Tax Planning
Maximising Your Savings Under the Cost-of-Living Tax Cuts: A Guide for Individuals
New tax rate cuts and increased low-income thresholds are law now — see how you can plan to benefit.
By NomadicTax Research Team • 6 min read • March 30, 2026
## Background: What’s Changing and What’s Effective
The **Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024** took effect in 2024-25 and made significant changes to income tax rates and Medicare levy low-income thresholds.([ato.gov.au](https://www.ato.gov.au/law/view/pdf?DocId=PAC%2F20240003%2F2&PiT=99991231235958&filename=law%2Fview%2Fpdf%2Facts%2F20240003.pdf&utm_source=openai))
Additionally, the **Treasury Laws Amendment (More Cost of Living Relief) Act 2025** (Act No. 28 of 2025) further expanded tax cuts and raised low-income thresholds.([ato.gov.au](https://www.ato.gov.au/law/view/print?DocID=PAC%2F20250028%2FATOTOC&PiT=99991231235958&utm_source=openai))
## Key Changes to Be Aware Of
- From **1 July 2024**, several marginal tax rates changed: for example, the 19% rate fell to 16%, the 32.5% rate dropped to 30%.([ato.gov.au](https://www.ato.gov.au/api/public/content/0-307bd737-ce3a-4500-8a3d-77b5fd2a774a?utm_source=openai))
- Effective **1 July 2026**, the 16% rate (for the income bracket $18,201-45,000) is **reduced to 15%**, and further to **14% from 1 July 2027** under Budget 2025-26 measures.([deloitte.com](https://www.deloitte.com/au/en/pages/federal-budget/topics/federal-budget.html?utm_source=openai))
- The **Medicare levy**-low income thresholds were increased by 4.7% to relieve lower income earners. For singles, for example, the threshold is now ~$27,222.([ashurst.com](https://www.ashurst.com/en/insights/australia-federal-budget-2025-2026-key-tax-measures/?utm_source=openai))
## Tax Planning Strategies to Maximise Benefit
- If your income is near the top of the $18,201-45,000 bracket, consider deferring or accelerating income depending on your cash flow to maximise tax savings when new rates apply.
- Review deductible expenses: timing of deductible items like investment-related expenses or educations costs could influence whether they fall in a higher or lower rate period.
- For retirees and pensioners, updated thresholds for Seniors Australians Pension Offset (SAPTO) now mean you may retain more income before crossing into higher brackets.([ato.gov.au](https://www.ato.gov.au/api/public/content/0-307bd737-ce3a-4500-8a3d-77b5fd2a774a?utm_source=openai))
- If you’re a family or have dependents, monitor changes to family income thresholds and coordinate income among partners if possible.
## Illustrative Examples
**Example 1**: Sarah earns A$45,000/year — under current rules her income from $18,201-45,000 is taxed at 16%. From 1 July 2026, that portion will be taxed at 15%, giving her an annual saving.
**Example 2**: Mark earns A$30,000 and qualifies for Medicare levy exemption threshold under the new rules — the increase in threshold means he might now be exempt or pay reduced levy, depending on dependent status. This means more net income each pay period.
**Example 3**: For pensioners or senior Australians, previously a spouse-based income threshold shade-out might have impacted SAPTO — now with higher thresholds, the benefit may be preserved longer before being phased out.([ato.gov.au](https://www.ato.gov.au/api/public/content/0-307bd737-ce3a-4500-8a3d-77b5fd2a774a?utm_source=openai))
## Things to Consider and Risks
- These changes are already **law**, so delaying action risks missed opportunities. The initial Cost of Living Tax Cuts Act is in force; the “More Cost of Living Relief” measures are also enacted.([ato.gov.au](https://www.ato.gov.au/law/view/print?DocID=PAC%2F20250028%2FATOTOC&PiT=99991231235958&utm_source=openai))
- For taxpayers with fluctuating income across financial years, rate changes and thresholds might change your effective rate substantially. Plan for marginal tax impacts when considering investments or freelance work.
- Stay updated on legislative instruments from Treasury and the ATO; definitions or thresholds may be refined.
## Next Steps for Individuals
- Review recent changes with your accountant or tax adviser to see if you can adjust withholding or estimated tax payments.
- Monitor your salary progress, deductions, and any change in dependent status all year.
- Use ATO’s online tools to estimate your tax liability under the new brackets.
- For investors, consider when to sell assets or realize capital gains in light of marginal rate shifts.
These tax cuts are designed to help with **cost-of-living pressures**, especially for low-to-middle income earners. Being proactive and informed means you’ll keep more of what you earn.