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) These cuts are designed to reduce ‘bracket creep’ and deliver relief especially to low- and middle-income earners. (ashurst.com)
Strategies to Maximise Your Before-Rate-Cut Position
Here are proactive steps to take now, to benefit the most:
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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.
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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.
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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.
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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.
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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)
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
- Review upcoming invoices and expenses with your accountant.
- Estimate your 2025-26 taxable income and tax payable under existing brackets.
- Determine what income or deductions you can shift.
- Avoid surprises—file estimated tax obligations, ensure PAYG instalments are current.
- Keep account of any changes to Medicare levy thresholds, which also change in the same Budget and affect low-income reporting. (ashurst.com)
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.