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)
- Then, from 1 July 2027, that same bracket’s rate will drop again from 15% to 14%. (ato.gov.au)
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)
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.
Practical Planning Tips
To maximise these changes:
- 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.
- 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.
- 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).
- Adjust withholding (PAYG): Employers and PAYG payers may need to update withholding schedules to reflect lower rates when implementing the new legislation.
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.
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)
- No parliament stage is pending for these rate drops. They are effective measures. (ato.gov.au)
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.
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.