Australian Tax Changes 2026-27
From 1 July 2026 the Australian Government proposes to cut the two lowest income tax rates — from 19% to 16% and from 32.5% to 30%. If legislated, most workers earning under $135,000 will pay less tax from FY2027 onwards. This page shows the exact impact at every common salary level.
What is changing from 1 July 2026?
| Taxable income | 2025–26 rate | 2026–27 rate | Change |
|---|---|---|---|
| $0 – $18,200 | 0% | 0% | — |
| $18,201 – $45,000 | 19% | 16% | −3 pp |
| $45,001 – $135,000 | 32.5% | 30% | −2.5 pp |
| $135,001 – $190,000 | 37% | 37% | — |
| $190,001+ | 45% | 45% | — |
Rates are proposed and subject to legislation. Medicare levy (2%), LITO, and HECS repayments are unchanged.
Annual tax saving by salary
| Salary | Take-home 2025–26 | Take-home 2026–27 | Annual saving |
|---|---|---|---|
| $60,000 | $48,933 | $50,112 | +$1,179 |
| $70,000 | $55,383 | $56,812 | +$1,429 |
| $80,000 | $61,933 | $63,612 | +$1,679 |
| $90,000 | $68,483 | $70,412 | +$1,929 |
| $100,000 | $75,033 | $77,212 | +$2,179 |
| $120,000 | $88,133 | $90,812 | +$2,679 |
| $150,000 | $107,108 | $110,162 | +$3,054 |
| $200,000 | $136,808 | $139,862 | +$3,054 |
Calculations use resident rates. Excludes HECS, MLS, and salary sacrifice.
Who benefits most from the 2026-27 tax cuts?
The cuts are targeted at low and middle incomes. Workers earning between $18,201 and $45,000 get the full benefit of the 19% → 16% reduction — a saving of up to $804 per year. Workers earning $45,001 to $135,000 get an additional saving from the 32.5% → 30% change on top of the lower-bracket cut, up to approximately $3,529 at incomes around $135,000.
Earners above $135,000 still benefit from the lower rates on the first $135,000 of income, but pay the same 37% and 45% rates on income above that threshold as they do today.
What is NOT changing in 2026-27?
- Medicare levy — remains 2% of taxable income (phase-in thresholds may be indexed separately).
- HECS/HELP repayment thresholds and rates — unchanged in these proposals.
- Superannuation guarantee rate — 12% from 1 July 2025, unchanged in these proposals.
- Medicare Levy Surcharge thresholds — unchanged in these proposals.
- Low Income Tax Offset (LITO) — maximum $700, same phase-out schedule as today.
- Capital gains tax discount — 50% CGT discount on assets held over 12 months is unchanged.
How do the 2026-27 rates compare to previous years?
Australia has had two major rate changes in recent years. The Stage 3 tax cuts took effect from 1 July 2024, restructuring the old four-bracket system into the current rates. The 2026-27 proposals now take a further step by reducing the 19% and 32.5% rates without touching the upper brackets.
Use the interactive salary calculator to model your personal take-home pay across all three tax years side by side, with HECS, salary sacrifice, and Medicare included.
Frequently asked questions
Are the 2026-27 tax cuts confirmed?
The cuts have been announced as policy but require legislation to pass Parliament. They are shown as "proposed" in all AuSalaryTools calculators. We will update rates here if the legislation is amended before or after passage.
When will I see the 2026-27 rates in my pay?
If legislated, the new rates apply from 1 July 2026. Your employer updates PAYG withholding tables from that date, so you should see more in your first pay cycle in July 2026. You do not need to do anything — withholding is automatic.
Does the 2026-27 rate change affect my HECS repayments?
No. HECS/HELP repayment rates are calculated separately using your repayment income, not your marginal tax rate. Lower income tax does not reduce your HECS obligation. Your take-home pay rises, but the HECS withholding stays the same.
Is salary sacrifice still worth it after the 2026-27 cuts?
Yes, though the benefit reduces slightly for middle incomes. At 30% (down from 32.5%), each dollar sacrificed into super saves 15 cents in the fund versus 30 cents outside — still a 15-cent-per-dollar advantage. For incomes above $135,000, the 37% rate is unchanged, so salary sacrifice is just as effective as today.
How much will I save if I earn $100,000?
At $100,000 the annual saving under proposed 2026-27 rates is approximately $1,929 compared with 2025-26. This is entirely from the 32.5% → 30% reduction on income between $45,001 and $100,000. The calculation above shows the exact figure.