Effective tax rate
The share of your total income that actually goes to tax, once every bracket has been applied.
Your effective tax rate is total tax paid divided by total income, expressed as a percentage. It is the honest answer to 'how much tax do I really pay?'.
Because Australia's brackets are progressive, your effective rate is always lower than your marginal rate. Someone on $150,000 sits in the 37% bracket but pays an effective rate closer to 25%.
This is the number to use when comparing job offers, working out whether salary sacrificing is worth it, or estimating your take-home pay. Your marginal rate only tells you what happens to the next dollar.
Two rates, one salary
On $90,000 in FY2025-26 you pay roughly $17,788 in income tax. That is an effective rate of about 19.8%, even though your marginal rate is 30%.
The bit people get wrong
Adding the Medicare levy and any HECS-HELP repayment lifts the share of income leaving your pay packet well above the income-tax-only figure. Compare like with like when you quote a rate.
Common questions
How do I calculate my effective tax rate?
Divide your total tax for the year by your total taxable income, then multiply by 100. If you paid $17,788 on $90,000, your effective rate is 19.8%.
Should I use my marginal or effective rate for decisions?
Use your marginal rate for decisions about extra income or extra deductions, since those affect your top slice. Use your effective rate to understand your overall position and budget.
Why is my effective rate lower than my tax bracket?
Because the lower brackets apply to everything beneath your top slice, including the first $18,200 which is taxed at nothing at all. Your income is spread across every band below you, so the blended result always lands under the headline rate of the bracket you sit in.
Run your own numbers