Compliance
Australia’s Mid-Year PAYG Tax Table Updates: What Payroll and Small Businesses Must Do
Starting 1 July 2026, Australia changes withholding rates and thresholds—this article guides businesses and payroll departments through how to prepare and stay compliant.
By NomadicTax Research Team • 5-8 min read • June 16, 2026
## Overview: The PAYG Changes at a Glance
Australia’s **ATO PAYG withholding tax tables** are updated effective **1 July 2026**. These updates reflect tax rate cuts from the 2025-26 Budget and adjustments in study and training support loan repayment thresholds.([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/2026-pay-you-go-payg-withholding-tax-tables-0?utm_source=openai))
Businesses, payroll providers, accountants, and employee P.R. departments must align systems with new rates to avoid incorrect deductions or penalties. This includes software updates, training, and communication with staff.
## Key Updates: What’s Changing
- **Personal income tax cuts** from Budget 2025-26 reflected in the new withholding schedules.([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/2026-pay-you-go-payg-withholding-tax-tables-0?utm_source=openai))
- Indexation of **study and training support loan repayment thresholds** means higher repayments may begin later or at different earning levels.([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/2026-pay-you-go-payg-withholding-tax-tables-0?utm_source=openai))
- Updated **tax tables and formula schedules** that affect 15 withholding schedules and 12 tax tables. Some have only formatting changes, others carry cap adjustments.([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/2026-pay-you-go-payg-withholding-tax-tables-0?utm_source=openai))
## What Your Business Needs to Do Before 1 July
- Update payroll software: Ensure system patches are applied and checks made against published ATO schedules (Schedules NAT 1004, NAT 3539, etc.)([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/2026-pay-you-go-payg-withholding-tax-tables-0?utm_source=openai)).
- Recalculate employee withholding: Communicate any change in take-home pay to employees ahead of time to manage expectations.
- Train payroll staff on new thresholds, especially for loan repayments or tertiary financing offsets.
- Review all termination payments, superannuation lump sums and income stream caps since some cap amounts or payment limits have changed.([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/2026-pay-you-go-payg-withholding-tax-tables-0?utm_source=openai))
## Example to Illustrate Impact
Imagine an employee earning AUD 80,000 annually. Under the current withholding table, their PAYG withheld amount may drop in mid-year because of the reduced marginal tax rate. Simultaneously, if they're making study loan repayments, the threshold adjustment may temporarily put them under a lower repayment tier. The result is a **noticeable increase in net pay** from July.
## Risk Management & Compliance Tips
- Use both test runs and previews of payroll output in June to detect anomalies.
- Keep documentation of your software version and update application—you may need proof in case of audit.
- Be aware that mis withholding can lead to underpayments owed at year end or compliance action.
## Conclusion
For businesses with Australian payroll responsibilities, this mid-year shift is non-negotiable. Align systems, inform staff, and validate withholding choices before **1 July 2026**, or you risk unintended tax liabilities or penalties. Adapting early keeps you compliant and builds trust.