What Are the Changes?
- From 1 July 2026, the marginal tax rate on income between A$18,201 and A$45,000 for resident taxpayers will drop from 16% to 15%.(ato.gov.au)
- From 1 July 2027, that same tax bracket rate further reduces to 14% under the More Cost of Living Relief Act 2025.(ato.gov.au)
- The Medicare levy low-income thresholds (both for individuals and families) and surcharge thresholds are also being increased in line with CPI to help those on lower incomes.(ato.gov.au)
Examples: How This Affects You
| Scenario | Income | Today’s Rate (2025-26) | Rate from 1 July 2026 | Approx. Annual Tax Savings* |
|---|---|---|---|---|
| Entry-level worker | A$35,000 | 16% | 15% | ~A$100–150 |
| Mid-income earner | A$45,000 | 16% (on income above A$18,200) | 15% | ~A$120–200 |
*Depends on other deductions and Medicare liability.
What You Should Do Now
- Adjust your withholdings once updated tax tables are released from July 2026.
- Review take-home pay so you’re not surprised when your pay increases slightly due to these cuts.
- Check with a tax professional if your total income spans multiple brackets—that can change your overall tax benefit.
Wider Impacts
- Consumers may feel more disposable income, especially in services and retail sectors.
- Employers edge toward better attraction and retention as workers’ net income increases.
- Sensitivity analyses show that the government will lose billions over forward estimates, but judged to be “high impact” politically.(ato.gov.au)
Bottom line: If you're a resident taxpayer, everyone with taxable income over the tax-free threshold (A$18,200) will benefit starting from July 2026—and the benefit grows in July 2027.
Related Policy to Watch
- Changes to study and training support loans repayment rules from 1 July 2025, which may reduce repayments for those with lower incomes.(ato.gov.au)
- Adjustments in super contributions on paid parental leave and the closing of the Small Business Superannuation Clearing House in July 2026.(ato.gov.au)