Tax Cuts Are Coming – Here Is What They Mean for You
From 1 July 2026, every Australian taxpayer will benefit from another reduction in personal income tax. This is the second phase of legislated tax cuts that began in 2024, and it applies automatically – you do not need to do anything to receive it.
Understanding what is changing, and how it interacts with your broader financial position, is a worthwhile conversation to have before the new financial year begins.
What Is Changing
The marginal tax rate that applies to income between $18,201 and $45,000 will reduce from 16% to 15% from 1 July 2026. A further reduction to 14% is legislated to take effect from 1 July 2027.
All other income tax brackets remain unchanged. The savings are modest but meaningful – every Australian taxpayer earning above $18,200 will benefit.
How Much Will You Save
The maximum saving from the 1 July 2026 rate change is $268 per year. This applies to any taxpayer earning $45,000 or more, as the full $26,800 income band benefits from the 1% rate reduction. For those earning between $18,201 and $45,000, the saving will be proportional to their income within that band.
From 2027, when the rate drops to 14%, the combined saving from both rounds of cuts rises to a maximum of $536 per year.
When combined with the earlier round of tax cuts delivered in July 2024, the Government has indicated the average taxpayer will receive total annual tax relief of around $2,190 from 2027-28 onwards.
What This Means for Planning
While $268 is not a figure that changes most people’s financial position on its own, there are some planning considerations worth thinking about in the lead-up to 1 July.
For individuals with flexibility around the timing of income, such as those who receive bonuses, have investment income, or run their own business, the rate change creates a small but legitimate incentive to consider deferring income into the new financial year where that is practical and appropriate.
Conversely, if you have deductions you can bring forward into the current financial year before 30 June, doing so may be more tax-effective now than after 1 July when the lower rate applies.
The cuts also interact with superannuation contributions, capital gains planning, and other year-end decisions. This is why a review with your advisor before 30 June is worthwhile, not because of the tax cut itself, but because it is one more factor in a broader set of decisions that benefit from being looked at together.
What About Employers
For employers, payroll systems will need to be updated to reflect the new tax withholding rates from the first pay period after 1 July 2026. Most payroll software providers will update their tax tables automatically, but it is worth confirming with your provider that this update has been applied correctly.
Given that Payday Super also takes effect from 1 July 2026, the start of the new financial year brings a number of payroll changes at once. Ensuring your systems are ready in advance will avoid unnecessary complications.
If you would like to understand how the new tax rates interact with your personal or business financial position, we are happy to help. Call us on 1800 618 800 or email admin@simmonslivingstone.com.au to arrange a review before 30 June.
