Tax Planning
Personal Tax Rate Cuts and PAYG Withholding: What Individuals Need to Know
Changes to individual income tax rates and withholding schedules from Budget 2025-26 mean adjustments for both employees and employers—know what to expect before the next financial year starts.
By NomadicTax Research Team • 5-8 min read • June 17, 2026
## What’s New in Tax Rates?
- The **Treasury Laws Amendment (More Cost of Living Relief) Act 2025** introduced new tax brackets that will be effective for the **2026-27 income year** onward. The current top marginal rates for residents are: 15% up to $45,000; 30% between $45,000 and $135,000; 37% between $135,000 and $190,000; and 45% for incomes above $190,000. ([ato.gov.au](https://www.ato.gov.au/law/view/pdf/acts/20250028.pdf?utm_source=openai))
- These cuts are intended to ease the cost-of-living pressures and reduce withholding burdens mid-year.
## How Does PAYG Withholding Get Updated?
- Corresponding **PAYG withholding tax tables and schedules** have been revised to reflect these new brackets and thresholds. The updated tables and schedules take effect from **1 July 2026**. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/2026-pay-you-go-payg-withholding-tax-tables-0?utm_source=openai))
- Employers must ensure their payroll systems use the latest NAT forms (e.g., NAT 1004, 3539, etc.) reflecting new formulas. Formats and presentations may have changed slightly. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/2026-pay-you-go-payg-withholding-tax-tables-0?utm_source=openai))
## Implications for Different Groups
| Group | Impact |
|---|---|
| Employees | If you are currently withholding taxes based on older tables, your net take-home pay may increase after 1 July 2026. |
| Employers & Payroll Providers | Payroll software must be updated; withholding calculations must use new tables to avoid mis-withholding or under/over payments. |
| Contractors & Higher-Income Individuals | Pay particular attention if you fall in higher brackets—marginal tax savings will be more noticeable. |
## Example Scenario
**Sarah** earns $60,000/year. Under the old system, her income between $45,000 and $135,000 would be taxed at 30%. With the new brackets unchanged in that range—but adjustments in other brackets—it may slightly impact her total annual tax or income thresholds, especially if she moves into a higher or lower category during the year.
Payroll providers must ensure Sarah’s monthly or fortnightly PAYG deductions reflect the updated tables from 1 July to avoid surprises at end of financial year.
## What You Should Do Next
- **Check your payroll provider or software** to make sure it’s using updated withholding tables from 1 July 2026.
- **Review your current deductions** to identify if you're overpaying or underpaying withholding tax.
- **Estimate your end-of-year tax liability** under new rates to adjust withholding or make additional payments if needed.
Stay informed by reviewing your payslips, tax offsets, and lodging your returns using updated rates. Avoid shocks in next year’s assessments.