Federal Budget 2026: Tax Measures That Affect Your Return

General information only. This is not tax or financial advice. Consult a registered tax agent for advice specific to your situation.

The 2026 Federal Budget was handed down in early May, and while much of the headline coverage focused on the macro numbers — surplus projections, GDP forecasts, and spending commitments — there are specific measures that change the arithmetic for individual taxpayers. This article focuses on what matters for your 2026-27 tax return and what, if anything, you should do before 30 June 2026.

The Big One: Personal Tax Cuts from 1 July 2026

The stage 3 tax cuts, legislated as part of the 2018-19 Budget and reaffirmed in subsequent budgets, take effect from 1 July 2026. Here is the bracket comparison:

Threshold	2025-26 Rate	2026-27 Rate
$0 – $18,200	0%	0%
$18,201 – $45,000	16%	16%
$45,001 – $135,000	30%	30%
$135,001 – $190,000	37%	30%
$190,001+	45%	45%

The headline change is the 37% bracket disappearing entirely — income between $135,001 and $190,000 drops from 37% to the 30% rate that already applies from $45,001 to $135,000.

The dollar impact depends on where you sit within that range:

Income	2025-26 Tax (approx.)	2026-27 Tax (approx.)	Saving
$140,000	$35,267	$34,317	~$950
$160,000	$42,667	$40,317	~$2,350
$180,000	$50,067	$46,317	~$3,750
$190,000	$53,767	$49,317	~$4,450
$200,000	$57,967	$57,067	~$900

These are rough estimates using 2025-26 thresholds and assume no other deductions. For someone earning exactly $190,000 — the top of the old 37% bracket — the saving is approximately $4,450 per year, or about $171 per fortnight.

How It Works in Practice

These are withholding-rate changes, which means your employer will adjust PAYG deductions automatically from the first pay period after 1 July 2026. You do not need to lodge any form or make any election to receive the cut — it will simply appear as a slightly higher net pay.

However, if you receive income from multiple sources, or have significant deductions that reduce your taxable income, your actual tax outcome depends on your total taxable income — not just your salary. The PAYG withholding tables are calibrated for a single-job employee with no adjustments. If your circumstances are more complex, checking the withholding against your expected actual liability is sensible — especially in the first year of the new rates when employers may still be adapting payroll systems.

Low and Middle-Income Earners

For earners below $45,000, the 2026-27 changes are neutral — the 16% rate (already cut from 19% in July 2024) and the $18,200 tax-free threshold are unchanged. The effective tax-free threshold including the Low Income Tax Offset (LITO) continues to apply. LITO provides up to $700 of offset for taxable incomes below $37,500, phasing out at 5 cents per dollar between $37,500 and $45,000, and then at 1.5 cents per dollar between $45,000 and $66,667.

Superannuation Changes

Super Guarantee Rises to 12%

The super guarantee rate rises to 12% from 1 July 2026, the final step in the legislated increase from 9.5% that began in 2021-22.

Year	SG Rate
2020-21	9.5%
2021-22	10.0%
2022-23	10.5%
2023-24	11.0%
2024-25	11.5%
2025-26	11.5% (held)
2026-27	12.0%

For an employee earning $90,000, the 12% rate means $10,800 in compulsory super contributions for 2026-27, up from $10,350 at 11.5%. Over a 30-year career, the cumulative difference between 11.5% and 12% is material — roughly $30,000–$60,000 in additional retirement savings depending on investment returns.

Payday Super Starts 1 July 2026

From 1 July 2026, employers must pay super contributions on or before the day salary and wages are paid — not quarterly. This is a significant operational shift:

• Employers who currently pay super quarterly (by the 28th day after each quarter) must move to a per-pay-cycle process
• The ATO has confirmed a phased enforcement approach for the first 12 months, prioritizing education and voluntary compliance over penalties
• However, from day one, SG charge (the penalty for late payment) can still apply — the phased approach only affects ATO audit activity, not the legal obligation
• Employers using clearing houses should verify that their clearing house supports payday-frequency processing

The ATO estimates that payday super will recover approximately $1.7 billion in unpaid and late super over the first four years, largely by preventing employers from falling into arrears during the quarter.

Concessional Contribution Cap

The concessional contributions cap is indexed to wages growth. While the Budget did not announce a specific increase, the cap for 2026-27 is expected to be confirmed when the ATO publishes the new year’s key rates. For 2025-26 the cap is $30,000. If indexed, it would rise to approximately $30,500–$31,000 for 2026-27.

Carry-forward of unused concessional cap amounts from the 2019-20 year onward continues. If your total super balance is below $500,000 on 30 June of the previous year, you can access unused cap amounts from up to five prior years.

EOFY Planning Before 30 June 2026

Maximise Concessional Contributions While the 37% Rate Still Exists

If your income is in the $135,000–$190,000 range, the tax benefit of salary-sacrificing into super is slightly larger in 2025-26 than it will be in 2026-27 — you are offsetting 37% (plus 2% Medicare Levy) versus 32% from July. The difference is 7 cents per dollar sacrificed.

For someone earning $160,000 and salary-sacrificing $15,000 into super, the tax benefit in 2025-26 is roughly $5,850 (39% including Medicare Levy). In 2026-27 the same contribution offsets at 32%, saving roughly $4,800. The difference is about $1,050 — not life-changing, but worth weighing if you were planning a large one-off contribution anyway.

The reverse logic applies: if you expect your income to be around $135,000–$140,000 and you have been deferring deductible expenses (prepaying investment loan interest, bringing forward work-related purchases), doing so in 2025-26 gives you a 37%+2% deduction versus 30%+2% in 2026-27.

Review Your HELP Repayment

HELP repayment thresholds and rates are adjusted annually. With the bracket restructure, your repayment income — which includes taxable income, reportable fringe benefits, and reportable super contributions — may push you into a different repayment tier. Check your position using the HELP repayment calculator once the ATO publishes the 2026-27 thresholds.

Consider the Medicare Levy Surcharge

The Medicare Levy Surcharge (MLS) of 1%, 1.25%, or 1.5% applies if you do not hold an appropriate level of private hospital cover and your income exceeds $90,000 (single) or $180,000 (couple/family). With the bracket changes, the MLS thresholds and rates are unchanged for 2026-27. If you are approaching the $90,000 threshold and do not hold hospital cover, the combined effect of the MLS plus the tax on income above the threshold justifies reviewing your health insurance position.

What Did Not Change

Several items were expected by some commentators but did not appear in this Budget:

• The 45% top rate remains above $190,000. There was speculation about reverting to a pre-stage-3 top threshold; this did not occur.
• Capital gains tax discount remains at 50% for individuals holding assets 12+ months. The Senate inquiry into CGT discount reform has not produced legislation.
• Negative gearing rules are unchanged, including the investment loan interest deduction.
• Division 293 tax threshold ($250,000 on combined income and concessional contributions) is unchanged.
• GST rate and base remain at 10% with no broadening of the base announced.

State-Level Changes to Watch

While the Federal Budget dominates headlines, state budgets — typically delivered in June — often contain payroll tax, land tax, and stamp duty changes that affect your overall tax position. NSW and Victoria in particular tend to align state budget timing with the federal cycle. Keep an eye on your state’s budget for land tax threshold adjustments, stamp duty concession changes, and payroll tax rate movements if you are an employer.

Bottom Line

The 2026 Budget delivers the final stage of personal tax cuts on schedule. For most taxpayers, the primary action is awareness — understand what your July 2026 payslip should look like — rather than pre-30-June manoeuvring. The larger structural story is the combination of SG at 12% plus payday super, which together reshape employer compliance obligations and employee retirement savings trajectories.

For individuals in the $135,000–$190,000 zone, the narrowing of the 37% bracket creates a modest incentive to pull forward deductible expenses and super contributions into 2025-26. For everyone else, the Budget is largely steady-as-she-goes on the personal tax front.

Check your 2026-27 take-home pay using our Income Tax Calculator and run super contribution scenarios with the Superannuation Calculator.