One tax rate is changing when the new financial year starts. From 1 July 2026, the marginal rate on income between $18,201 and $45,000 drops from 16% to 15%. Every other bracket stays exactly where it is.
That single change is worth up to $268 per year for most working Australians — and it applies automatically through your employer’s payroll. You do not need to apply for anything.
This article covers the full 2026-27 bracket table, a side-by-side comparison with 2025-26, a savings breakdown by income, and what to expect in future years.
The ATO Tax Brackets for 2026-27
These rates apply to Australian tax residents for the financial year 1 July 2026 – 30 June 2027. These are marginal rates — you only pay each rate on the income that falls within that bracket, not on your total income.
| Taxable income | Tax rate (2026-27) |
|---|---|
| $0 – $18,200 | 0% |
| $18,201 – $45,000 | 15% |
| $45,001 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| $190,001 and above | 45% |
Medicare levy: 2% on top of your income tax (see below).
2025-26 vs 2026-27: What Is Different
| Taxable income | 2025-26 rate | 2026-27 rate | Change |
|---|---|---|---|
| $0 – $18,200 | 0% | 0% | No change |
| $18,201 – $45,000 | 16% | 15% | ↓ 1% |
| $45,001 – $135,000 | 30% | 30% | No change |
| $135,001 – $190,000 | 37% | 37% | No change |
| $190,001+ | 45% | 45% | No change |
That is it. One bracket. One percentage point.
How Much Do You Actually Save?
Because only the $18,201–$45,000 band changes by 1%, the maximum saving is 1% × $26,800 = $268 per year. Anyone earning above $45,000 hits that cap.
| Annual income | Annual saving (2026-27 vs 2025-26) |
|---|---|
| $20,000 | ~$18 |
| $30,000 | ~$118 |
| $40,000 | ~$218 |
| $45,000 or above | $268 (maximum) |
| $80,000 | $268 |
| $120,000 | $268 |
| $200,000 | $268 |
In weekly terms, $268 per year is about $5.15 per week.
How Marginal Rates Work in Practice
A common misunderstanding: you do not pay your top rate on all your income. Each rate only applies to the dollars that fall within that bracket.
Worked Example — $75,000 Income (2026-27)
| Bracket | Income in bracket | Rate | Tax |
|---|---|---|---|
| $0 – $18,200 | $18,200 | 0% | $0 |
| $18,201 – $45,000 | $26,800 | 15% | $4,020 |
| $45,001 – $75,000 | $30,000 | 30% | $9,000 |
| Total income tax | $13,020 | ||
| Medicare levy (2%) | $1,500 | ||
| Total tax payable | $14,520 | ||
| Effective rate | 19.4% |
The same income in 2025-26 would produce $13,288 in income tax — a difference of $268 from the bracket change.
What Stays the Same in 2026-27
- Tax-free threshold: $18,200 (unchanged)
- 30% bracket: $45,001 – $135,000 (unchanged)
- 37% bracket: $135,001 – $190,000 (unchanged)
- 45% bracket: $190,001 and above (unchanged)
- Medicare levy: 2% (unchanged)
- Super Guarantee: 12% (locked in since 1 July 2025)
- LITO: $700 maximum — 2026-27 thresholds confirmed post May 2026 Federal Budget
Several indexed thresholds — including the HECS repayment threshold, Medicare Levy Surcharge tiers, and super caps — are announced following the May 2026 budget and March CPI data. Fenro will update this article when those figures are confirmed. For official current rates, see the ATO’s individual income tax rates page{:target=”_blank” rel=”noopener”}.
See the current HECS-HELP debt guide 2026 for the latest repayment threshold.
The Full Stage 3+ Timeline
The 2026-27 change is the second phase of a three-phase tax cut plan that began in 2024.
| Date | What changed |
|---|---|
| 1 July 2024 (Phase 1) | 19% rate cut to 16%; 32.5% cut to 30%; thresholds expanded |
| 1 July 2026 (Phase 2) | 16% drops to 15% |
| 1 July 2027 (Phase 3) | 15% drops to 14% (already legislated) |
Phase 3 adds another $268 per year, for a cumulative saving of $536/year versus the pre-2024 system for anyone earning above $45,000.
These cuts are already law under the Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024— Parliament would need to pass new legislation to reverse or delay them.
Low Income Tax Offset (LITO)
The LITO reduces the tax bill for lower earners. It is applied automatically when you lodge your return — you do not need to claim it separately.
LITO Amounts for 2025-26 (2026-27 figures subject to post-budget update)
- Maximum LITO: $700 for incomes up to $37,500
- Tapers: $700 minus 5 cents per $1 above $37,500 (to $45,000), then minus 1.5 cents per $1 above $45,000
- Cuts out entirely at: $66,667
Effective Tax-Free Threshold
The LITO combined with the $18,200 tax-free threshold means most Australians effectively pay no income tax below approximately $22,575 per year (2025-26 figure). With the rate cut to 15% in 2026-27, this effective point will shift slightly — the ATO will confirm this when it releases updated withholding schedules.
Medicare Levy
The 2% Medicare levy applies to your taxable income and is separate from income tax.
Who Is Exempt
You are exempt from the levy if your income is below the low-income threshold:
- Singles threshold (2025-26): $27,222
- Shade-in range: $27,222 – $34,027 (levy phases in at 10 cents per $1 above the threshold)
The 2026-27 thresholds will be indexed and announced post-budget.
Medicare Levy Surcharge
If you earn above $101,000 (2025-26 figure) and do not hold private hospital cover, the Medicare Levy Surcharge adds 1%–1.5% on top of the standard levy.
For more on how healthcare spending fits your budget, see healthcare costs in Australia 2026.
Non-Residents
Non-residents for tax purposes do not get the tax-free threshold and face different rates:
| Taxable income | 2026-27 rate |
|---|---|
| $0 – $135,000 | 32.5% |
| $135,001 – $190,000 | 37% |
| $190,001 and above | 45% |
Non-residents also do not qualify for the LITO.
High Balance Super Tax — New From 1 July 2026
One additional change affects high super balances from 1 July 2026:
- Super balances $3 million – $10 million: earnings taxed at 30% (up from 15%)
- Super balances above $10 million: earnings taxed at 40%
This only applies to future realised earnings above the $3 million threshold. It does not affect the vast majority of Australians. For broader context on super planning, see how much super you need to retire comfortably.
Before 1 July 2026: What Is Worth Considering
The rate drop is small — the maximum extra saving is $268. But a few timing decisions are still worth noting:
- Deferring income into 2026-27 is worth considering if your income sits between $18,201 and $45,000 — you will pay 1% less on that portion
- Maximising 2025-26 super contributions — the $30,000 concessional cap must be received by your fund by 30 June 2026
- Instant asset write-off — small businesses with turnover under $10M can write off assets up to $20,000 per asset if installed and ready to use by 30 June 2026
See Australia tax rates 2026 for the full tax framework if you need a broader picture.
Frequently Asked Questions
Are the 2026-27 tax brackets confirmed or just proposed?
They are already law under the Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024. No further legislation is required for the 16% → 15% change on 1 July 2026.
Does the tax-free threshold change in 2026-27?
No. The threshold stays at $18,200.
When do my PAYG withholding amounts change?
Your employer applies the new withholding schedules from the first pay period starting on or after 1 July 2026. You should see slightly higher take-home pay from that point.
What is the next tax cut after 2026-27?
The 15% rate drops to 14% on 1 July 2027 — already legislated.
Will the 30% bracket change in 2026-27?
No. The 30% rate on $45,001–$135,000 is unchanged in 2026-27.
What This Means for Take-Home Pay
The 1% rate cut is real and automatic. For most workers it adds around $5 per week after July 2026. It is not transformative, but it compounds with the Phase 1 cuts already in place since 2024.
For Australians affected by high rent prices in Australia and rising grocery prices in Australia, the saving is marginal against broader cost-of-living pressure. The Australia tax rates 2026 article covers the broader picture if you need to understand your full tax position.
Disclaimer: This article is general information only and does not constitute financial or tax advice. Tax rules can change. Always verify your individual tax position with a registered tax agent or refer to the ATO’s official website at ato.gov.au.
Last updated: April 2026 | Sources: ATO, Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024, PwC Federal Budget analysis.
