Tax Planning
How Australia’s Upcoming Tax Cuts Can Boost Your Personal Planning
Major tax cuts for every Australian taxpayer take effect from mid-2026—learn who benefits, how they change planning, and what to do now for optimal outcomes.
By NomadicTax Research Team • 5-8 min read • March 12, 2026
## Overview of the Upcoming Tax Cuts
Australia's **Treasury Laws Amendment (More Cost of Living Relief) Act 2025** brings significant changes to personal income tax rates starting **1 July 2026**, with further adjustments from **1 July 2027**. ([ato.gov.au](https://www.ato.gov.au/law/view/pdf/acts/20250028.pdf?utm_source=openai))
- From **1 July 2026**, the **16% bracket** will be lowered to **15%**. ([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))
- From **1 July 2027**, the **15% bracket** will be reduced 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))
This is in addition to measures that lift the thresholds for the Medicare levy low-income exemptions. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/latest-news-on-tax-law-and-policy?utm_source=openai))
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## Tax Planning Implications & Strategies
With tax brackets changing, there are actionable strategies individuals can take now to manage their tax burden over the transition.
### 1. Timing Income & Deductions
If you expect a large income event (e.g., bonuses, selling an asset):
- Defer it into the 2026-27 year if it keeps you in a **lower bracket** under the new 15% rate.
- Accelerate deductible expenses into the current 2025-26 year (pre-1 July 2026) to meet higher marginal rates now.
### 2. Superannuation Contributions
With rate cuts, pre-tax income will stay with taxpayers instead of flowing into higher tax on contribution.
- Consider **salary sacrificing** now to reduce taxable income in current year.
- Review timing of those contributions; starting 2026-27, after-tax income holds more value under lower rates.
### 3. Investment & Withholding Considerations
If you receive investment income subject to withholding, or dividends:
- Ensure you're using correct withholding rates; you may be eligible for better rates if you fall into the new lower brackets.
- Assess whether altering asset sales or timing CGT events can leverage lower rates.
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## When These Changes Become Effective
| Date | What Changes |
|---|---|
| **1 July 2026** | 16% bracket becomes 15%; Medicare levy low income thresholds increased. ([ato.gov.au](https://www.ato.gov.au/about-ato/new-legislation/latest-news-on-tax-law-and-policy?utm_source=openai)) |
| **1 July 2027** | 15% rate reduced to 14% for lowest taxable bracket. ([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)) |
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## Practical Examples
- **Sue**, earning $40,000 taxable income: pre-1 July 2026 pays tax at **15%**; from that date, at **15%** (same rate, but rate structure adjustments may impact credits/levies). From July 2027, she pays **14%** on her lowest rate portion.
- **Alex**, earning $50,000: only income up to $45,000 (or threshold floor) falls in lowest bracket; the remainder taxed at higher tiers remains unchanged. Planning around the bracket cutoff becomes more valuable.
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## Action Steps Before Changes Kick In
1. **Review last tax return**: Identify income near bracket thresholds.
2. **Plan large incomes or asset sales**: Could timing shift into later years where lower rates apply?
3. **Talk to agent**: Ensure tax withholding & PAYG estimates reflect upcoming brackets.
4. **Update payroll/software**: Employers & payroll services must update tax tables. ^
> **Note**: These are legal changes passed as law. These cuts are **not proposals** but **enacted** measures. ([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))
**The takeaway**: These tax cuts offer real savings. For lower- and middle-income earners especially, strategic decision-making around timing and deductions before these rate changes can enhance benefits.