Tax Planning
New Tax Rate Cuts from 1 July 2026: What Australians Should Expect
Starting 1 July 2026, new tax cuts reduce the lowest marginal rate from 16% to 15%, part of Australia’s ongoing cost of living relief. Fully enacted, the change will also drop that rate further to 14% in 2027.
By NomadicTax Research Team • 5-8 min read • June 23, 2026
## What’s Changing?
As part of the **Treasury Laws Amendment (More Cost of Living Relief) Act 2025**, the federal government has introduced new income tax rate changes to help combat bracket creep and boost take-home pay.([ato.gov.au](https://www.ato.gov.au/api/public/content/0-307bd737-ce3a-4500-8a3d-77b5fd2a774a?utm_source=openai))
- From **1 July 2026**, the **16% marginal rate** (applied to income exceeding the tax-free threshold but not exceeding $45,000) will be reduced to **15%**.([ato.gov.au](https://www.ato.gov.au/api/public/content/0-307bd737-ce3a-4500-8a3d-77b5fd2a774a?utm_source=openai))
- From **1 July 2027**, that same band will drop to **14%**, further easing tax burdens for lower and middle income earners.([ato.gov.au](https://www.ato.gov.au/api/public/content/0-307bd737-ce3a-4500-8a3d-77b5fd2a774a?utm_source=openai))
## Who Benefits the Most?
- Individuals earning between the tax-free threshold (approx. $18,200) and $45,000 will see immediate relief.
- Middle income earners just above that threshold may also feel less strain as the lower bands shift.
- These changes **do not affect higher income bands**, which remain the same until further announcements.
## Practical Examples
| Taxpayer | Tax-free threshold up to | Old rate | New rate from 1/7/26 | Change in 2026-27 Year |
|---|---|---|---|---|
| Jane earns $30,000/year | $18,200 | paid at 16% on $11,800 | paid at 15% on $11,800 | ~$118 extra take-home |
| Paul earns $45,000 | same threshold | portion above threshold taxed at 16% | now taxed at 15% | ~$162 saved annually |
*Calculation: Savings = difference in rate × amount in that band (e.g. 1% × income in that band).*
## Tips to Leverage These Cuts
- **Review withholding rates**: If your tax withheld so far in 2026-27 is based on older tables, check with employer or payroll provider to ensure correct withholding from 1 July.
- **Budget forward**: The change might slightly increase net pay from July onwards—plan accordingly for expenses or savings.
- **Understand full impact**: If your taxable income straddles bands, the change applies only to that portion within the first band over the threshold. The rest continues at existing rates for their bands.
These personal income tax changes deliver a modest but meaningful boost to those in the lowest taxable bracket, with gradual benefits extending into 2027. Keeping track of rate tables and withholding will help everyone adjust smoothly.