Overview of the 2026-27 PAYG Withholding Changes
From 1 July 2026, updated Pay As You Go (PAYG) withholding tax tables and related withholding schedules will apply nationwide. These changes incorporate:
- Personal income tax rate cuts announced in the Budget that ease taxpayer burdens;
- Indexation of thresholds for student and training-support loan repayments. (softwaredevelopers.ato.gov.au)
All 15 withholding schedules and 12 tax tables are updated and come into force from that date. (softwaredevelopers.ato.gov.au)
What this means for employers and payroll teams
| Stakeholder | Need to review or update | What might change |
|---|---|---|
| Payroll software vendors | Implement new NAT1004, NAT1004ML, NAT3539, NAT4466, NAT75331, etc. Ensure templates map updated thresholds properly | Differences in formulae, thresholds, and repayment rates for STSL (Student and Training Support Loans) may change deductions from pay slips |
| Employers | Ensure correct versions used from first pay run after 1 July 2026 | Possible change in withholding tax amounts — employees near threshold bands may see different deductions |
| HR / Finance teams | Train staff to recognize disputes or anomalies after implementation | Faster queries from employees when withholding amounts differ from expectations |
Example situation
- Employee-A, earning just above a threshold, might have less tax withheld after 1 July if their income pushes into a lower marginal rate due to rate cuts. Or,
- Employee-B repaying a student loan might see their repayment component deduction change because of updated thresholds in NAT3539 (the schedule dealing with such loans).
Actionable preparation steps
- Update payroll tools: Contact your payroll software/processor to confirm that the 2026-27 tables are loaded and tested before your first pay run in July.
- Run simulations: Produce sample pay slips for July pay runs using estimated salary or wages with new tables to flag big surprises.
- Review employee communications: Let employees know ahead of time any expected changes in deductions so they can budget accordingly.
- Check obligations for benefits & termination payments: Some schedules dealing with redundancy, super lump sums, or terminations also adjusted for caps or thresholds—ensure you use the correct tables.
Staying ahead will help employers avoid withholding mistakes, ensure employee trust, and comply with the new financial year’s standards.