Tax Planning
How Australia’s New Cost-of-Living Tax Cuts Will Impact Your Planning From Mid-2026 Onwards
Major tax bracket changes are coming July 2026 and July 2027—here’s what to do now to maximize benefits and avoid surprises.
By NomadicTax Research Team • 5-8 min read • March 12, 2026
## What’s Changing Under the New Tax Cuts
As part of the **2025-26 Federal Budget**, the Australian government passed 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)) Starting **1 July 2026**, the **base rate for resident taxpayers** above the tax-free threshold but under $45,000 will drop from **16% to 15%**. From **1 July 2027**, that rate drops 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)) Rates for higher brackets (above $45,000) remain unchanged for now. These cuts are intended to provide relief by reducing bracket creep and lowering taxes for low-to-middle income earners. ([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))
## Who Gains and by How Much
| Taxable Income Range | Rate from 1 July 2026 | Impact vs Current Rate |
|-----------------------|------------------------|--------------------------|
| $18,201 – $45,000 | 15% | Save ~1% on income in this band |
| $45,001 – $135,000 | 30% | No change |
| $135,001 – $190,000 | 37% | No change |
| Above $190,000 | 45% | No change |
For someone earning $40,000, the new rate from mid-2026 means their tax liability on every dollar between the threshold and $45,000 is reduced, increasing their aftertax income noticeably.
## Planning Now for Greater Benefit
- **Timing deductions:** If you expect to have deductions or income near the threshold, shifting income or expenses across 30 June might help.
- **Salary packaging or bonuses:** If you can defer bonus income into the next financial year (post-30 June 2026), more of that income could fall into the lower rate band.
- **Superannuation contributions:** Consider boosting concessional super contributions now, since future tax cuts don’t affect super-taxed contributions but reduce your marginal rate.
## Other Related Tax Changes to Factor In
- **Foreign Resident Capital Gains Withholding (FRCGW):** From 1 Jan 2025, foreign residents face a 15% withholding rate on any property contract—no threshold. Australian residents must get clearance certificates to avoid withholding. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-b8ccd585-9999-4e4a-99b2-af37b6ca5791?utm_source=openai))
- **International Tax Measures:** New thin capitalisation and interest limitation rules (BEPS Action 4) apply to private groups from **1 July 2023**. If you own or invest through corporate private entities, check for potential impacts. ([ato.gov.au](https://www.ato.gov.au/businesses-and-organisations/international-tax-for-business/private-wealth-international-program/new-international-tax-measures-affecting-private-groups?utm_source=openai))
## Actionable Advice
- Review your upcoming FY2026 tax forecast: if most income falls in the lowest bracket, you’ll benefit from the cut—plan deductions accordingly.
- If selling property or disposing of capital assets, check whether FRCGW applies, and prepare for variation or clearance applications.
- For business owners and private groups, ensure your structuring and finance arrangements comply with the newer thin capitalisation rules.
- Keep cash flow in mind: the reduced withholding through FRCGW might affect settlement timing or obligations.
**Summary:** Australia’s tax-cut measures starting July 2026 will deliver meaningful relief for millions. With careful timing and awareness of how other rules like FRCGW and corporate integrity changes interact, taxpayers can reduce exposure and maximize benefit.