Tax Planning
Smart Tax Planning Ahead of the 2026-27 Rate Cut: How to Maximise Your Savings
With Australia’s lowest personal income tax bracket dropping from 16% to 15% on 1 July 2026—and further to 14% from July 2027—there are smart strategies individuals can employ now to amplify savings.
By NomadicTax Research Team • 5-8 min read • March 21, 2026
## What’s Changing from 1 July 2026 and 2027
Australia’s Federal Budget 2025-26 brings tax relief: the marginal rate on incomes between **AUD 18,201 and AUD 45,000** falls from **16% to 15% on 1 July 2026**, then **further to 14%** on 1 July 2027. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-307bd737-ce3a-4500-8a3d-77b5fd2a774a?utm_source=openai)) These cuts are designed to reduce ‘bracket creep’ and deliver relief especially to low- and middle-income earners. ([ashurst.com](https://www.ashurst.com/en/insights/australia-federal-budget-2025-2026-key-tax-measures/?utm_source=openai))
## Strategies to Maximise Your Before-Rate-Cut Position
Here are proactive steps to take now, to benefit the most:
* **Defer taxable income** if possible until after 1 July 2026. For freelancers or those with variable income, delaying invoices can shift income into a lower tax rate bracket. Timing matters.
* **Bring forward deductions** to the 2025–26 year: super contributions beyond the minimum, charitable donations, or work-related expenses can reduce your taxable income when rates are higher.
* **Income splitting**: married couples might consider strategies like moving investment income to lower-earning partner (within legal limits) so more income sits in the lower tax bracket after 2026 cuts.
* **Super contributions’ timing**: Consider increasing concessional super contributions before 30 June 2026. Reducing taxable income now offers double benefit—lower tax at 16% rate and compounding retirement savings. After 1 July 2026, your marginal rate on that tranche drops, but every dollar you reduce tax due in 2025-26 is more valuable.
* **Prepay interest or deductible expenses** for investment properties or business where possible, so you get the deduction in the higher-rate period before cuts.
## Beware the Trade-Offs
* Any income you defer, or deduction you bring forward, should not create cash-flow pressures.
* Government may phase-out or make adjustments to other thresholds (e.g. Medicare levy) that can offset gains. Keep aware. ([ashurst.com](https://www.ashurst.com/en/insights/australia-federal-budget-2025-2026-key-tax-measures/?utm_source=openai))
## Example: A Freelancer’s Edge
Sophie is a graphic designer expecting AUD 50,000 income in 2025-26, with AUD 5,000 deductions. She can either invoice now or delay AUD 3,000 until July 2026. By deferring:
* In 2025-26: She earns AUD 47,000 taxable income → in the 16% bracket for the AUD 18,201-45,000 slice and higher for remainder.
* Delaying shifts more income into 2026-27, when the 16% → 15% cut applies, saving 1% on those dollars.
If she also accelerates deductions into 2025-26, she lowers her taxable income now, further diminishing tax payable at the higher 16% rate.
## Action Plan Before 30 June 2026
1. Review upcoming invoices and expenses with your accountant.
2. Estimate your 2025-26 taxable income and tax payable under existing brackets.
3. Determine what income or deductions you can shift.
4. Avoid surprises—file estimated tax obligations, ensure PAYG instalments are current.
5. Keep account of any changes to **Medicare levy thresholds**, which also change in the same Budget and affect low-income reporting. ([ashurst.com](https://www.ashurst.com/en/insights/australia-federal-budget-2025-2026-key-tax-measures/?utm_source=openai))
By carefully planning ahead before the rate cuts take effect, individuals can capture greater long-term savings and reduce the tax bite over two financial years.