How your tax refund is worked out
Rates checked 15 Oct 2026 against the ATO's resident tax rates and the ATO Medicare levy, surcharge and study loan pages.
Your refund is the tax your employer withheld minus the tax you actually owe for the year. We add your salary, interest, dividends and franking credits, take off your deductions to get your taxable income, then work out income tax at Australian resident rates, take off the low income tax offset (up to $700, phasing out by $66,667), and add the Medicare levy (2%, reduced below $35,013), the Medicare levy surcharge if you had no private hospital cover, and any compulsory HECS/HELP repayment. Franking credits come off what you owe and can be refunded.
| Taxable income | 2025-26 | 2026-27 |
|---|---|---|
| $0 to $18,200 | Nil | Nil |
| $18,201 to $45,000 | 16% | 15% |
| $45,001 to $135,000 | 30% | 30% |
| $135,001 to $190,000 | 37% | 37% |
| $190,001 and over | 45% | 45% |
2026-27 adds a $1,000 standard deduction for employees, applied automatically. Work-related expenses you claim reduce it dollar for dollar, so you get the larger of $1,000 and your claims. Union fees and professional association fees are claimed on top. The Medicare levy surcharge thresholds rise from $101,000 (2025-26) to $105,000 (2026-27) for singles, and the HECS/HELP repayment threshold from $67,000 to $69,528. The ATO hasn't published 2026-27 Medicare levy low-income thresholds yet, so 2025-26 figures ($28,011 and $35,013) are used.
General information only, not financial, tax or credit advice. Check your situation with the ATO, your state revenue office or a licensed adviser.
Tax refund FAQs
How much tax do I pay on $85,000 in 2025-26?
$17,988: $16,288 income tax plus a $1,700 Medicare levy, with no deductions. In 2026-27 the same salary pays $17,400 ($15,720 tax plus $1,680 Medicare levy), $588 less, thanks to the 15% bracket and the $1,000 standard deduction.
How much does the $1,000 standard deduction save?
$320 at a $85,000 salary in 2026-27 (30% tax plus 2% Medicare levy on $1,000). It isn't in your pay; it comes back when you lodge, so it adds to your refund. It doesn't exist for 2025-26.
Will I pay the Medicare levy surcharge without private health insurance?
Only above the surcharge threshold. A single person with $110,000 taxable income and no hospital cover pays $1,100 (1%) in 2025-26. In 2026-27 the same salary pays $1,090, because the $1,000 standard deduction takes taxable income to $109,000, still above the $105,000 threshold.
How much HECS/HELP comes out of my refund?
$2,700 on $85,000 in 2025-26: 15c for each $1 over $67,000. In 2026-27 it's $2,170.80, because the threshold rises to $69,528 and the standard deduction lowers taxable income to $84,000. Employers withhold extra for HELP during the year, so include that in tax withheld.
Why do I get a refund if I earn under $45,000?
Mostly the low income tax offset, which the ATO applies at tax time, not in your pay. On $30,000 in 2025-26 the $700 offset cuts income tax from $1,888 to $1,188. With a $198.90 Medicare levy and $1,500 withheld, the refund is $113.10.