Personal Income Tax Cuts From 1 July 2026: 16% to 15%
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Primary tax-year context: Current Australian tax settings
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General information only. This is not tax or financial advice. Consult a registered tax agent for advice specific to your situation.
Australia has now gone through two rounds of personal income tax reform in quick succession. The Stage 3 cuts reshaped the bracket structure from 1 July 2024. A smaller but legislated follow-on cut then takes effect from 1 July 2026. This article explains what changed in 2024, what is confirmed for 2026, and what each means for your take-home pay.
The current 2025-26 tax brackets
The following rates apply for the 2025-26 financial year (after Stage 3):
| Taxable income | Marginal rate |
|---|---|
| $0 – $18,200 | 0% (tax-free threshold) |
| $18,201 – $45,000 | 16% |
| $45,001 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| $190,001+ | 45% |
Medicare levy of 2% applies on top for most residents (subject to low-income thresholds and exemptions).
What changed from 1 July 2024 (Stage 3)
Before Stage 3, the structure was:
| Taxable income | Old rate |
|---|---|
| $0 – $18,200 | 0% |
| $18,201 – $45,000 | 19% |
| $45,001 – $120,000 | 32.5% |
| $120,001 – $180,000 | 37% |
| $180,001+ | 45% |
Stage 3 made three structural changes:
- The 19% bracket reduced to 16% (savings at lower incomes)
- The 32.5% bracket replaced with a wider 30% bracket extending to $135,000
- The 37% bracket threshold shifted from $120,001 to $135,001
The net effect: most taxpayers earning between $18,201 and $190,000 paid less tax. Higher-income earners who previously hit 37% at $120k now did not hit it until $135k.
Before vs after Stage 3: income tax comparison
The table below shows income tax only (excluding Medicare levy and offsets) under the old structure versus the current 2025-26 structure:
| Taxable income | Tax before Stage 3 | Tax from 2024-25 | Annual saving |
|---|---|---|---|
| $60,000 | $11,167 | $9,967 | $1,200 |
| $100,000 | $24,617 | $22,567 | $2,050 |
| $150,000 | $43,567 | $38,092 | $5,475 |
| $200,000 | $60,667 | $54,592 | $6,075 |
The savings ranged from around $1,200 at $60k up to $6,075 at $200k. For most middle-income households, the real-world benefit after LITO and Medicare levy settled at roughly $1,500 to $4,500 per year.
What changes from 1 July 2026
The Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024 legislated a further step:
- From 1 July 2026: the $18,201 to $45,000 bracket drops from 16% to 15%
- From 1 July 2027: that same bracket is scheduled to reduce further to 14%
The bracket width is $26,800 ($45,000 minus $18,200). A 1% rate reduction across that width produces a maximum annual saving of $268.
That is a modest number, but it is a confirmed saving that applies automatically — no action required.
Who benefits and by how much
Anyone with taxable income above $18,200 benefits from the 2026 cut. The maximum saving applies once income reaches $45,000; income above that is unaffected by this specific change.
| Taxable income | Extra saving from 1 July 2026 |
|---|---|
| $25,000 | ~$68 |
| $35,000 | ~$168 |
| $45,000 and above | ~$268 |
The Low Income Tax Offset (LITO) and Low and Middle Income Tax Offset (LMITO, which ended in 2022-23) are separate adjustments and do not change these figures.
The cumulative picture
If you compare a taxpayer on $80,000 today against their position three years ago:
- 2022-23 rate: 32.5% on most of that income
- 2025-26 rate: 30% from $45k to $135k, with 16% on the lower bracket
- 2026-27 rate: 30% from $45k to $135k, with 15% on the lower bracket
The cumulative improvement from Stage 3 plus the 2026 cut is substantial for most working Australians. For someone on $80,000 the combined saving versus 2022-23 is roughly $2,600 per year.
Practical next steps
- Check your first payslip after 1 July 2026 — PAYG withholding tables update automatically, so your employer should adjust without you needing to submit a new TFN declaration.
- Recalculate annual take-home — even small changes can shift whether you expect a refund or a tax bill at return time.
- Multiple income sources — if you have side income, rental income, or a second job, the new rate slightly reduces the total liability but does not change your withholding obligations.
- Salary packaging and super contributions — the lower rate mildly reduces the advantage of pre-tax contributions in the 16% bracket, though contributions tax is 15% regardless.
2027 and beyond
The legislation already schedules a further cut for 1 July 2027, reducing the same bracket to 14%. That would add another $268 per year in savings. Both the 2026 and 2027 cuts are legislated, not merely announced — they do not require a future budget decision to take effect.
Bottom line
Stage 3 (2024) delivered the structural reform: a wider 30% band and a lower starting rate. The 2026 and 2027 cuts add incremental savings of up to $268 and $536 per year respectively. For most employees these changes arrive automatically through updated PAYG withholding — but checking your first payslip of the new financial year is still worth doing.