Understanding What’s Changing
Australia has passed the Treasury Laws Amendment (More Cost of Living Relief) Act 2025, which introduces new personal income tax rates from 1 July 2026. The changes include:
- The tax rate for income $18,201 to $45,000 drops from 16% to 15%. (ato.gov.au)
- From 1 July 2027, that same bracket will be taxed at 14%. (ato.gov.au)
These changes are part of a broader effort to ease the financial burden of everyday Australians. (cpaaustralia.com.au)
Who Wins, Who Needs to Act
Who Benefits Most
- Low-to-middle income earners: The rate cuts directly reduce tax for individuals earning in the second bracket.
- Families especially feeling cost-of-living pressure, including those with modest incomes.
Strategic Moves You Can Make Now
- Revisit withholding and PAYG instalments now so your scores don’t overshoot when rates change.
- Delay big income unless needed — if pushing into the $45,000 bracket before July 2026, see if timing income to after the change will reduce tax.
- Review deductions and concessions that may phase out or change value under new brackets (e.g. some offsets, or thresholds tied to taxable income).
Examples in Context
- Sally, a part-time worker earning $40,000: her tax bill might fall by hundreds of dollars once the new rate hits.
- Mike, who earns $48,000 but can defer a bonus of $5,000 until August 2026, could potentially save by shifting that income into the lower rate period.
What to Check with Your Adviser
- Confirm whether pension, superannuation, or other non-ordinary incomes are structured to benefit from the new brackets.
- If you run a business, think whether salary packaging and distributions should align with the new rates for best effect.
Bottom line: With bracket creep eased for lower incomes, now’s a smart time to plan income flows, deductions, and withholding to align with the upcoming cuts.