Tax Planning
How Australia’s New Personal Income Tax Cuts Impact Individuals from July 2026
Australia’s 2025-26 budget introduced tax rate reductions starting 1 July 2026: the 16% tax bracket drops to 15%, then 14% from July 2027. Here’s what this means for different income groups.
By NomadicTax Research Team • 7 min read • April 27, 2026
## Tax Brackets Before & After
| Income Range | Current Rate | From 1 July 2026 | From 1 July 2027 |
|-------------|----------------|------------------|------------------|
| Threshold to ~$45,000 | Tax-free up to threshold; then **~16% bracket** | **15%** | **14%** |
| $45,001 to $135,000 | **30%** | **30%** | **30%** |
| $135,001 to $190,000 | **37%** | **37%** | **37%** |
| Over $190,000 | **45%** | **45%** | **45%** |
Individuals in the bottom taxable bracket will see roughly a **1-2% cut in marginal tax rate**—small for mid/higher earners.
## Additional Measures: Medicare Levy Thresholds
The Medicare Levy low-income thresholds will be indexed in line with CPI movements—resulting in more people being **exempt or paying a reduced rate**. ([ato.gov.au](https://www.ato.gov.au/law/view/document?DocNum=0000081420&FullDocument=true&PiT=99991231235958&utm_source=openai))
## Who Benefits Most
- **Low earners** just above the tax-free threshold benefit most from the drop in marginal rate.
- **Seniors, students, and pensioners** may benefit more if their incomes fall near the low-income thresholds for Medicare Levy exemptions.
- Higher income earners (above ~$45,000) see rates unchanged beyond that breakpoint.
## Example Scenarios
**Case 1**: Alice earns $40,000/year. Currently, she pays 16% on her taxable income above threshold. From 1 July 2026, that falls to 15%, then 14% from 1 July 2027. Over two years, this results in **hundreds of dollars of tax savings**.
**Case 2**: Ben earns $70,000/year. His taxable income in the 30% bracket sees **no rate change**, so his benefit comes only if his income falls into the threshold for Medicare Levy adjustments.
## Tax Planning Tips
- Accelerate deductions before 30 June 2026 to reduce taxable income in the 15%-/16% bracket year.
- Delay some income into the 2027-28 year only if it pushes into higher brackets—evaluate whether the savings from 16%→14% justify timing.
- Review your super contributions or other tax-offset-eligible payments—these can interact with your taxable income and thresholds.
## Compliance Reminders
- Ensure you’re using correct taxable income base—avoid mistakes in declaring OTE, deductions.
- Keep updated financial records: with changing thresholds, mistakes cost more.
- Use ATO calculators and official resources for income estimates.
## Long-term Perspective
These cuts are intended to help with cost-of-living relief and combat “bracket creep” where inflation pushes taxpayers into higher brackets. Skills in budgeting, planning, and staying informed will help individuals maximise benefit.