Effective Marginal Tax Rates: Who Keeps 33c of an Extra Dollar?

Your effective marginal tax rate is the share of your next dollar of income that you lose — not just to income tax, but to everything that moves when your income moves: the Medicare levy, HECS repayments, Family Tax Benefit tapers, Child Care Subsidy tapers and Centrelink income tests, all stacked on top of each other. It can sit far above your tax bracket. A single parent on $90,000 with a HECS debt and two young children faces an EMTR of 67% on a pay rise — keeping $3,300.08 of an extra $10,000 — even though their income tax bracket is only 30%.

That number is not a guess. It comes from the worked scenarios behind our new Worth Working More? calculator, which stacks the FY 2026-27 rules — income tax, Medicare levy, HECS, Family Tax Benefit Parts A and B, Child Care Subsidy and JobSeeker income tests — and shows exactly where each dollar of a pay rise, extra shift or second job goes. Every example below is reproduced from the calculator's published test scenarios, so you can rerun them yourself.

Because four separate systems each take a slice of the same $10,000. Take a single parent earning $90,000 with a HECS debt, two children under 13 and Family Tax Benefit Part A, who is offered $10,000 more (FY 2026-27 settings):

Each component is orthodox and published: the 30% bracket and 2% Medicare levy are ATO settings (ato.gov.au); HECS is 15c per dollar over $69,528 in 2026-27 (ato.gov.au); FTB Part A reduces by 20c per dollar of family income over $69,131 (servicesaustralia.gov.au). No single agency ever sees the combined 67% — it only appears when you stack them.

32% through most of the middle of the income distribution. A worker on $80,000 with no HECS debt and no family payments who earns $5,000 more loses $1,500 to income tax (30%) and $100 to the Medicare levy (2%), keeping $3,400 of the $5,000. That is the baseline case — the 30% bracket runs from $45,001 to $135,000, so the 32% EMTR covers a very wide band of full-time earners.

Add a HECS debt and the picture shifts at $69,528. Someone on $68,000 with a student loan who takes on $5,000 of extra work crosses the threshold and faces 30% tax + 2% Medicare + 15% HECS on the dollars above it — an EMTR of 42.4%, keeping $2,879.20 of the $5,000. Importantly, under the marginal repayment system that applies from 2025-26 onwards this is not a cliff: the 15% only applies to the $3,472 above $69,528 (a $520.80 repayment), not to the whole income. Our HECS marginal system guide covers why that change matters.

The Child Care Subsidy adds a quieter drag that scales with your childcare bill. The standard CCS rate is 90% for family incomes up to $88,520 and falls by 1 percentage point for every $5,000 of family income above that (servicesaustralia.gov.au). For a couple each on $60,000 with $20,000 a year in childcare fees, a $10,000 rise moves the subsidy rate down 2 percentage points — $400 of extra out-of-pocket fees. Combined with tax and Medicare, the EMTR on that rise is 37% (keeping $6,300 of $10,000). The bigger the fees, the bigger the bite: on $40,000 of fees the same 2-point drop costs $800.

For income-support recipients the tapers are steeper. JobSeeker reduces by 50c per dollar of fortnightly income between $150 and $256, and 60c per dollar above $256 (servicesaustralia.gov.au). In the calculator's scenario, a single JobSeeker recipient adding $100 a fortnight of wages loses $54.40 a fortnight of payment — an EMTR of 54.4% with no income tax involved at all, since the wage is under the tax-free threshold.

There are also genuine cliffs, where one extra dollar costs hundreds: the FTB Part A supplement — worth up to $970.90 per child for 2026-27 (servicesaustralia.gov.au) — has a family-income limit, so a rise that tips a two-child family past it costs $1,941.80 in one hit. Crossing the Medicare levy surcharge threshold without private hospital cover similarly applies the surcharge to your whole income, not the extra dollars. The calculator flags both cliffs when your inputs approach them.

Usually, yes — but you should know your number before you commit. Even in the 67% scenario the extra $10,000 leaves the household $3,300.08 a year better off, plus around $1,200 of extra employer super (at the 12% guarantee) that no taper touches, plus whatever the higher base salary does for future rises, leave loading and long service leave. The point of an EMTR is not that extra work is pointless; it is that the advertised pay rise and the real pay rise can be very different sizes, and the gap depends on your family situation, not your effort.

Where the number genuinely changes decisions is at the margins: a second earner weighing a fourth or fifth day against childcare fees, a shift worker choosing between overtime and time off, or a single parent near the FTB supplement limit. Run your own combination — pay rise, extra shifts or a second job — through the Worth Working More? calculator, and if a second job is on the table, read our tax-free threshold guide first so the withholding is set up correctly.

What is a typical effective marginal tax rate in Australia?

For a middle-income earner with no HECS debt or family payments, 32% (30% income tax plus the 2% Medicare levy) across the $45,001–$135,000 bracket. With a HECS debt it is typically 47% above $69,528. With family payment tapers stacked on top, EMTRs of 50–70% are realistic for parents in the taper zones.

Is the 67% figure a real tax rate?

It is a modelled effective rate, not a legislated one. It combines four legislated settings — 30% income tax, 2% Medicare levy, 15% HECS repayment and the 20c-per-dollar FTB Part A taper — applied to a single parent on $90,000 receiving a $10,000 rise in FY 2026-27. Of the $10,000, $6,699.92 goes to those four systems and $3,300.08 is kept.

Does earning over $69,528 trigger HECS on my whole income?

No. From 2025-26 the repayment system is marginal: you repay 15c per dollar only on repayment income above the threshold ($69,528 in 2026-27). Crossing it by $1,000 costs $150, not thousands. The old whole-of-income system ended with the 2024-25 year.

Why did my Child Care Subsidy drop after a pay rise?

The CCS percentage falls 1 point per $5,000 of family income above $88,520. The dollar cost equals the percentage drop times your annual childcare fees, so the same rise costs a high-fee family far more than a low-fee family.

How do I work out my own EMTR?

Use the Worth Working More? calculator: enter your current income, the extra income you are weighing up, and toggle HECS, partner income, FTB, childcare and any Centrelink payment. It itemises exactly which system takes what and reports the percentage you keep.