TaxAlly — Lesson: Your real tax position

Module 2 · ☕

Your real tax position

Before any strategy, know your numbers. One of them — your marginal rate — decides whether every later move is worth it.

1The idea

Australia taxes income in brackets. You don't pay one rate on everything — each slice of income is taxed at its own rate, climbing as you earn more. Your first $18,200 is tax-free; only the dollars above each threshold are taxed at the higher rate.

That gives you two numbers. Your average rate is the total tax as a share of income. Your marginal rate is what your next (or last) dollar is taxed at — and it's the one that matters, because a deduction or a super contribution saves you tax at your marginal rate, not your average.

2Who it's for

Everyone — this is the foundation. Whether a deduction, salary sacrifice, or moving an asset to a partner is worth doing always comes back to comparing rates. You can't weigh any of it until you know yours.

3The worked example

On a $90,000 salary:

Income tax$17,788

Medicare levy (2%)$1,800

Take-home$70,412/yr · $5,868/mo

Marginal rate32% (avg 22%)

So a $1,000 deduction here is worth $320, and a dollar into super at 15% instead of 32% saves 17¢. The 32% is the number you carry into every other lesson.

4Try it on your numbers

Your salary

How your salary is taxed, slice by slice

Each slice of your income is taxed at its own rate — the rate on your top slice is your marginal rate. A flat 2% Medicare levy is added on top.

Income tax (sum of slices)$17,788

+ Medicare levy (2%)$1,800

Total tax$19,588

Take-home$70,412/yr

per month$5,868/mo

Marginal rate (all-in)

32%

Average rate

22%

FY2025-26 resident rates + 2% Medicare (simplified — a low-income threshold reduces it under ~$27k). Ignores the low-income offset (LITO), HELP/HECS, the Medicare levy surcharge and other offsets, so it's an estimate of the shape, not your exact return.

5The honest caveats

This is the PAYG shape, not your final return — offsets (LITO), HELP/HECS repayments and the Medicare levy surcharge all shift the real number.

If you have a HELP/HECS debt, an extra repayment kicks in above ~$54k and rises with income — worth knowing before you chase more income.

6How to action it

Note your marginal rate — 32%, 39% or 47% for most. Keep it handy; it's the input to every other lesson.

The higher your marginal rate, the more every deduction and super dollar is worth — so high earners gain most from the moves ahead.

Check your real position in the ATO's myTax estimate or your payslip once a year.

Next lesson

Private health & the Medicare Levy Surcharge

Continue

General educational information, not personal tax or financial advice. Confirm your specifics with a registered tax agent or at ato.gov.au. Figures are estimates for FY2025-26.