What’s changing
Australia’s Government passed the Treasury Laws Amendment (More Cost of Living Relief) Act 2025, creating permanent tax rate reductions:
- From 1 July 2026, the bottom rate for resident individual taxable income above the tax-free threshold becomes 15% (down from 16%). (ato.gov.au)
- From 1 July 2027, that same rate drops further to 14% for the same income band. (ato.gov.au) These reductions are aimed at giving every Australian taxpayer some cost-of-living relief and returning to pre-bracket creep position. (ato.gov.au)
Who benefits and how much
| Annual Taxable Income | Change in rate band from 2025-26 | Approximate annual tax savings* |
|---|---|---|
| $25,000 | Rate drop from 16% → 15% | ~$100 before other factors |
| $45,000 | Moving lower portion of income | ~$200-$230 |
| $60,000 | More income taxed at the lower rate | ~$300-$350 |
| $90,000 | Larger portion shifted | ~$500-$600 |
*Actual savings depend on deductions, offsets, residency status.
Implications for tax planning
- Salary packaging and structure: Lower base rates mean less incentive for employees to aim for fringe-benefits in lieu of taxable salary unless they yield additional benefits.
- Loan and investment considerations: Lower marginal rates increase the after-tax return on investments. Evaluate before adjusting portfolio risk.
- Super contributions timing: While super’s concessional contributions (up to cap) may still offer benefit, the marginal tax saved onto upfront contributions reduces slightly — but long-term compounding still makes super attractive.