A 5% pay rise sounds like a win — until the first payslip lands and the number in your bank account is smaller than the headline figure. So how much of a 5% raise do you actually keep after tax in Australia?
The short answer: on a $100,000 salary, a 5% pay rise gives you $5,000 more in gross pay, but your take-home pay rises by only $3,400. You keep 68 cents of every raise dollar. Lower incomes keep a bigger slice (82% at $40,000), while higher incomes keep less (61% at $150,000) — because each extra dollar is taxed at your marginal rate, not your average rate.
This guide walks through the 2025–26 Australian tax figures so you know exactly where your raise goes: how much income tax takes, what the 2% Medicare levy adds, and why moving into a higher tax bracket can never make you worse off. All figures are for Australian tax residents who claim the tax-free threshold, with the standard Medicare levy and no HECS/HELP debt or salary sacrifice.
Want to run your own numbers rather than read tables? Try our free pay rise calculator — enter your current salary and the raise percentage and it shows you the after-tax difference instantly.
The 5% pay rise, by the numbers
Here is what a 5% increase looks like at three common salary levels, using 2025–26 resident tax rates (including the 2% Medicare levy). The arithmetic is simple: the gross raise is taxed at your marginal rate, and what remains is what you keep.
| Salary before | Salary after 5% rise | Gross raise | Take-home before | Take-home after | Raise you keep | Keep rate |
|---|---|---|---|---|---|---|
| $40,000 | $42,000 | $2,000 | $35,712 | $37,352 | $1,640 | 82% |
| $100,000 | $105,000 | $5,000 | $77,212 | $80,612 | $3,400 | 68% |
| $150,000 | $157,500 | $7,500 | $110,162 | $114,737 | $4,575 | 61% |
Read each row from left to right. On $40,000, the $2,000 gross raise becomes $1,640 in your pocket — you keep 82%. On $100,000, the $5,000 gross raise becomes $3,400 — you keep 68%. On $150,000, the $7,500 gross raise becomes $4,575 — you keep 61%.
The pattern is consistent: the higher your salary, the smaller the share of your raise you keep, because Australia’s tax system is progressive — each extra dollar is taxed at a higher rate than the dollars before it. The rate on your next dollar — your marginal rate — is what determines how much of a raise you keep.
How marginal tax rates decide your keep rate
The most important idea in this whole article is the difference between your marginal tax rate and your average tax rate. Your average tax rate is the total tax you pay divided by your total income — a broad measure of your overall tax burden. Your marginal tax rate is the tax you pay on the next dollar you earn — and that is the rate that applies to your pay rise.
For the 2025–26 financial year, Australian resident tax rates (excluding the Medicare levy) are:
- $0 – $18,200: nil (the tax-free threshold)
- $18,201 – $45,000: 16 cents for each $1 over $18,200
- $45,001 – $135,000: $4,288 plus 30 cents for each $1 over $45,000
- $135,001 – $190,000: $31,288 plus 37 cents for each $1 over $135,000
- $190,001 and over: $51,638 plus 45 cents for each $1 over $190,000
On top of this, most taxpayers pay the Medicare levy of 2% of their taxable income. So the true marginal rate on each extra dollar — the figure that determines how much of your raise you keep — is your bracket rate plus 2%.
| Tax bracket | Marginal tax rate | Plus Medicare levy | Total marginal rate | Keep per raise dollar |
|---|---|---|---|---|
| $18,201 – $45,000 | 16% | 2% | 18% | 82¢ |
| $45,001 – $135,000 | 30% | 2% | 32% | 68¢ |
| $135,001 – $190,000 | 37% | 2% | 39% | 61¢ |
| $190,001+ | 45% | 2% | 47% | 53¢ |
Now the worked examples make perfect sense. The $40,000 worker’s entire raise sits in the 16% bracket, so each raise dollar loses 18% (16% tax + 2% levy) and keeps 82% — $1,640 of $2,000. The $100,000 worker’s raise sits in the 30% bracket: 32% gone, 68% kept — $3,400 of $5,000. The $150,000 worker’s raise sits in the 37% bracket: 39% gone, 61% kept — $4,575 of $7,500.
Notice something else: your raise is never taxed at your average rate. On $100,000, the total tax and levy bill is $22,788 — an average rate of about 23% — but the raise is taxed at the marginal 32%. This is the single most common mistake people make when estimating a pay rise: they apply their average rate and overstate what they will keep.
Moving into a higher tax bracket can never make you worse off
This is the myth worth killing properly, because it stops people from negotiating raises. It goes like this: “If my raise pushes me into the next tax bracket, I’ll end up with less.” It sounds logical. It is completely wrong.
Australia’s tax brackets apply only to the dollars above each threshold. The higher rate never reaches backwards and re-taxes income you were already earning. Take a worker on $134,000 receiving a 5% rise to $140,700: the $135,000 threshold is crossed, but only the dollars above $135,000 ($5,700 of the $6,700 raise) are taxed at 37% plus the 2% levy. The first $1,000 of the raise, and all income below $135,000, is taxed exactly as before.
Your take-home pay always rises when your gross pay rises. A higher bracket takes a bigger bite out of the dollars above the line — it can never take a bite out of the dollars below it. There is no salary level where earning an extra dollar leaves you with less than you had.
This is also why a raise that straddles a threshold keeps a blended rate: the portion of the raise in the lower bracket keeps more, the portion in the higher bracket keeps less, and the weighted result sits between the two. Our pay rise calculator handles this automatically — it applies the correct marginal rate to each slice of the raise.
What else takes a cut: Medicare levy, HECS debt and super
Income tax is the biggest slice, but a few other items shape what a raise is worth to you.
The Medicare levy
The 2% Medicare levy applies to most taxpayers’ taxable income, including raise dollars. That is why every keep-rate here is two cents lower than the bracket rate alone: 82¢ kept instead of 84¢ in the 16% bracket, 68¢ instead of 70¢ in the 30% bracket, 61¢ instead of 63¢ in the 37% bracket. Low-income earners may pay a reduced levy or none — if that applies to you, you keep slightly more than these figures show.
HECS/HELP student debt
If you have a HECS or HELP student loan, your raise can also trigger compulsory repayments. For 2025–26, repayments start once your income reaches the $67,000 threshold, and the repayment rate rises as income climbs. A 5% raise that carries you across or further up the repayment scale keeps a little less than our table figures — the repayment is calculated on your whole income, so crossing the threshold for the first time is where the bite is most noticeable. If you are a graduate with student debt near $67,000, factor repayments into your raise expectations.
Superannuation guarantee
The superannuation guarantee is 12% of your ordinary earnings for 2025–26. It is paid by your employer on top of your salary, so it does not reduce your take-home pay. A 5% pay rise usually means 5% more super too — on $100,000 rising to $105,000, that is an extra $600 a year into your super balance. Not money in your pocket today, but real raise value the after-tax figures above do not capture.
How to work out your own raise, step by step
Use this method for any salary and any raise percentage:
- Calculate the gross raise. Multiply your salary by the raise percentage. A 5% rise on $100,000 is $100,000 × 0.05 = $5,000.
- Find your marginal bracket. Check which 2025–26 tax bracket your current salary sits in using the table above — that is the rate that will apply to most of your raise dollars.
- Add the Medicare levy. Add 2% to the bracket rate (unless you pay a reduced levy or none).
- Multiply. Gross raise × (1 − marginal rate) = what you keep. For the $100,000 example: $5,000 × (1 − 0.32) = $5,000 × 0.68 = $3,400.
- Adjust for HECS if relevant. If you have student debt and earn at or above $67,000, repayments take an additional cut.
For a precise result that accounts for bracket thresholds your raise crosses, plus a weekly, fortnightly and monthly breakdown, use the pay rise calculator — it runs the full 2025–26 calculation for you. If you also want to see the complete tax picture for your salary, including every bracket slice, our income tax calculator shows the full breakdown.
Frequently asked questions
How much of a 5% pay rise do I keep on $100,000?
You keep $3,400 of the $5,000 gross raise — 68%. Your take-home pay rises from $77,212 to $80,612. The raise dollars are taxed at your marginal rate of 32% (30% income tax plus the 2% Medicare levy).
Why do I keep less of my raise than my average tax rate suggests?
Because a raise is taxed at your marginal rate, not your average rate. On $100,000, your average tax-plus-levy rate is around 23%, but every extra dollar is taxed at 32% (30% bracket + 2% levy). Always use the marginal rate when estimating a raise.
Can a pay rise ever leave me worse off by pushing me into a higher tax bracket?
No — never. Higher tax rates apply only to the dollars above each threshold. When a raise crosses into the next bracket, only the above-threshold portion of the raise is taxed at the higher rate; everything below is taxed exactly as before. Your take-home pay always goes up when your gross pay goes up.
How much of a 5% raise do I keep on $40,000?
You keep $1,640 of the $2,000 gross raise — 82%. Your take-home rises from $35,712 to $37,352. Because the whole raise sits in the 16% bracket, the marginal rate on the raise is just 18% including the Medicare levy — the best keep rate of any bracket above the tax-free threshold.
Does HECS/HELP debt reduce what I keep from a pay rise?
Yes, if you earn at or above the 2025–26 repayment threshold of $67,000. Compulsory repayments are calculated on your whole income and the rate steps up with income, so a raise near or above that threshold keeps a little less than the standard figures. No student debt, no effect at all.
Does a pay rise increase my super?
Usually, yes. The superannuation guarantee is 12% of ordinary earnings, paid by your employer on top of your salary, so a 5% salary increase generally lifts your super contributions by about 5% as well. It does not reduce your take-home pay — it is extra raise value that lands in your super balance instead.
The bottom line
A 5% pay rise is always worth having — but it is worth knowing what it is really worth. On $40,000 you keep 82% of the raise, on $100,000 you keep 68%, and on $150,000 you keep 61%. The difference is your marginal tax rate: 18%, 32% and 39% respectively once the 2% Medicare levy is included. And the reassuring truth underneath it all: no matter where the thresholds fall, every extra dollar you earn leaves you better off than before.
Before you negotiate, celebrate or budget around your next raise, run the exact numbers for your salary. The pay rise calculator shows your gross raise, the tax on it and your new take-home pay in seconds — so you know precisely what that 5% is worth to you.