Tax Planning
How Australia’s 2025-26 Tax Cuts Will Impact Your Pay Packet from July 2026
Learn how the upcoming personal income tax rate reductions will affect different income groups and discover actionable tax planning strategies to make the most of the changes.
By NomadicTax Research Team • 5-8 min read • March 25, 2026
## What’s Changing?
- From **1 July 2026**, the 16% tax rate on taxable income between **A$18,201 and A$45,000** will be reduced to **15%**. ([ato.gov.au](https://www.ato.gov.au/law/view/pdf/acts/20250028.pdf?utm_source=openai))
- From **1 July 2027**, it will drop **further to 14%** for the same bracket. ([ato.gov.au](https://www.ato.gov.au/law/view/pdf/acts/20250028.pdf?utm_source=openai))
- These are part of the **More Cost of Living Relief** measures passed in the **Treasury Laws Amendment (More Cost of Living Relief) Act 2025**. ([ato.gov.au](https://www.ato.gov.au/law/view/pdf/acts/20250028.pdf?utm_source=openai))
## Who’s Most Affected?
| Income Range | Current Rate | Rate from 1 July 2026 | Rate from 1 July 2027 |
|--------------|--------------|------------------------|-------------------------|
| A$18,201–A$45,000 | 16% | **15%** | **14%** |
| Above A$45,000 | No change | N/A | N/A |
If you currently earn within the A$18,201–45,000 range, you’ll see greater take-home pay starting mid-2026. For earners above that, your marginal tax rates stay the same.
## Tax Planning Opportunities
- **Boost deductible expenses**: Prepay allowable expenses before the round-off date of 30 June 2026; this maximises deductions under the current 16% rate before the drop.
- **Salary packaging**: If possible, front-load expenses or investments to claim deductions or offsets now.
- **Review shared income structures**: Couples or trusts should reassess income allocations if lower brackets are impacted. For example, splitting income into the A$18,201–45,000 bracket of a lower-earning spouse could yield savings.
- **Delay large capital gains**: Unless needed urgently, consider deferring selling capital assets until after the tax‐rate shift where applicable, especially for those with gains that would fall into that affected bracket.
## Compliance Reminders
- Adjust payroll withholding tables if you're an employer, and let staff know about expected changes to their take-home pay.
- Update budgeting plans for the transition years. Big jumps in heartland income brackets won’t be repeated, so ensure you don’t overestimate deductions or offsets.
- Check whether any other relief (like the **increases in Medicare levy low-income thresholds**) also impacts your tax; those are also coming into force with the same Act. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/latest-news-on-tax-law-and-policy?utm_source=openai))
## Example
Maria is a single earner with taxable income of A$40,000. Under current law, she pays 16% marginal tax, meaning **tax on the portion from A$18,201 to A$40,000 at 16%**. From 1 July 2026, she’ll pay **15%** on that same range, saving about **A$100–A$150** for the full year. From 1 July 2027, her saving increases further because the rate drops to **14%**, adding another ~$100 in savings. Over two years, that’s a few **hundred dollars** extra in her pocket.
## What to Do Now
- Speak to your employer or payroll provider to ensure your withholding amounts are aligned with your projected income once rates change.
- Consult with a tax adviser if you have variable income or are part of a trust or partnership to make sure you aren’t caught off guard.
- Use online budget calculators to project household income changes. Small adjustments in deductions or rate thresholds can make a meaningful difference.
**Bottom line**: If your income sits in the A$18,201–45,000 bracket, these upcoming tax cuts are good news. Plan now to maximise opportunities and minimise surprises.