Guide
Marginal Tax Rate vs Effective Tax Rate
Understand the difference between the rate on your next dollar and the average rate across your income.
Written for Australian workers and job seekers · Updated 2026-09-13 · General information only
Plain-English answer
Helpful before using the calculator
Updated 2026-09-13
Worked example
Why entering a higher bracket does not tax every dollar at that rate
If part of your income enters a 30% bracket, only the part inside that bracket is taxed at 30% under the ordinary resident-rate calculation. Lower slices keep their lower rates. Your effective rate compares total estimated tax with total taxable income, so it is normally below the marginal rate shown for the next dollar.
Check before relying on it
- Use marginal rate when thinking about the next slice of income.
- Use effective rate when judging the average tax across the whole income.
- Include Medicare and HELP separately when comparing bank-account pay.
- Compare two complete salary scenarios instead of taxing a pay rise with one flat rate.
What this page helps you answer
What this pay, tax or salary topic means in simple terms.
What number or setting to check next in the calculator.
Which assumption could change the answer most.
When to stop using a rough estimate and ask payroll, the ATO or a qualified adviser.
Marginal tax rate
Your marginal tax rate is the rate applied to income in your highest tax bracket. It does not mean every dollar you earn is taxed at that rate.
Effective tax rate
Your effective tax rate is the total modelled tax and compulsory repayments divided by taxable income. It is usually lower than the marginal rate.
Why it matters
Pay rises, bonuses and overtime are easier to understand when you distinguish the rate on additional income from the average rate on total income.
Before you make a decision
Use the guide to understand the topic, then check the number with your own inputs. If the result affects a resignation, job offer, visa decision, redundancy, tax return or family budget, confirm the details with the right official source or adviser.
Check the financial year.
Confirm whether super is included or added on top.
Check HELP debt and tax residency settings.
Compare weekly, fortnightly and monthly cashflow.