Evidence-backed. Sourced from ATO official rate tables, PwC Tax Summaries, Etax, ITP, SBS News, Treasury Budget 2026–27, Baker McKenzie and the Prime Minister’s office. General information only — not financial or tax advice. Tax rates and offsets change annually — confirm with a registered tax agent or the ATO. Last updated: June 2026.
⚡ Key Takeaways
- For the 2025–26 income year (returns lodged mid-2026), Australian residents pay: 0% on the first $18,200; 16% on $18,201–$45,000; 30% on $45,001–$135,000; 37% on $135,001–$190,000; and 45% on income above $190,000. Medicare levy (2%) applies separately and most people also receive the low-income tax offset (LITO). [4][5][2]
- From 1 July 2026 (the 2026–27 income year), the only structural change is that the lowest marginal rate drops from 16% to 15% on income between $18,201 and $45,000. All other brackets stay the same. For someone earning at least $45,000, this saves up to $140 per year — roughly $5 per fortnight in take-home pay. A further drop to 14% from 1 July 2027 is also legislated. [3][6][1]
- The cuts are delivered through lower employer withholding each pay period — not through a bigger tax refund. Many Australians will see a slightly smaller refund (or a small bill) at lodgement time, even though their total annual tax is lower. [10][6]
- Bracket creep is slowed, not solved. As wages grow and push more income into higher bands (37% and 45%), the effective tax burden increases over time without any change to the rate scale. The 2024 Stage 3 cuts and the 16%→15% change help, but don’t eliminate this pressure. [1][4][6]
- Offsets and levies still shape most people’s actual bill more than the headline rates. The low-income tax offset (LITO), Medicare levy, HELP repayments, seniors offsets, and upcoming measures including the $1,000 standard deduction (from 2026–27) and the Working Australians Tax Offset (from 2027–28) can substantially change what you actually pay. [11][12]
Australia’s New Income Tax Rates for 2026 — Exactly What You’ll Pay on Every Dollar
By The Fine Print editorial team | Last updated: June 2026 | 12 min read | ⚠️ Not financial advice
Every year Australians lodge tens of millions of tax returns — and every year a significant number are confused about what they actually should have paid. What are the current brackets? Did the rates change? Why is my refund smaller than last year when the rates went down? This guide answers all of those questions precisely. It covers the 2025–26 brackets in full, the change taking effect from 1 July 2026, what’s scheduled for 2027, four ways the system affects ordinary Australians, and three concrete actions to make the most of where the rates are now.📋 What’s in This Guide
2025–26 Tax Rates — What You’re Lodging Now
The following rates apply to Australian tax residents for the 2025–26 income year (1 July 2025 – 30 June 2026) — the return most Australians are lodging in mid-2026. These exclude the Medicare levy (2% for most) and any tax offsets. [4][5][2]🇦🇺 Resident tax brackets — 2025–26
| Taxable income | Tax on this income |
|---|---|
| $0 – $18,200 | Nil (tax-free threshold) |
| $18,201 – $45,000 | 16c for each $1 over $18,200 |
| $45,001 – $135,000 | $4,288 plus 30c for each $1 over $45,000 |
| $135,001 – $190,000 | $31,288 plus 37c for each $1 over $135,000 |
| $190,001 and above | $51,638 plus 45c for each $1 over $190,000 |
Add 2% Medicare levy for most residents. Subtract LITO, HELP repayments and other applicable offsets/levies to get your actual liability. [16]
The 1 July 2026 Change: 16% Drops to 15%
From 1 July 2026, the start of the 2026–27 income year, the only structural change to the resident rate scale is that the lowest marginal rate on income between $18,201 and $45,000 drops from 16% to 15%. All other brackets remain unchanged. [3][6][1]🇦🇺 Resident tax brackets — 2026–27 (from 1 July 2026)
| Taxable income | Tax on this income | Change from 2025–26 |
|---|---|---|
| $0 – $18,200 | Nil | No change |
| $18,201 – $45,000 | 15c for each $1 over $18,200 | ↓ from 16c (saves up to $268 over the band = ~$140 net saving for $45k earners after offset adjustments) |
| $45,001 – $135,000 | 30c for each $1 over $45,000 | No change |
| $135,001 – $190,000 | 37c for each $1 over $135,000 | No change |
| $190,001 and above | 45c for each $1 over $190,000 | No change |
⚠️ Important context for the 2025–26 return you’re lodging now: The 16%→15% cut applies from 1 July 2026. Your 2025–26 return (income earned 1 July 2025 – 30 June 2026) uses the 16% rate on that band. The new 15% rate will apply to your 2026–27 income — the return you’ll lodge in 2027. [3][5]
Four Ways This Affects Everyday Australians
1. Everyone gets a small cut — but low- and middle-income workers feel it most
The 1-percentage-point reduction on the $18,201–$45,000 band saves up to $268 across the band — roughly $140 per year after accounting for the low-income tax offset interaction, for someone earning at least $45,000. For those earning between $18,201 and $45,000, the saving is proportionately smaller. It won’t transform anyone’s finances, but combined with the earlier Stage 3 cuts (from 1 July 2024), it raises take-home pay each fortnight rather than appearing as a larger refund at year end. [2][3][8]2. Refunds shrink — and that surprises people
Because the rate cut is delivered through lower employer withholding (your employer takes a little less tax from each pay), many Australians will see a smaller tax refund — or a small unexpected bill — when they lodge their 2026–27 return, even though their total annual tax is genuinely lower. SBS and the ATO have both warned taxpayers not to expect bigger refunds from these cuts. If you’ve historically used your annual refund as a form of forced saving, that mechanism is being eroded. The end of the Low and Middle Income Tax Offset (LMITO) in 2022 already cost some Australians $500–$1,500 in annual refunds; this cut won’t restore that. [13][14][10][6]3. Bracket creep is slowed, not solved
Australia’s income tax brackets are not indexed to inflation or wage growth. As wages rise over time, more income is pushed into higher bands — 37% and 45% — increasing the real tax burden even without any change to the rates. The redesigned Stage 3 cuts (which simplified and lowered the mid-brackets from 1 July 2024) and the 16%→15% change help offset this, but don’t eliminate it. Policy commentators consistently note that without structural indexation, bracket creep will reassert itself — meaning the tax cuts of today may simply be reversing the stealth increases of the last decade. [1][4][6]4. Offsets and thresholds matter more than the headline rate for many people
A significant portion of Australians’ actual tax outcome is determined not by the headline rate but by offsets, levies and special programs. The low-income tax offset (LITO) phases out above $37,500 and can eliminate most tax liability for lower-income Australians entirely. Medicare levy applies at 2% (with an exemption threshold). HELP repayments apply as a separate percentage on top of income tax. Looking ahead, the $1,000 standard deduction (from 2026–27) and the Working Australians Tax Offset (from 2027–28) are incoming measures that will further shift the effective tax paid — in some cases by more than the 1-percentage-point rate cut. For many people, understanding these offsets is more valuable than tracking the bracket rates themselves. [11][12][3]The Controversies: Refund Confusion, Bracket Creep and Fairness
- Redesigned Stage 3 cuts (2023–2024): In early 2024, the government re-worked the original “Stage 3” tax-cut package — reducing the benefit to very high-income earners and redirecting it to low- and middle-income earners. The first round took effect from 1 July 2024, followed by the legislated 16%→15% cut from 1 July 2026 and a further 14% from 1 July 2027. The redesign was politically contentious but broadly welcomed by lower-income taxpayers. [7][10]
- Refund confusion and LMITO loss: SBS and other outlets have consistently warned taxpayers not to expect bigger refunds from the rate cuts, because lower rates change withholding (your pay packet), not the refund mechanism. Combined with the permanent end of the LMITO, many Australians are still receiving smaller refunds — or unexpected bills — despite lower statutory rates. The ATO publishes guidance on why this happens. [13][14][8]
- Bracket creep and structural concerns: Policy commentators and economists note that the cuts address rate levels but don’t solve the structural issue of unindexed brackets. Baker McKenzie’s 2026 Budget analysis and PwC’s personal-tax commentary both note that as wages continue to grow, the 37% and 45% bands will capture an increasing share of ordinary incomes without any legislative change. [12][15]
- No court decisions: No major cases between 2023 and 2026 have altered the legislated rate scales. The changes are entirely parliamentary — enacted through tax legislation and administered by the ATO. [16][1]
✅ Three Actions to Take Now
Action 1: Work out your exact marginal rate — not just your “average” tax
Your average tax rate (total tax divided by total income) is much lower than your marginal rate (the rate on each additional dollar). The distinction matters whenever you’re considering earning more income — overtime, a bonus, freelance work, investment distributions, or extra rental income. Use a current 2025–26 bracket table and a tax calculator (the ATO’s income tax estimator, Etax’s calculator or ITP’s take-home pay tool) to work out which band your next dollar falls into, and how much of any additional income you’ll actually keep after tax. That calculation should inform whether extra work, salary sacrifice to super, or additional investment income makes sense in your situation. For example: if your base salary puts you at $130,000, your next dollar is taxed at 30% — but if overtime pushes you to $136,000, those extra dollars are taxed at 37%. Knowing this lets you make informed decisions about timing and structure. [5][4][6]Action 2: Adjust your budget for lower refunds and slightly higher take-home pay
From 1 July 2026, your employer should apply the new 15% rate to the $18,201–$45,000 band, reducing withholding slightly each pay. Depending on your employer’s payroll update timing, you may notice a small increase in take-home pay each fortnight — but the annual saving is modest (up to $140 at most). More importantly: when you lodge your 2026–27 return in 2027, don’t expect a larger refund. The cut flows through lower withholding during the year, not through a year-end payment. If you’ve historically relied on a tax refund as a savings mechanism — to pay down a credit card, fund a holiday or build an emergency fund — replace it deliberately. Set up an automatic transfer from your pay to a savings account for the equivalent amount each fortnight, rather than waiting for a refund that may be smaller or non-existent. [6][3][7]Action 3: Stack other tax strategies on top of the rate cuts
The rate cuts are legislated — you don’t need to do anything to receive them. Where you have genuine decision-making power is in strategies that reduce the amount of income that sits in higher tax bands. Salary sacrifice to superannuation is taxed at 15% concessional rate — if your marginal rate is 30%, 37% or 45%, every dollar salary-sacrificed saves the difference. From 2026–27, a $1,000 standard deduction is being introduced — automatically reducing taxable income for taxpayers who don’t itemise above that amount. From 2027–28, a Working Australians Tax Offset provides further direct relief. Deductible expenses — work-related costs, investment property interest, income-protection insurance premiums, charitable donations — reduce your taxable income at your marginal rate, not the average. Doing this analysis with your actual bracket in mind — not a vague sense of “I pay a lot of tax” — lets you identify where each dollar of deduction or contribution saves you the most. [17][11][12]❓ Frequently Asked Questions
What are the 2025–26 tax brackets?
0% to $18,200; 16% on $18,201–$45,000; 30% on $45,001–$135,000; 37% on $135,001–$190,000; 45% above $190,000. Plus 2% Medicare levy. Subtract LITO and other applicable offsets. [4][5][16]Did the 2026 rate change apply to my current return?
No — the 16%→15% cut applies from 1 July 2026. Your 2025–26 return (income earned July 2025 – June 2026) still uses the 16% rate. The new 15% rate applies to the 2026–27 year. [3][5]How much does the 2026 cut save?
Up to $140 per year (roughly $5 per fortnight) for someone earning $45,000+. Delivered through lower withholding each pay — not through a bigger refund. [2][3][8]Why is my refund smaller despite lower rates?
Lower rates mean less withholding each pay — so there’s less over-withheld tax to refund at year end. The LMITO ending in 2022 also permanently reduced refunds. Smaller refund ≠ higher tax. [13][14][10]What is bracket creep?
When wages rise without the tax brackets being indexed, more income gets pushed into higher tax bands each year — effectively a stealth tax increase. The 2024 Stage 3 cuts and 2026 cut help, but don’t fully solve it. [1][4][6]⚖️ The Fine Print Verdict
The 16%→15% cut from 1 July 2026 is real but modest — $140 a year is not life-changing. What matters more for most Australians is understanding which bracket they’re actually in, why their refund is smaller than they expected, and how to use the available levers — salary sacrifice, deductions, planned income timing — to reduce the amount of income that sits in higher bands. The rate changes are legislated and automatic. The benefit is limited. The real work is in what you do around the edges: knowing your marginal rate before you take on extra work or make an investment decision; replacing your old refund-based saving habit with a deliberate system; and stacking the upcoming standard deduction and Working Australians offset on top of the cut to maximise the combined effect. That’s where the actual dollars are.
👉 Use a tax calculator with your actual income to find your marginal rate — then make every extra dollar decision with that number in mind.
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Plain-English breakdowns of Australian money news every week — no jargon, no spam.📚 Sources & References
- PwC, “Australia — taxes on personal income,” taxsummaries.pwc.com/australia/individual/taxes-on-personal-income
- Easifleet, “Income tax rate update,” easifleet.com.au/blog/income-tax-rate-update/
- Etax, “Tax brackets Australia,” etax.com.au/tax-brackets-australia/
- QuickBooks Australia, “Tax rates,” quickbooks.intuit.com/au/blog/taxes/tax-rates/
- SMH Accountants, “ATO latest tax rules 2025–26,” smhaccountants.com.au/blog/ato-latest-tax-rules-2025-26/
- ITP, “Australian tax rates 2026 — take home pay impact,” itp.com.au/australian-tax-rates-2026-take-home-pay-impact/
- Prime Minister of Australia, “New cost-of-living tax cuts under Labor,” pm.gov.au/media/new-cost-living-tax-cuts-under-labor (2025)
- SBS News, “Your guide to the major 2026 changes,” sbs.com.au/news/article/your-guide-to-the-major-2026-changes/zd5258wvu (2026)
- Salary After Tax Australia, “Australia tax brackets 2026–27,” salaryaftertaxau.com/blog/australia-tax-brackets-2026-27
- Etax, “Stage 3 tax cuts explained,” etax.com.au/stage-3-tax-cuts-explained/
- Treasury, “Budget 2026–27 taxation,” treasury.gov.au/policy-topics/taxation/budget2026-27
- PwC Australia, “Federal budget — personal tax and superannuation,” pwc.com.au/insights/federal-budget-tax-analysis-and-insights/personal-tax-and-superannuation.html (2026)
- SBS News, “Why you shouldn’t bank on a refund after lodging your tax return this year,” sbs.com.au (2026)
- ATO, “Why you may receive a tax bill,” ato.gov.au/individuals-and-families/your-tax-return/your-notice-of-assessment/why-you-may-receive-a-tax-bill
- Baker McKenzie, “Australia Budget bites: personal income tax,” bakermckenzie.com/en/insight/publications/2026/05/australia-budget-bites-personal-income-tax (May 2026)
- ATO, “Tax rates — Australian residents,” ato.gov.au/tax-rates-and-codes/tax-rates-australian-residents
- CKSaksens, “Official 2026 tax cuts, super rules, new rates and brackets,” cksaksens.com/global/en-au/official-2026-tax-cuts-super-rules-new-rates-brackets-preservation-age-confirmed/
This article is general information only and does not constitute financial or tax advice. Tax rates, offsets and thresholds change annually — always confirm with the ATO website or a registered tax agent before lodging. Information based on ATO rate tables, PwC, Etax, ITP, SBS and Treasury Budget 2026–27, current as at June 2026. The Fine Print 🇦🇺 is not affiliated with the ATO or any firm mentioned.