Tax Planning
Navigating Australia’s New Tax Cuts: What Every Employee Needs to Know
Australia is cutting personal income tax rates in stages—find out exactly what this means for your pay, thresholds, and Medicare levy obligations.
By NomadicTax Research Team • 5-8 min read • May 3, 2026
## 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](https://www.ato.gov.au/about-ato/new-legislation/in-detail/individuals/personal-income-tax-new-tax-cuts-for-every-australian-taxpayer?utm_source=openai))
- 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](https://www.ato.gov.au/about-ato/new-legislation/in-detail/individuals/personal-income-tax-new-tax-cuts-for-every-australian-taxpayer?utm_source=openai))
- 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](https://www.ato.gov.au/law/view/document?DocNum=0000081420&FullDocument=true&PiT=99991231235958&utm_source=openai))
## 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](https://www.ato.gov.au/law/view/document?DocNum=0000081420&FullDocument=true&PiT=99991231235958&utm_source=openai))
**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](https://www.ato.gov.au/individuals-and-families/study-and-training-support-loans/study-and-training-loans-what-s-new?utm_source=openai))
- Adjustments in super contributions on paid parental leave and the closing of the Small Business Superannuation Clearing House in July 2026.([ato.gov.au](https://www.ato.gov.au/businesses-and-organisations/super-for-employers/paying-super-contributions/how-to-pay-super/small-business-superannuation-clearing-house?=redirected_sbsch&utm_source=openai))