Taxes · Australia · 2025/26 / 2026/27 / 2027/28
Australia’s 2026 tax cuts: 15% rate and $1,000 deduction
This article was created with artificial intelligence support.
From 1 July 2026, income between $18,201 and $45,000 is taxed at 15 percent instead of 16 percent, and resident employees can deduct at least $1,000 of work-related expenses, or their whole salary if it is lower. The rate cut is worth up to $268 a year and the deduction up to $470, depending on your tax rate. From 1 July 2027 the rate falls to 14 percent and a working Australians tax offset of up to $250 begins.
What changed on 1 July 2026
The Treasury Laws Amendment (More Cost of Living Relief) Act 2025 changed the resident tax rates in the Income Tax Rates Act 1986. For the 2026/27 income year, taxable income above the $18,200 tax-free threshold and up to $45,000 is taxed at 15 percent. The other rates and thresholds stay as they were: 30 percent up to $135,000, 37 percent up to $190,000 and 45 percent above that.
From the same income year, the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 adds a standard deduction for work-related expenses. Section 25-130 of the Income Tax Assessment Act 1997 lets a resident employee deduct $1,000, or their whole salary if it is lower, less the work-related expenses they claim in the usual way. Smaller claims are topped up to $1,000, and claims above $1,000 replace the standard deduction. Either way, at least $1,000 of salary is no longer taxed. The calculator deducts exactly $1,000 from 2026/27.
The bottom band changes three times between 2024 and 2027. The Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024 set it at 16 percent from 1 July 2024, the 2025 Act cut it to 15 percent from 1 July 2026, and the same 2025 Act sets 14 percent for 2027/28 and later years. The first table below compares 2025/26 with 2026/27, and the second shows the step to 2027/28.
Who saves how much
The rate cut is worth 1 percent of the income inside the 15 percent band, at most $268 once the whole band of $26,800 is covered. The deduction is worth $1,000 times your marginal rate, including the 2 percent Medicare levy: $320 on the 30 percent rate ($335 while the low income tax offset is still being withdrawn), $390 on the 37 percent rate and $470 on the 45 percent rate. Together, take-home pay at the same salary rises by $588 at $90,532, $658 at $150,000 and $738 at $250,000.
Below $46,000 both changes are worth less, because less income falls in the band and the deduction saves tax at a lower rate: take-home pay rises by $438 at $40,000 and $218 at $25,000.
The lowest incomes gain nothing. The low income tax offset of up to $700 already cancels the income tax on them, so there is no tax left to cut: at $20,000, take-home pay is the same in both years.
Take-home pay before and after the changes
The first table compares the 2025/26 and 2026/27 rules at the same salary, and the second compares 2026/27 with 2027/28. At $90,532, the calculator’s starting salary, take-home pay rises from $70,774 to $71,362 and then to $71,880. The marginal rate column shows the share of the next $100 lost to income tax and the Medicare levy.
Example assumptions
Annual model estimate
Salary example for a tax resident. Eligibility and actual payment dates may differ.
Assumes private hospital cover, so the Medicare levy surcharge does not apply. The 2 percent Medicare levy and the low income tax offset are included.
A single resident taxpayer whose salary is the only income, with no HELP debt or other offsets, who claims no work-related expenses beyond the $1,000 standard deduction from 2026/27.
- Model year
- 2025/26 / 2026/27 / 2027/28
- Currency
- AUD
- Age
- 35
- Children
- 0
- Private Health Insurance
- Yes
| Annual gross salary | Scenario | Taxes | Annual net pay | Net difference | Marginal rate, all deductions | Calculator |
|---|---|---|---|---|---|---|
| A$20,000 | 2025/26 rules | A$0 | A$20,000 | A$0 | 0% | Open these settings |
| A$20,000 | 2026/27 rules | A$0 | A$20,000 | A$0 | 0% | Open these settings |
| A$25,000 | 2025/26 rules | A$388 | A$24,612 | A$0 | 16% | Open these settings |
| A$25,000 | 2026/27 rules | A$170 | A$24,830 | +A$218 | 15% | Open these settings |
| A$40,000 | 2025/26 rules | A$3,713 | A$36,287 | A$0 | 23% | Open these settings |
| A$40,000 | 2026/27 rules | A$3,275 | A$36,725 | +A$438 | 22% | Open these settings |
| A$45,000 | 2025/26 rules | A$4,863 | A$40,137 | A$0 | 33.5% | Open these settings |
| A$45,000 | 2026/27 rules | A$4,375 | A$40,625 | +A$488 | 22% | Open these settings |
| A$90,532 | 2025/26 rules | A$19,758 | A$70,774 | A$0 | 32% | Open these settings |
| A$90,532 | 2026/27 rules | A$19,170 | A$71,362 | +A$588 | 32% | Open these settings |
| A$150,000 | 2025/26 rules | A$39,838 | A$110,162 | A$0 | 39% | Open these settings |
| A$150,000 | 2026/27 rules | A$39,180 | A$110,820 | +A$658 | 39% | Open these settings |
| A$250,000 | 2025/26 rules | A$83,638 | A$166,362 | A$0 | 47% | Open these settings |
| A$250,000 | 2026/27 rules | A$82,900 | A$167,100 | +A$738 | 47% | Open these settings |
| Annual gross salary | Scenario | Taxes | Annual net pay | Net difference | Marginal rate, all deductions | Calculator |
|---|---|---|---|---|---|---|
| A$40,000 | 2026/27 rules | A$3,275 | A$36,725 | A$0 | 22% | Open these settings |
| A$40,000 | 2027/28 rules | A$2,817 | A$37,183 | +A$458 | 21% | Open these settings |
| A$45,000 | 2026/27 rules | A$4,375 | A$40,625 | A$0 | 22% | Open these settings |
| A$45,000 | 2027/28 rules | A$3,867 | A$41,133 | +A$508 | 21% | Open these settings |
| A$90,532 | 2026/27 rules | A$19,170 | A$71,362 | A$0 | 32% | Open these settings |
| A$90,532 | 2027/28 rules | A$18,652 | A$71,880 | +A$518 | 32% | Open these settings |
| A$150,000 | 2026/27 rules | A$39,180 | A$110,820 | A$0 | 39% | Open these settings |
| A$150,000 | 2027/28 rules | A$38,662 | A$111,338 | +A$518 | 39% | Open these settings |
| A$250,000 | 2026/27 rules | A$82,900 | A$167,100 | A$0 | 47% | Open these settings |
| A$250,000 | 2027/28 rules | A$82,382 | A$167,618 | +A$518 | 47% | Open these settings |
How other countries compare
The table shows how annual take-home pay changes between the two tax years shown, as a percentage of take-home pay in the earlier year. Each country uses its own middle example salary and settings. The last column shows, for every country, the take-home share of this article’s example salary of A$90,532 a year, converted into the local currency.
| Country | Tax years compared | Take-home change from the earlier year | Salary in local currency | Take-home share of the same salary |
|---|---|---|---|---|
| Australia | 2025/26 → 2026/27 | +0.84% | A$90,532 | 78.8% |
| South Africa | 2025/26 → 2026/27 | +0.41% | ZAR 1,051,276 | 70.4% |
| United Kingdom | 2025/26 → 2026/27 | 0% | £47,590 | 79.4% |
| United States | 2025 → 2026 | -0.02% | $62,823 | 78% |
| New Zealand | 2025/26 → 2026/27 | -0.77% | NZ$111,945 | 70.8% |
Converted at the exchange rates of 2 October 2026. Each country uses the calculator’s default profile and its latest enacted tax year. Living costs are not compared.
Your marginal rate changes only inside the band
A cut to one band lowers the marginal rate only for people whose next dollar falls inside it. Up to a taxable income of $45,000, which is what a salary of $46,000 leaves after the deduction, each extra dollar is now taxed at 15 cents instead of 16, plus the Medicare levy and, from $37,500, the 5 cents by which the low income tax offset shrinks. Above that the marginal rate is exactly what it was, so a pay rise is taxed as before: at $90,532 the next dollar still loses 32% to income tax and the Medicare levy.
The deduction leaves every rate as it was but moves each threshold $1,000 higher in salary terms, so in the $1,000 of salary just above a threshold the marginal rate is still the lower one. Above $46,000 the total change stays about the same within each tax band instead of growing with pay, which makes it worth proportionally more at lower incomes.
When the saving reaches your pay
The new rate and the deduction apply to income earned in the 2026/27 income year, from 1 July 2026 to 30 June 2027. Tax withheld from each pay is only an estimate of that year’s tax. Your final tax, with the rate cut and the deduction, is worked out when you lodge your return after 30 June 2027. If more was withheld than the year’s tax, the difference comes back as part of your refund; if less, you pay it then.
At $90,532, spreading $588 over 26 fortnightly pays comes to about $23 a fortnight.
What changes again on 1 July 2027
For 2027/28 the bottom rate falls from 15 to 14 percent, worth up to another $268 a year, and the working Australians tax offset begins. Sections 61-150 to 61-160 of the Income Tax Assessment Act 1997, inserted by the Tax Reform No. 1 Act, reduce the tax on salary after deductions by up to $250. The offset cannot take tax below zero and is not paid out as a refund.
At the same salary, take-home pay in 2027/28 is $518 higher than in 2026/27 at $90,532 and $458 higher at $40,000. The calculator marks 2027/28 as a year with estimated amounts: the rates, the deduction and the offset are enacted, but indexed amounts such as the Medicare levy low-income thresholds and the surcharge thresholds are not yet published for that year.
What the changes leave alone
The Medicare levy stays at 2 percent, and the low income tax offset of up to $700 works as before. The Medicare levy surcharge thresholds rose for 2026/27, to $105,000 for a single person; that is a separate change, and the examples assume private hospital cover so the surcharge does not affect the figures. The employer’s super guarantee stays at 12 percent of ordinary earnings.
What to do
You do not need to apply for the rate cut or the standard deduction. If your work-related expenses are above $1,000, keep records and claim them as before; the standard deduction then adds nothing. Check a payslip from July 2026 or later against one from before July at the same gross pay. If your taxable income is close to $45,000, the changes do little to how a pay rise is taxed, because the next dollar above it is still taxed at 30 percent plus the levy and 1.5 cents of offset withdrawal.
Checks for 2026/27
- Compare a payslip from July 2026 or later with one from before July at the same gross pay.
- Use the 2026/27 year in the calculator for this year’s take-home pay and 2025/26 for last year’s.
- Count on $268 a year from the rate cut once your taxable income passes $45,000, plus $1,000 times your marginal rate from the deduction.
- If your work-related expenses are above $1,000, keep claiming them: the standard deduction only tops smaller claims up to $1,000.
- Expect a further cut to 14 percent on the same band and an offset of up to $250 from 1 July 2027.
See your own numbers
The articles use example figures. Enter your salary in the calculator to see your own result.
Sources and model coverage
What the estimate covers
The calculator estimates employment income using its supported country rules and selected inputs. Benefits, collective agreements and personal circumstances that are not modelled are excluded. Official rules determine your actual liability.
- Salary packaging / fringe benefit tax (FBT) arrangements are outside scope.
Official sources
- Federal Register of Legislation – Treasury Laws Amendment (More Cost of Living Relief) Act 2025, Schedule 1
- Federal Register of Legislation – Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Schedules 3 and 4
- Federal Register of Legislation – Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024, Schedule 1
- Treasurer and Prime Minister – New cost-of-living tax cuts (joint media release, 25 March 2025)
- Federal Register of Legislation – Income Tax Assessment Act 1997, section 61-115 (low income tax offset)
- Federal Register of Legislation – Medicare Levy Act 1986, compilation in force from 1 July 2026
- Department of Health – Medicare levy surcharge income thresholds