Marginal tax rate
The tax rate on your next dollar of income.
Your marginal tax rate is the rate of tax you pay on your next dollar of income. Australia uses a progressive system, so income is taxed in bands — only the income that falls inside a higher band is taxed at that higher rate, not your whole income.
It’s why a pay rise never leaves you worse off: only the extra income in the new band is taxed higher. Your average rate — total tax divided by total income — is always lower than your marginal rate.
Try the income tax →Grounded in ATO guidance. General information, not tax advice.
Related terms
Tax-free threshold
The first $18,200 of income you can earn tax-free.
Medicare levy
A 2% levy on most taxable income that funds public health.
CGT discount (50%)
Hold an asset over 12 months and only half the gain is taxed.
Franking credits
A credit for company tax already paid on your dividends.
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