Key points
- Individual tax rates are unchanged for 2025–26 (the $18,201–$45,000 bracket stays at 16%).
- ATO interest charges (GIC/SIC) are no longer tax-deductible from 1 July 2025 — for individuals and businesses alike.
- The working-from-home fixed rate is 70c per hour, with a full-year record of actual hours plus one bill per expense type.
- HELP/HECS changed: the repayment threshold rises to $67,000, a marginal system applies, and balances had a one-off 20% reduction.
- Medicare Levy Surcharge (private health) income thresholds increased.
The 2025–26 financial year (often called the “2026 financial year”) is ending soon, and lodgement opens in July. Tax rates themselves haven’t changed this year, but there are real changes to ATO interest deductibility, working-from-home records, student loan repayments and Medicare thresholds that directly affect your refund or amount payable.
Individual tax rates: unchanged for 2025–26
Resident individual tax rates for 2025–26 are the same as last year:
- $0 – $18,200: 0%
- $18,201 – $45,000: 16%
- $45,001 – $135,000: 30%
- $135,001 – $190,000: 37%
- Over $190,000: 45%
(Plus the 2% Medicare levy.) There’s no change to these rates at lodgement.
ATO interest charges are no longer deductible (GIC/SIC)
This is a wide-reaching change that’s easy to overlook. From 1 July 2025, the ATO’s General Interest Charge (GIC) and Shortfall Interest Charge (SIC) are no longer tax-deductible.
- Applies to individuals and businesses alike.
- It’s the date the interest is incurred that matters, not when it’s paid. Any GIC/SIC incurred on or after 1 July 2025 is non-deductible, even if it relates to an earlier year’s tax.
- Interest incurred before 1 July 2025 remains deductible for 2024–25 and earlier years.
In practice, the “tax discount” that used to soften the cost of late-paid tax is gone. Pay on time where you can; if cash flow is tight, arrange a payment plan with your accountant rather than letting non-deductible interest accumulate.
Working from home: 70c per hour
For 2025–26, the working-from-home fixed rate method is 70c per hour, covering electricity, gas, internet, phone and stationery/consumables.
To use it, keep a record of your actual hours worked from home for the whole year (a timesheet, diary or roster), plus at least one bill for each expense type the rate covers; you can’t separately claim items already covered by the 70c rate (such as phone or internet). Depreciation on equipment (computers, desks, chairs) can still be claimed on top. If your actual costs are higher, the actual cost method is an option but needs fuller records.
HELP/HECS student loans: how repayments changed
If you have a HELP/HECS loan, several important changes apply from 1 July 2025:
- The repayment threshold rises to $67,000 (you used to start repaying from about $54,435).
- A marginal repayment system now applies — you only repay a percentage of the income above $67,000, not of your whole income — removing the old “cliff” effect.
- In addition, the government applied a one-off 20% reduction to all eligible HELP balances in 2025 (before that year’s indexation).
For many middle-income taxpayers with a student loan, this year’s compulsory repayment will be lower than before.
Medicare and private health thresholds increased
The Medicare Levy Surcharge (MLS) income thresholds rose again for 2025–26: the first singles tier is about $101,000 and the first family tier about $202,000 (the family threshold increases by $1,500 for each dependent child after the first).
If your income is over the threshold and you don’t hold appropriate private hospital cover, you pay an extra 1%–1.5% MLS. Higher thresholds mean some people now sit just under the line. The private health insurance rebate uses the same income tiers.
FAQs
Q: Did my tax rate change for 2025–26?
A: No. Rates are the same as last year — the $18,201–$45,000 bracket is still 16%.
Q: Can I still deduct ATO interest?
A: GIC/SIC incurred on or after 1 July 2025 is not deductible (individuals and businesses alike); interest incurred before then remains deductible for 2024–25 and earlier years.
Q: What records do I need for the 70c/hour method?
A: A full-year record of your actual work-from-home hours, plus at least one bill for each covered expense type; covered items can’t be claimed separately.
Q: I have a HECS/HELP debt — will I repay less this year?
A: Likely yes. The threshold rises to $67,000, repayments apply only to income above it, and a one-off 20% balance reduction was applied in 2025.
Disclaimer: This article is general information only and not personal tax advice. Final outcomes depend on legislation as enacted, ATO guidance and your individual circumstances.
