Tax Planning
How Australia’s New Cost-of-Living Tax Cuts Affect Your Paycheck from 1 July 2026
From 1 July 2026, new tax bracket adjustments are set to reduce the rate for many Australians — learn how these changes impact your after-tax income and planning strategies.
By NomadicTax Research Team • 5-8 min read • April 5, 2026
## What’s Changing?
Australia’s Federal Budget for 2025-26 introduced new tax cuts for **every Australian taxpayer**. From **1 July 2026**, the tax rate for ordinary taxable income exceeding the tax-free threshold and up to **$45,000** will drop from 16% to **15%**. Then, from **1 July 2027**, that rate will fall further to **14%**. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/in-detail/individuals/personal-income-tax-new-tax-cuts-for-every-australian-taxpayer?utm_source=openai))
For incomes above $45,000, the rates remain unchanged: 30% for $45,000 to $135,000; 37% for $135,000 to $190,000; and 45% for income over $190,000. ([ato.gov.au](https://www.ato.gov.au/law/view/pdf/acts/20250028.pdf?utm_source=openai))
## Who Benefits Most
- Low to moderate income earners (earning up to about **$45,000**) will see **immediate relief** in take-home pay.
- Those above $45,000 will see **no change** in their current bracket until after 2027 when the first bracket’s rate is reduced.
## Practical Impacts
- If you earn **$40,000**, your tax on the portion above the threshold will be taxed at 15% (from 1 July 2026), instead of 16%.
- For someone on **$90,000**, only your first $45,000 (minus tax-free threshold) is affected; higher income portions retain current bracket rates.
## Planning Tips Before 1 July 2026
- **Delay income** (if possible) to shift into the period after the tax cut takes effect, e.g. bonuses, dividends or deductions.
- **Maximise super contributions** or other deferred income arrangements for high earners to reduce taxable income this year.
- **Prepay deductible expenses** (if allowed), like professional memberships or investment-related fees, to get deductions in the current year rather than after July.
## Example
| Scenario | Income | Tax Rate June 2026 (Old) | Tax Rate July 2026 (New) | Annual Tax Saving |
|---|---|---|---|---|
| A | $40,000 | 16% on taxable over threshold | 15% | ~$100 |
| B | $60,000 | 16% on first bracket only | 15% same bracket | Smaller saving, ~$50 |
## Key Takeaway
The reduction in rate for the first bracket from 16% to 15% in **2026-27**, then to 14% in **2027-28**, delivers **cost of living relief**, especially for lower-to-middle income Australian taxpayers. Plan ahead now to make the most of timing deductions and taxable income. The change is **law** via the *Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024*. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/in-detail/individuals/personal-income-tax-new-tax-cuts-for-every-australian-taxpayer?utm_source=openai))