Tax Planning
Tax Planning Under the New PAYG Withholding Rates and Cost-of-Living Tax Cuts
From 1 July 2026, Australia’s personal tax rates have shifted under the Cost-of-Living Tax Cuts, and PAYG withholding tables have been updated—taxpayers and businesses need to plan now.
By NomadicTax Research Team • 5-8 min read • August 25, 2026
## What’s Changed from 1 July 2026
- **Reduced tax rates for lower brackets**: The 16% marginal rate has been reduced to **15%**, giving immediate relief to lower-income earners. A further cut to **14%** is legislated for 1 July 2027. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-307bd737-ce3a-4500-8a3d-77b5fd2a774a?utm_source=openai))
- **Updated PAYG withholding tables**: All 15 withholding schedules and 12 tax tables have been revised to reflect these rate changes plus indexation of thresholds. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/PAYGWTaxtables?utm_source=openai))
- **Study and Training Loan thresholds updated** to align repayments with rising wages/incomes. ([softwaredevelopers.ato.gov.au](https://softwaredevelopers.ato.gov.au/PAYGWTaxtables?utm_source=openai))
## Why it Matters for Tax Planning
- **Cash flow and take-home pay** will increase for most employees. Plan budgets with higher disposable incomes.
- For businesses, **payroll systems and software must be updated** to reflect revised withholding rates to avoid compliance issues.
- **Salary packaging and bonuses** should be reviewed; timing of payments may yield different tax outcomes under new tables.
## Practical Steps
1. **Review your salary system now**: Ensure enforcement of new withholding rates from the first pay run after 1 July.
2. **Project your income for the year**: Know whether you can rely on the 2026 rates, or if anticipated promotions or bonus payments could push you into a higher bracket next year.
3. **Consider prepayments**: If you anticipate higher income in 2027-28, could certain deductions (e.g. prepaid expenses) be brought forward? But be aware of anti-avoidance rules.
## Examples
- *Example 1*: Sarah earns $50,000/year. Under the old 16% bracket, too much tax was withheld. With the drop to 15%, her weekly take-home pay increases slightly—she should reforecast expenses like mortgage repayments or rent.
- *Example 2*: A small business must update payroll software before first pay run in July, to avoid overdrawing net from wrong tax withholding or being under-paying super or PAYG amounts.
## Actionable Insights
- Talk to your payroll provider/software vendor now—ensure updates are deployed.
- Individuals should update withholding declarations if needed (e.g. vary release of tax file declaration form, withholding variation).
- SMEs should run cash flow forecasts with these changes baked in; the relief from rate reductions may offer opportunity for investment.
**Bottom line**: The tax cuts effective 1 July 2026 offer opportunities for planning but come with compliance responsibilities—get ahead now so you benefit.