Tax Planning
Personal Income Tax Cuts from July 2026: What Every Australian Needs to Know
From 1 July 2026, the 16% tax bracket drops to 15% (and then 14% in 2027): this article frames how the staged tax cut works, who benefits, and how to plan ahead.
By NomadicTax Research Team • 5-6 min read • March 18, 2026
## What’s Changing
Under the **Treasury Laws Amendment (More Cost of Living Relief) Act 2025**, Australia’s income tax schedule for individuals in the lower brackets will shift starting **1 July 2026**. The key points are:
- The tax rate for income between **A$18,201 and A$45,000** falls from **16% to 15%** from **1 July 2026**. ([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))
- Then, from **1 July 2027**, that same bracket’s rate will drop again from **15% to 14%**. ([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))
These cuts are part of wider “cost-of-living” relief measures, aimed at counteracting bracket creep and helping taxpayers keep more of their earnings. ([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))
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## Who Benefits the Most
| Taxable Income Range | Status Before 1 July 2026 | After 1 July 2026 | After 1 July 2027 |
|----------------------|---------------------------|--------------------|---------------------|
| A$0 – 18,200 | Nil | Nil | Nil |
| A$18,201 – 45,000 | 16% | **15%** | **14%** |
| Above that | Unchanged in these stages | Unchanged | Unchanged |
- Any taxpayer in that bracket—whether full-time, part-time, or on casual income—will see direct savings in take-home pay.
- Over the two-year period (2026 to 2027), those earning e.g. A$40,000 could save several hundred dollars. If someone earns A$45,000, they’ll see even more.
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## Practical Planning Tips
To maximise these changes:
1. **Review your current tax structure**: If you're close to a higher bracket you might assess deferring income or shifting deductions where possible before the cut begins.
2. **Salary packaging & bonuses**: If a bonus is payable in 2026-27, timing may matter. Having income land post-1 July 2026 helps with lower marginal rates.
3. **Know family members’ income too**: For families with multiple earners, one person’s lower marginal rate vs another’s could influence strategies (e.g., through super contributions or investment income).
4. **Adjust withholding (PAYG)**: Employers and PAYG payers may need to update withholding schedules to reflect lower rates when implementing the new legislation.
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## Example
Emma works part-time and earns **A$40,000**. Under the current tax laws, she pays 16% on everything she earns over A$18,200. After **1 July 2026**, she'll pay **15%** instead, saving about **A$80-100/year**. After **1 July 2027**, dropping to 14% saves her another **A$40-50/year**. Total savings over those two years might be around **A$120-150**.
If she has pre-tax deductions (super, for instance) or expects other income (freelance work, investments), these savings compound slightly more.
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## What’s Already Enacted / What’s Still in Process
- These cuts are **already law**: the 2025–26 Budget passed and Royal Assent granted on **28 March 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))
- No parliament stage is pending for these rate drops. They are **effective** measures. ([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))
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## Key Takeaways
- If you earn between **A$18,201 and A$45,000**, **you will benefit** starting mid-2026 and then again in mid-2027.
- Plan any major financial decisions (bonuses, investment income, super contributions) around these dates to optimise your tax outcome.
- Stay informed: the ATO will release updated PAYG/withholding tables, notices to tax agents, and relevant guidance ahead of implementation.
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**Bottom line:** these staged tax cuts are a win for low-to-middle income earners. Knowing when and how they take effect allows you to plan wisely and keep more of your money.