Tax Planning
Navigating Australia’s New Tax Cuts from 1 July 2026: What Every Individual Should Know
Australia is reducing income tax rates and lifting Medicare levy low-income thresholds starting 1 July 2026—discover how this affects your take-home pay, deductions, and planning.
By NomadicTax Research Team • 5-8 min read • June 1, 2026
## What’s Changing from 1 July 2026
Australia has passed the **Treasury Laws Amendment (More Cost of Living Relief) Act 2025**, bringing in two key changes with immediate impact for individuals. First, the 16% marginal tax rate threshold is dropping to **15%** for the 2026-27 income year, and further to **14%** in 2027-28 and subsequent years. Second, the **Medicare levy low-income thresholds** (including SAPTO thresholds and surcharge thresholds) are being increased in line with CPI movements. These changes aim to give cost-of-living relief and combat bracket creep. ([ato.gov.au](https://www.ato.gov.au/law/view/document?DocNum=0000081420&FullDocument=true&PiT=99991231235958&utm_source=openai))
## Who Benefits Most
- **Low to middle income earners**: Individuals just above the tax-free threshold will see a noticeable reduction in tax on their first segment of taxable income. For example, someone earning $40,000 will pay less tax on the portion exceeding the tax-free threshold under the new 15% bracket versus the old 16%.
- **Families, seniors, pensioners**: Higher thresholds mean many who previously paid the full Medicare levy may pay reduced amounts or be exempt altogether. ([ato.gov.au](https://www.ato.gov.au/law/view/document?DocNum=0000081420&FullDocument=true&PiT=99991231235958&utm_source=openai))
- **All taxpayers**: Even those in higher brackets will see modest gains due to the lowered rate on the first taxable slice and reduced Medicare levy burden. Privacy is preserved, and it’s a direct saving.
## Practical Implications for Your Tax Planning
- **Adjust Pay As You Go (PAYG) withholding settings**: With lower marginal rates and adjusted tables, ensure your employer or tax agent updates relevant forms so you don’t overpay during the year. The ATO has published updated PAYG withholding tax tables effective 1 July 2026 reflecting these changes. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/2026-pay-you-go-payg-withholding-tax-tables-0?utm_source=openai))
- **Review deductions and salary packaging**: With extra breathing room in lower tax rates, expenses and deductions might have different after-tax values. For variable incomes, thresholds matter more now than before.
- **Estimate your Medicare levy liability**: If you're close to a threshold previously paying the full levy, check if the new rates move you into partial or full exemption.
## Examples
| Taxpayer Profile | Current Rate on First $45,000 | New Rate from 1 July 2026 | Saving on First $30,000 Above Threshold* |
|------------------|-------------------------------|----------------------------|--------------------------------------------|
| Single person | 16% | 15% | ~$300 annually |
| Family, SAPTO eligible | 16% | 15% | ~$300, plus Medicare levy savings |
*Approximate, based on difference between 16% and 15% on taxable income above tax-free threshold.
## Action Items
- Confirm your employer is using the **new ATO PAYG withholding tables** from 1 July 2026.
- Revisit budgeting to account for the increased take-home pay and lowered Medicare obligations.
- For financial planners and tax agents: update projections, tax-planning advice, and client communications accordingly.
## What to Watch For
- Changes to policy may still be subject to minor amendments despite being “now law.” Always refer to the ATO’s latest tables and notices.
- The full benefit for your situation depends on your mix of income, deductions, and eligibility for offsets like SAPTO.
With these changes, 2026-27 brings relief for all taxpayers—especially those feeling stretched by rising costs. Review your position and make sure you’re set to gain, not lag behind.
*NomadicTax Research Team*