Compliance
Stay Ahead: How Australia’s New PAYG Withholding Tax Tables from July 2026 Affect Your Payroll
Australia’s updated PAYG withholding tax tables, effective 1 July 2026, reflect the new income tax cuts and will require employers to update payroll software and ensure accurate withholding for employees.
By NomadicTax Research Team • 5-8 min read • June 12, 2026
## What’s Changing in PAYG Withholding Tax Tables
From **1 July 2026**, Australia’s tax withholding schedules will be updated. These updates include:
- New tax rate cuts announced in the **2025–26 Federal Budget**, now enshrined in the law via the *Treasury Laws Amendment (More Cost of Living Relief) Act 2025*, which reduce the bottom marginal tax rate from **16% to 15%** effective 1 July 2026. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/2026-pay-you-go-payg-withholding-tax-tables-0?utm_source=openai))
- Adjustments to thresholds and rate bands for various withholding schedules, including for **study and training support loan repayments** and other benefits. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/2026-pay-you-go-payg-withholding-tax-tables-0?utm_source=openai))
## Who Needs to Be Ready
If you’re a business paying salaries, a tax practitioner, or handle payroll, you need to:
- Update payroll systems or software to use the new **NAT-1004**, **NAT-3539**, and related forms starting 1 July 2026. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/2026-pay-you-go-payg-withholding-tax-tables-0?utm_source=openai))
- Train payroll staff on new thresholds and rates so that employees aren’t over- or under-withheld. Misapplication can lead to significant compliance risk.
## Practical Example
Sarah works full-time with a salary that places part of her income in the bottom tax bracket. Under the old structure she paid 16% tax on each dollar above the tax-free threshold. From 1 July 2026, she will pay only **15%** on that band—putting more money in her take-home pay. Employers withholding incorrectly will need to adjust and possibly refund the difference.
## Action Steps for Compliance
- **Audit your payroll software** now—make sure your software vendor has applied the new schedules.
- Review employee agreements with bonuses or varied pay—ensure taxation on variable income aligns with updated thresholds.
- Communicate changes to affected employees—explaining any small shifts in withholding to maintain trust.
- Monitor legislation updates in case implementation delays or corrections occur.
Implementing these changes proactively reduces risks of payroll complaints, underpayments, or overwithholding.