Overview of Australia’s 2026–27 Tax Rate Changes
In the 2025–26 Federal Budget, the Australian Government passed the Treasury Laws Amendment (More Cost of Living Relief) Act 2025, delivering new tax cuts for every Australian taxpayer effective 1 July 2026. The tax rate applied to taxable income between AUD $18,201 and $45,000 will be reduced from 16% down to 15%, then further reduced to 14% from 1 July 2027. (budget.gov.au)
What It Means for You and How to Plan Ahead
These cuts mean more take-home pay. For example:
- A worker on average earnings is expected to receive about AUD $268 less in tax in 2026-27, rising to AUD $536 in 2027-28 (compared to 2024-25 settings). (budget.gov.au)
- Couples filing jointly, or those with multiple incomes, should project combined savings—e.g., reducing tax on lower-income earners boosts overall household income. (budget.gov.au)
Actionable Tax Planning Tips
- Review your withholding: Lower rates may mean you’re over-withheld now. Submit a revised withholding schedule to your employer closer to 1 July 2026.
- Project your 2026–27 income: If you expect income growth, ensure you're aware of marginal brackets above $45,000.
- Utilise pre-paid deductions: If itemised deductions apply (e.g., work expenses, charitable donations), aligning them with the fiscal year can amplify savings under lower marginal tax rates.
- Reassess cashflow, especially if expecting bigger refunds: Plan major expenses and your tax return timing with the new lower thresholds in mind.
Considerations & Caveats
- These reductions don’t affect higher brackets (30%, 37%, 45%) thresholds—those remain intact. So substantial income above $45,000 is still taxed at higher rates. (ato.gov.au)
- For those subject to Medicare levy thresholds, earlier legislation lifted the low-income thresholds, but these adjustments happen sooner—1 July 2024 for levy thresholds. (budget.gov.au)
- Bracket creep (inflation pushing income into higher brackets over time) remains a concern for future adjustments.
Summary
These tax cuts are enacted law, effective from 1 July 2026, with further improvement in 2027. For individuals at lower income levels, this is an opportunity to increase net income now. Act early — review withholding, plan deductions, and forecast household tax liability to fully utilise the benefit.