Tax Planning
Planning for the 2026–27 Income Tax Cuts: What Australian Individuals Should Do Now
New income tax rates effective from 1 July 2026 will change your marginal rate—here’s how to optimize deductions, withholding, & investment timing before the changes hit.
By NomadicTax Research Team • 5-8 min read • April 22, 2026
## Overview
Australia’s 2025–26 Federal Budget introduced **new personal income tax cuts** that begin from **1 July 2026**, with another reduction set for **1 July 2027**. The lowest marginal tax rate—currently 16% for incomes over the tax-free threshold—will drop to **15%** in 2026–27, and then further to **14%** from 2027-28.([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 changes are law via the *Treasury Laws Amendment (More Cost of Living Relief) Act 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))
## Tax Planning Strategies Before the July 2026 Cut
Here are actionable steps individuals can take to make the most of the upcoming tax shifts:
- **Bring forward deductible expenses**: Prepaying allowable expenses like interest on investment loans, self-education, or certain professional subscriptions before 30 June 2026 can allow deductions at the current higher rate (16%) rather than the reduced rate. Careful cost-benefit analysis is needed to avoid negative cash flow impacts.
- **Defer income where feasible**: If you’re able to control timing of bonus payments, consulting work, or investment income that’s declared, shifting income into the 2026-27 year could reduce your tax rate on those amounts.
- **Review investment strategy**: Capital gains made before 1 July 2026 are taxed against the old brackets. If you anticipate selling assets, it may be beneficial to complete those sales before then. Keep accurate records, especially for assets held over 12 months for the CGT discount.
- **Maximize super contributions**: While these tax cuts won’t affect concessional contributions directly, reducing expected future marginal rates could alter your strategy around salary sacrificing vs. taking cash and investing personally.
## Impacts to Withholding & PAYG
Employers and payers of passive income must prepare for changes:
- Review **PAYG withholding tables**: With marginal rates shifting down, withholding obligations may over-withhold unless updated.
- Annuities, dividends, and interest income payments may need reassessment, particularly for taxpayers in the lowest marginal bracket whose portions shift into a lower percentage.
## Example Scenario
| Scenario | Before 1 July 2026 | After 1 July 2026 (2026-27) |
|---|---|---|
| Taxable income $50,000 | First $18,200 tax free; $31,800 taxed at 16% → ~$5,088 tax |
| | | First $18,200 tax free; $31,800 taxed at 15% → **~$4,770 tax** |
Savings ~$318 for someone earning $50,000. Larger incomes will also benefit on the portion taxed at that lowest marginal rate.
## What You Should Do Now
- Update tax software / payroll with correct thresholds and rates from 1 July 2026.
- Speak with your accountant or advisor about tax-effective timing of income and deductions if nearing bracket edges.
- Keep good records of invoices, receipts, and investment purchases to validate any carried forward items or CGT events.
- Monitor ATO announcements for details on withholding schedules and any transitional rules.
By acting early, individuals can smooth the transition, reduce taxable income under higher rates, and align cashflow expectations with what the tax cuts will bring. Once the cuts take effect, ensuring correct withholding will help avoid surprises when lodging returns.