay less tax in 2025-26 than in 2023-24.
Non-Resident Tax Rates FY 2025-26
| Taxable Income (AUD) | Tax Rate | Notes |
|---|---|---|
| $0 – $135,000 | 30% from the first dollar | No tax-free threshold, no LITO |
| $135,001 – $190,000 | 37% | — |
| $190,001 and above | 45% | — |
No Medicare Levy for non-residents. No Low Income Tax Offset. No tax-free threshold. The previous version of this article showed 32.5% as the base non-resident rate — that was the pre-Stage 3 rate, which no longer applies. The corrected rate is 30%.
The Residency Tax Difference — Illustrated
| Scenario | Income: $80,000 | Income: $120,000 |
|---|---|---|
| Australian resident tax (approx, before Medicare) | $17,947 | $29,197 |
| Non-resident tax | $24,000 | $36,000 |
| Cost of non-resident status | $6,053 more | $6,803 more |
This gap — driven by the missing tax-free threshold and higher effective rate at low-mid incomes — is why residency determination matters so much. A nurse misclassified as non-resident on a $80,000 salary overpays by approximately $6,000 every year.
Working Holiday Maker Rates (417/462 Visa)
| Taxable Income (AUD) | Tax Rate |
|---|---|
| $0 – $45,000 | 15% flat (regardless of residency test result) |
| $45,001 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| $190,001+ | 45% |
Working Holiday Makers have their own separate rate schedule. The 15% flat rate on the first $45,000 is neither the resident nor non-resident rate — it is specific to this visa type. No tax-free threshold applies. No Medicare Levy for non-residents on this visa.
Medicare Levy and Medicare Levy Surcharge
Medicare Levy — 2% for Residents
| Category | Rate | Who |
|---|---|---|
| Standard residents | 2% of taxable income | Most Australian tax residents |
| Low income residents | Reduced or nil below ~$26,000 | Low earners — phased in between $26K–$34K |
| Non-residents | Nil | No Medicare access, no levy |
Medicare Levy Surcharge (MLS) — For High Earners Without Private Hospital Cover
| Income (single) | MLS Rate | Private Hospital Cover Exemption |
|---|---|---|
| Below $101,000 | Nil | Not applicable — below threshold |
| $101,001 – $118,000 | 1.0% | Hold private hospital cover → MLS nil |
| $118,001 – $151,000 | 1.25% | Hold private hospital cover → MLS nil |
| $151,001+ | 1.5% | Hold private hospital cover → MLS nil |
Tax Offsets — Resident Benefits That Non-Residents Do Not Get
| Offset | Maximum Value | Phase-Out | Who Qualifies |
|---|---|---|---|
| Low Income Tax Offset (LITO) | $700 | Reduces above $37,500; zero at $66,667 | Australian tax residents only |
| Low and Middle Income Tax Offset (LMITO) | Ended — FY 2022-23 was last year | N/A | No longer available |
| Senior and Pensioners Tax Offset (SAPTO) | Up to $2,230 | Income-tested | Age Pension age (67+) residents |
| Foreign Income Tax Offset (FITO) | Capped at Australian tax on that income | N/A | Residents with foreign source income — prevents double taxation |
Tax offsets directly reduce tax payable — they are more valuable than deductions of the same dollar amount. A $700 LITO reduces your tax bill by $700. A $700 deduction at 30% reduces tax by only $210. Non-residents receive none of these offsets.
Key Deductions — What You Can Claim
Work-From-Home Expenses
The ATO’s fixed rate for FY 2025-26 is 70 cents per hour worked from home. This covers electricity, gas, internet, phone, and stationery. You need an actual record of hours (calendar entries, timesheets, rosters) — estimates are not accepted since March 2023. Equipment like laptops and desks are claimed separately via depreciation, not included in the 70c rate.
Vehicle Expenses
Work-related travel (between two workplaces, to client sites, to collect work supplies): claim at 88 cents per kilometre up to 5,000km, or logbook method for higher mileage. Travel from home to your regular workplace is private — not deductible.
Professional Development and Self-Education
Courses, certifications, conferences directly related to your current employment. Not deductible: courses that lead to a new career or job. An IT professional’s AWS certification: deductible. The same person’s MBA to move into management consulting: not deductible.
Tools, Equipment, and Technology
Under $300: claim immediately in year of purchase. $300 and above: depreciate over effective life. Work-use percentage must be realistic — if a laptop is 60% work and 40% personal, only 60% of the depreciation is claimable.
Professional Memberships, Subscriptions, Union Fees
Annual fees for professional associations relevant to your current job: fully deductible. Technical journals, industry publications, work-specific software subscriptions: deductible. Union fees: deductible. General trade union membership not related to your specific work: not deductible.
Investment Expenses
Interest on investment loans (property, shares), account management fees, financial advice fees related to investment income, rental property expenses — all deductible against the relevant income. Note the distinction: investment loan interest is deductible; home loan interest on your own residence is not.
Superannuation — Tax Rates That Apply
| Contribution / Income Type | Tax Rate | FY 2025-26 Cap |
|---|---|---|
| Employer SG (Super Guarantee) | 15% inside fund | 12% of OTE — mandatory |
| Concessional (SG + salary sacrifice + personal deductible) | 15% inside fund | $30,000 combined cap |
| Non-concessional (after-tax personal) | Nil on entry | $120,000 cap |
| Fund investment earnings | 15% (10% for long-term CG) | Ongoing |
| Pension phase withdrawals (age 60+) | 0% — fully tax-free | N/A |
| Division 293 (income + super > $250,000) | Additional 15% (total 30%) | N/A |
The SG rate for FY 2025-26 is 12% — the final scheduled rate in a decade-long increase. The previous version of this article showed 11.5%, which was the FY 2024-25 rate.
Salary Sacrifice — Tax Saving Example
Rahul, $110,000 salary, 30% marginal rate. Employer SG: $13,200. He salary sacrifices $10,000 additional.
| Item | Without Sacrifice | With $10,000 Sacrifice |
|---|---|---|
| Taxable income | $110,000 | $100,000 |
| Income tax + Medicare (approx) | $28,717 | $25,717 |
| Super tax on sacrifice (15%) | — | $1,500 |
| Net annual tax saving | — | $1,500 |
| Total going to super | $13,200 | $23,200 |
India vs Australia — Key Tax Comparison
| Feature | India (New Regime FY 2025-26) | Australia (Resident FY 2025-26) |
|---|---|---|
| Tax-free threshold | ₹4 lakh (₹12L effective with rebate) | AUD 18,200 |
| Second bracket rate | 5% (₹4L–₹8L) | 16% ($18.2K–$45K) |
| Top marginal rate | 30% + surcharge (effectively 42.7% with max surcharge) | 45% (+ 2% Medicare) |
| Healthcare levy | 4% H&E cess on tax | 2% Medicare Levy on income |
| Retirement savings | PF/NPS — partially compulsory | Super — 12% compulsory employer contribution |
| CGT on investments (LT) | 12.5% on equity LTCG above ₹1.25L | 50% discount on net gain — effective rate varies by marginal rate |
| Work deductions | Standard deduction ₹75,000 (salaried) | Actual work expenses — no standard deduction limit |
| Financial year | April 1 – March 31 | July 1 – June 30 |
Real Examples with Correct 2025-26 Rates
Example 1 — IT Professional, Resident, $95,000 Salary
| Item | Amount |
|---|---|
| Gross salary | $95,000 |
| WFH deduction (1,200 hrs × $0.70) | −$840 |
| AWS certification (work-related) | −$1,200 |
| Professional memberships | −$480 |
| Taxable income | $92,480 |
| Income tax at Stage 3 rates | ≈ $21,994 |
| Medicare Levy (2%) | $1,850 |
| LITO (phase-out at $66,667 — nil at this income) | Nil |
| Total tax payable | ≈ $23,844 |
| Effective tax rate (total / gross) | ≈ 25.1% |
Using the prior incorrect rates (19%/32.5%), the calculated tax would have been ≈ $27,700 — inflated by ≈ $3,856. The correct Stage 3 rates produce significantly lower numbers.
Example 2 — Nurse, Non-Resident Classification, $80,000
| Item | Non-Resident | If Resident |
|---|---|---|
| Taxable income | $80,000 | $80,000 |
| Income tax | $24,000 (30% flat) | $17,947 |
| Medicare Levy | Nil | $1,600 |
| LITO | Nil | Nil (above phase-out) |
| Total tax | $24,000 | $19,547 |
| Annual cost of non-resident status | $4,453 more per year | |
Example 3 — Working Holiday Maker, $42,000 Salary
| Item | Amount |
|---|---|
| Gross salary | $42,000 |
| Tax at WHM rate (15% on first $45,000) | $6,300 |
| PAYG withheld by employer during year | $6,300 |
| Work deductions (minimal) | −$350 |
| Taxable income | $41,650 |
| Tax at 15% | $6,248 |
| Refund on lodging return | $52 |
| Super balance accumulated (12%) | $5,040 — claim via DASP after departure |
Common Tax Mistakes Indians Make in Australia
Using outdated tax rates from pre-Stage 3 articles:
This is now the most common calculation error. If someone tells you the second bracket is 19% or the third is 32.5% for FY 2025-26 — those rates are wrong. Stage 3 changes apply from 1 July 2024. Any Australia tax article that has not been updated for Stage 3 will produce incorrect tax estimates. The correct rates are 16% and 30%.
Assuming temporary visa status = non-resident for tax:
Visa type and tax residency are determined by entirely different frameworks. A 482 visa holder living and working in Australia for two years with a family home here is almost certainly an Australian tax resident. Filing as non-resident means losing the $18,200 tax-free threshold and paying 30% from the first dollar — approximately $4,000 to $8,000 in excess tax annually depending on income level.
Not claiming work-related deductions:
Unlike India’s fixed standard deduction, Australia allows actual work expenses. Many Indians do not realise the scope: home office hours, professional memberships, certifications, tools, vehicle travel between workplaces — all deductible with records. On a $100,000 salary with $3,000 in legitimate deductions at 30% marginal rate, that is $900 in direct tax savings every year.
Forgetting Indian income in Australian return (residents only):
If you are an Australian tax resident, your rental income from a flat in Hyderabad, FD interest from SBI, and Indian dividends must be declared in Australia. With the DTAA’s Foreign Income Tax Offset, you claim credit for Indian TDS already paid — paying Australia only the difference. Omitting Indian income while being an Australian resident creates a reporting gap the ATO increasingly identifies through data-sharing arrangements.
How NRIs Can Claim DTAA Benefits — Complete Guide
Frequently Asked Questions
Q1. If I earn $45,000, which rate applies to the last dollar?
Australia uses a marginal rate system — each bracket rate applies only to the income within that bracket. At exactly $45,000, the $18,201–$45,000 bracket applies at 16% to the income above $18,200. The first $18,200 is tax-free. Total income tax: 16% × ($45,000 − $18,200) = $4,288. Add 2% Medicare Levy on the full $45,000 = $900. Less LITO ($700 at this income level). Net tax: approximately $4,488. Effective rate: approximately 10%.
Q2. I am on a student visa and working part-time at $28,000 AUD. Am I a resident for tax?
International students studying full-time in Australia for six months or more are generally considered Australian tax residents under the resides test. At $28,000 as a resident, your income tax is approximately $1,568 (after the $18,200 tax-free threshold at 16%), plus $560 Medicare Levy — reduced or nil at this income level. Total effective tax: approximately $1,000–$1,500 — much lower than non-resident rates. Confirm your residency status with a registered agent in your first year to ensure correct withholding.
Q3. Does the 2% Medicare Levy apply to my Indian income declared in Australia?
Yes. The Medicare Levy applies to your total taxable income — which for Australian residents includes worldwide income. If you declare ₹3 lakh of Indian rental income in your Australian return, its AUD equivalent is included in your assessable income and the 2% Medicare Levy applies to the combined total. However, the FITO credit for Indian TDS paid reduces your overall tax — the Medicare Levy calculation is a separate component on which no credit applies.
Q4. My Australian salary bracket changed this year because of Stage 3. Do I need to update my salary sacrifice arrangement?
Yes — if your salary sacrifice was calculated based on the old 32.5% rate to maximise tax efficiency, it is worth reviewing. With the third bracket now at 30% (not 32.5%), the relative benefit of salary sacrifice vs take-home pay has shifted slightly. The super cap ($30,000) is unchanged. The strategy still works — just at slightly different numbers. Check with payroll or your tax agent.
Q5. I left Australia in February 2026. What tax rate applies to me for FY 2025-26?
You will be a part-year resident — resident from July 2025 to February 2026. For the resident period, resident rates apply with a partial tax-free threshold (not the full $18,200 — it is reduced proportionately). For any income earned as a non-resident (if you had Australian-source income after February 2026), non-resident rates apply for that portion. This is a complex calculation — a registered Australian tax agent handles part-year residency routinely and can ensure the correct split is applied.
Conclusion
The Stage 3 tax cuts represent the most significant change to Australian income tax rates in many years, and the fact that articles published before mid-2024 still circulate with the old rates creates genuine confusion. For Indians in Australia — many of whom are relying on articles from well before these changes — the practical impact of using incorrect rates is material: thousands of dollars in wrong tax estimates, incorrect salary sacrifice calculations, and misinformed decisions about residency status.
The correct FY 2025-26 rates are 16% on the second bracket, 30% on the third (to $135,000), and the non-resident rate starts at 30%. Everything else in the deductions and super framework remains as described — and with correct inputs, the calculations in this guide will produce figures that match what you actually owe.
Related Guides
Official Resources
- ATO — Income Tax Rates (2025-26)
- ATO — Medicare Levy
- ATO — Superannuation for Individuals
- Indian Income Tax Portal — Form 67, FITO, India-Australia DTAA coordination
For more international tax updates visit: TaxPremia.com