What’s Changing in PAYG Withholding from 1 July 2026
From 1 July 2026, new PAYG withholding tax tables and schedules will take effect:
- They’ll integrate the new personal income tax rate cuts (the cut of 16% bracket down to 15%), consistent with the Treasury Laws Amendment (More Cost of Living Relief) Act. (softwaredevelopers.ato.gov.au)
- Study and training support loan repayment thresholds are being indexed. This affects how much is withheld for students or trainees who have outstanding loan balances. (softwaredevelopers.ato.gov.au)
Practical Employer Actions
- Update payroll systems and software to use the latest NAT (Notice Australia Tax) tables: NAT 1004, 3539, etc. These reflect rate changes and threshold shifts. (softwaredevelopers.ato.gov.au)
- Make sure study loan and training support loan components are factored in correctly—mistakes here can lead to over-withholding or under-withholding of loan repayments.
- Capture required data elements—like employee taxable income ranges, loan status—to apply correct deductions.
Examples
- Example 1: An employee earning $30,000 falls in the taxable bracket above $18,200 but below $45,000. Under new rates, portion above $18,200 will be taxed at 15% instead of 16%.
- Example 2: A trainee with a support loan whose repayment income is just above the indexed threshold will have more accurately withheld amounts, potentially lowering excess withholdings.
Compliance Risks and Penalties
- Using outdated tax tables post–1 July 2026 could result in incorrect withholding, employee overpayments, or ATO fines.
- Errors in lodging PAYG for large or medium entities; oversight in registering or using correct API services for global minimum tax returns are also risks.
Tips for Smooth Transition
- Audit payroll software now—check if vendor updates are in place for the 2026 tables.
- Train payroll staff on the upcoming rate cuts and thresholds.
- Run internal simulations using both old and new rates to estimate impact on cash flows.
- Communicate changes to employees, especially those affected by study loans. Knowing about increased take-home pay or shifted obligations helps with financial planning.
Effective payroll administration ahead of 1 July will ensure businesses meet their obligations smoothly and avoid downstream headaches when lodgments begin under the new rules.