How much can I contribute to super to reduce my tax in FY 2025-26?

The concessional (pre-tax) contributions cap is $30,000 for FY 2025-26, including your employer's 12% Superannuation Guarantee (SGC) contributions (ITAR 1997, r.292-25.01). Concessional contributions are taxed at 15% inside super instead of your marginal rate — saving up to 32 percentage points for someone on the top 47% combined rate. If your super balance is below $500,000 you may also carry forward unused cap amounts from the previous 5 years.

What is the Medicare Levy Surcharge threshold in FY 2025-26?

Singles earning above $101,000 without an appropriate level of private hospital cover pay the Medicare Levy Surcharge (MLS). The surcharge is 1% for $101,001–$118,000, 1.25% for $118,001–$158,000, and 1.5% above $158,000 (ITAA 1936, Subdivision 61-G; 2025-26 indexed thresholds). At $101,000 income, paying MLS costs $1,010/year — compared to a basic hospital policy from around $800/year.

Can I claim working from home expenses in FY 2025-26?

Yes. The ATO's revised fixed rate method (PCG 2023/1, effective 1 July 2022) allows you to claim 67 cents per work-from-home hour. This covers electricity, internet, phone, and stationery. You must keep a record of actual hours worked from home — the ATO no longer accepts a 4-week representative diary for years after 2022-23. A separate claim for home office equipment costing over $300 can be depreciated in addition.

What is the CGT 50% discount and when does it apply?

Australian resident individuals who hold a capital gains asset for more than 12 months (365 days) are entitled to a 50% discount on the capital gain before it is added to assessable income (ITAA 1997, Division 115). For example, a $50,000 gain on shares held 13 months is reduced to $25,000 of assessable income. The discount does not apply to assets acquired before 20 September 1985 (pre-CGT assets) or to companies.

What are the FY 2025-26 income tax rates in Australia?

FY 2025-26 tax brackets (residents): $0–$18,200 at 0%, $18,201–$45,000 at 16%, $45,001–$135,000 at 30%, $135,001–$190,000 at 37%, over $190,000 at 45%. Add 2% Medicare Levy for most taxpayers. Source: Income Tax Rates Act 1986, Schedule 7, as amended by Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024.

Tax Guide · FY 2025-26

How to Minimise Australian Tax in FY 2025-26

Q: What is the tax-free threshold in Australia for FY 2025-26?

The tax-free threshold is $18,200. No income tax is payable on the first $18,200 of taxable income (Income Tax Rates Act 1986, Schedule 7, as amended by Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024). With the Low Income Tax Offset (LITO) of up to $700, the effective tax-free threshold extends to $20,788 for low-income earners.

7 ATO-compliant strategies that can reduce your taxable income — backed by specific legislation, ruling references, and real dollar figures.

$18,200

Tax-free threshold

47%

Top combined rate

$30,000

Super CC cap

67¢/hr

WFH fixed rate

FY 2025-26 Income Tax Brackets

Source: Income Tax Rates Act 1986, Schedule 7, as amended by Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024

Taxable Income	Marginal Rate	+ Medicare (2%)	Change from FY24-25
$0 – $18,200	0%	0%	—
$18,201 – $45,000	16%	18%	↓ from 19%
$45,001 – $135,000	30%	32%	↓ from 32.5%
$135,001 – $190,000	37%	39%	Unchanged
$190,001+	45%	47%	Unchanged

Low Income Tax Offset (LITO) of up to $700 further reduces tax for incomes up to $66,667. Effective tax-free threshold with LITO: $20,788.

7 Tax Minimisation Strategies for FY 2025-26

Salary Sacrifice to Superannuation

ITAA 1997, s.290-150 · Concessional contributions cap: $30,000 (FY 2025-26)

Pre-tax salary sacrificed into super is taxed at a flat 15% contributions tax instead of your marginal rate. For an employee on $120,000 (30% bracket + 2% Medicare = 32% combined), every $1,000 salary sacrificed saves $170 in tax.

Salary	Combined rate	Tax saved per $1,000 sacrificed	Max annual saving (full cap)
$60,000	32%	$170	$3,230
$100,000	32%	$170	$3,230
$150,000	39%	$240	$4,560
$200,000+	47%	$320	$6,080

Note: Div 293 applies an additional 15% tax on concessional contributions for income + contributions above $250,000. Net saving at top rates is still $320/year per $1,000 contributed.

Carry-Forward Concessional Contributions

ITAA 1997, s.291-20 · Super balance must be below $500,000 on 30 June prior year

Unused concessional cap amounts from the previous 5 financial years can be carried forward and used in a single year. This allows a one-off catch-up contribution — useful after parental leave, part-time periods, or a windfall income year.

›Check your available carry-forward balance in MyGov > ATO > Super.
›Contributions must be made before 30 June 2026 to count for FY 2025-26.
›Lodge a Notice of Intent to Claim (NAT 71121) with your fund before you lodge your tax return.

Work-From-Home: 67¢ Fixed Rate (PCG 2023/1)

ATO PCG 2023/1 · Effective 1 July 2022 · Updated record-keeping from 1 March 2023

The ATO's revised fixed rate covers electricity, internet, phone, stationery, and computer consumables at 67 cents per work-from-home hour. Items costing over $300 (e.g. monitors, desks) can still be depreciated separately.

$301.50

450 hrs

1 day/wk

$603

900 hrs

2–3 days/wk

$1,005

1,500 hrs

Full WFH

Record-keeping requirement: A continuous log of actual hours worked from home for the full income year. The ATO no longer accepts a 4-week representative diary for FY 2022-23 onward.

Car Expenses — Cents per Kilometre

ITAA 1997, s.28-25 · ATO rate: 88¢/km for FY 2025-26 · Maximum: 5,000 km

The cents-per-kilometre method allows a deduction of 88 cents per kilometre for the first 5,000 work-related kilometres per year — a maximum deduction of $4,400. No receipts are required, but you must be able to substantiate the work purpose.

›Applies to cars (not motorcycles or utes > 1 tonne GVM).
›Work travel includes: client visits, inter-office travel, attending work conferences.
›Commuting from home to your regular workplace is not deductible.

CGT 50% Discount — Hold Assets Over 12 Months

ITAA 1997, Division 115 · Applies to assets held > 365 days by Australian resident individuals

Australian resident individuals who hold an asset for more than 12 months are entitled to a 50% discount on any capital gain before it is included in assessable income.

Gain	Without discount (<12 mo)	With discount (>12 mo)	Tax saved (30% bracket)
$10,000	$3,200	$1,600	$1,600
$30,000	$9,600	$4,800	$4,800
$50,000	$16,000	$8,000	$8,000

Private Health Insurance — Avoid the Medicare Levy Surcharge

ITAA 1936, Subdivision 61-G · FY 2025-26 indexed MLS thresholds

Singles without an appropriate level of hospital cover pay the MLS on top of the 2% Medicare Levy. The MLS is not waived for partial-year coverage — it is pro-rated based on the number of days without cover.

Income (single)	MLS Rate	Annual MLS cost	PHI rebate (base tier)
$101,001 – $118,000	1.0%	$1,010 – $1,180	24.288%
$118,001 – $158,000	1.25%	$1,475 – $1,975	16.192%
$158,001+	1.5%	$2,370+	8.095%–0%

The PHI rebate reduces your out-of-pocket premium cost. At the base tier, a $3,000/year policy costs ~$2,273 after the 24.288% rebate — often less than the MLS liability.

General information only · Not financial advice · Compare policies before purchasing

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First Home Super Saver Scheme (FHSS)

ITAA 1997, Subdivisions 290-H & 306-B · Annual FHSS limit: $15,000 · Lifetime limit: $50,000

First home buyers can make voluntary concessional contributions to super and later withdraw up to $50,000 lifetime (max $15,000/year) to put towards their first home. Contributions save tax at your marginal rate; withdrawals are taxed at your marginal rate less a 30% tax offset.

›85% of concessional contributions are releasable (net of 15% contributions tax).
›Deemed earnings added at ATO shortfall interest charge rate (4.01% for FY 2025-26).
›Must apply for a FHSS determination before signing a contract of purchase.

ATO Ruling Spotlight

PCG 2023/1

Working from Home Expenses — Revised Fixed Rate Method

ATO Practical Compliance Guideline · Issued 16 February 2023 · Effective 1 July 2022

What it says

›67 cents per work-from-home hour (up from 52c under the prior shortcut method).
›Covers electricity, gas, internet, phone, stationery, printer ink.
›Cannot claim additional internet or phone expenses separately.
›No requirement for a dedicated home office room.

Record-keeping requirements

›From 1 March 2023: Must keep a continuous record of actual hours worked from home for the entire income year.
›A 4-week representative diary is no longer accepted.
›Records must show: date, start time, finish time, nature of work.
›Time-tracking apps (e.g. Toggl, Google Calendar) satisfy this requirement.

Dollar impact example

Employee works from home 3 days per week (approx. 936 hours/year). Deduction: 936 × $0.67 = $627. At the 30% bracket + 2% Medicare, this saves $200 in tax. Additional monitor ($800) depreciated at 25% diminishing value adds a further $200 deduction.

Frequently Asked Questions

What is the tax-free threshold in Australia for FY 2025-26?+

The tax-free threshold is $18,200. With the Low Income Tax Offset (LITO) of up to $700, the effective tax-free threshold is $20,788 for those who earn below $37,500.

How much can I contribute to super to reduce my tax?+

The concessional (pre-tax) cap is $30,000 for FY 2025-26, including your employer's Superannuation Guarantee (SGC). Additional carry-forward amounts may apply if your super balance is below $500,000 and you have unused cap space from the past 5 years.

Does private health insurance fully eliminate the Medicare Levy Surcharge?+

No. The MLS is not all-or-nothing. It is applied pro-rata based on the number of days in the year without an appropriate level of private hospital cover (ITAA 1936, s.61-585). If you hold cover for only 6 months, the MLS applies to the other 6 months.

Can I claim both the work-from-home fixed rate AND a separate internet deduction?+

No. Under PCG 2023/1, the 67c/hour rate already includes internet and phone usage costs. You cannot separately claim a work-related portion of your internet bill on top of the fixed rate.

What is the CGT discount and when does it apply?+

Australian resident individuals who hold a CGT asset for more than 12 months (365 days) are entitled to a 50% discount on the gross capital gain (ITAA 1997, Division 115). The discount does not apply to short-term gains, foreign residents, or companies.

What is Division 293 tax?+

Division 293 (ITAA 1936) imposes an additional 15% tax on concessional super contributions for individuals whose combined income and concessional contributions exceed $250,000. The effective contributions tax rate rises from 15% to 30% for affected amounts — still below the 39% or 47% marginal rate.

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Not financial advice. All figures based on ATO published rates for FY 2025-26.