Evidence-backed. Sourced from Treasury, the ATO, PwC, H&R Block, etax, ANU Crawford and SavingsMate. General information only — not financial or tax advice. Your exact tax saving depends on your taxable income, offsets and deductions. Consult a registered tax agent for personalised advice. Last updated: June 2026.
⚡ Key Takeaways
- The revised Stage 3 tax cuts took effect from 1 July 2024. Your 2025–26 return (lodged from July 2026) is the second full year under these brackets. The key changes: the 19% rate dropped to 16% on income $18,201–$45,000, and the 32.5% rate dropped to 30% on income $45,001–$135,000 (with the upper threshold lifted from $120,000). [1][2][3]
- Treasury estimates the package delivers cuts to every Australian taxpayer, with around 84% better off than under the original Stage 3 design and roughly 2.9 million low-income taxpayers receiving a cut they would not have received under the original design. [7][8]
- In dollar terms, approximate annual savings vs the pre-Stage-3 system: $50,000 income → ~$929/year; $90,000 → ~$2,179/year; $150,000 → ~$3,729/year; $200,000 → ~$4,529/year. Middle-income earners around $60k–$130k gain the most in dollar terms. [2][4][1]
- Your 2026 refund may be smaller than you expect — and that’s not bad news. Employers have adjusted PAYG withholding to the new lower rates since July 2024, meaning you’ve been receiving the tax cut in your fortnightly pay throughout the year. A smaller refund simply means the benefit arrived earlier. [3][1][4]
- The cuts continue: from 1 July 2026 the 16% rate drops to 15%, and from 1 July 2027 it drops further to 14%. H&R Block estimates these further reductions are worth roughly $260–$520/year extra for most taxpayers. [5][6]
The Stage 3 Tax Cuts Arrived — Here’s Exactly How Much More (or Less) You’re Getting
By The Fine Print editorial team | Last updated: June 2026 | 11 min read | ⚠️ Not financial advice
The Stage 3 tax cuts are no longer a future event — they’ve been in your pay packet since 1 July 2024, and your 2025–26 return is the second full year under the revised brackets. But the politics around Stage 3 were messy, the original design was changed before it took effect, and many Australians still aren’t sure what they actually received, why their refund looks different, or what comes next. This guide cuts through the noise with the exact numbers, who wins, who got less than expected, and what the ongoing rate cuts mean for your planning.📋 What’s in This Guide
The 2025–26 Tax Brackets — What Changed and From What
The revised Stage 3 package amended the Income Tax Rates Act. The 2025–26 tax scale for Australian residents — the same scale that applies to the return you’re lodging now — is: [1][2][3]2025–26 individual tax rates (Australian residents):
- $0–$18,200: 0% (tax-free threshold — unchanged)
- $18,201–$45,000: 16% (was 19% pre-Stage-3)
- $45,001–$135,000: 30% (was 32.5%, threshold lifted from $120,000)
- $135,001–$190,000: 37% (bracket retained — original Stage 3 would have abolished it)
- Above $190,000: 45%
Note: The above are marginal rates on income in each bracket only. Your effective (average) tax rate will be lower. Medicare Levy (2%), offsets (LITO, LMITO, SAPTO) and other adjustments are applied separately.
Exactly How Much You’re Saving by Income Level
The savings figures below are approximate annual comparisons between the 2025–26 brackets and the pre-Stage-3 system (broadly, the 2023–24 rates). They represent the gross reduction in tax payable before offsets and Medicare. Your actual outcome depends on your deductions, offsets and tax agent’s treatment. [2][4][1]Annual tax saving vs pre-Stage-3 system (2025–26):
- Income $40,000: approximately $418/year less tax
- Income $50,000: approximately $929/year less tax
- Income $70,000: approximately $1,429/year less tax
- Income $90,000: approximately $2,179/year less tax
- Income $120,000: approximately $3,179/year less tax
- Income $150,000: approximately $3,729/year less tax
- Income $200,000: approximately $4,529/year less tax (less than original Stage 3 would have given)
💡 Important context: The total package cost is estimated at $69.6 billion over the forward estimates to 2026–27 and $308.7 billion over the medium term to 2033–34. This is one of the largest personal income tax reform packages in recent Australian history. Treasury’s own fact sheet states “every Australian taxpayer” receives a cut — though the size varies significantly by income and the benefit is zero for people below the tax-free threshold. [7][8][10]
Why Your Refund Might Be Smaller — And Why That’s Fine
One of the most common confusions this tax season: many Australians are expecting a large refund and are surprised to find it’s smaller than previous years. This is almost always because the tax cut has already been delivered — through your pay packet. [3][1][4]When Stage 3 took effect on 1 July 2024, employers updated their PAYG withholding tables to reflect the new lower rates. That means every pay since July 2024, your employer has been withholding less tax from your salary. You received the cut as higher take-home pay throughout the year — not as a lump sum at tax time. A smaller refund (or a smaller bill) is the mathematically expected outcome when the system is working correctly. [3][1][4]⚠️ When a smaller refund IS a problem: If your PAYG withholding was correct but your total tax is higher than expected because of undeclared income (a side hustle, bank interest, dividends, a capital gain), that’s a different issue — that’s a gap in what you reported, not a Stage 3 artefact. Equally, if you have major deductions (large WFH claims, rental losses) that weren’t reflected in your withholding, your refund should still be healthy. Use your tax agent’s pre-fill data to cross-check before lodging. [3][1][6]
Who Gains Most, Who Gains Least
The revised Stage 3 design redistributed the benefits compared to the original. The winners and the less-than-expected groups: [7][8][9]Middle-income earners ($60k–$130k) — biggest dollar gains
The combination of a lower 30% rate (down from 32.5%) and a lifted threshold (up to $135,000) delivers the largest absolute dollar savings for people with incomes in this range. A taxpayer on $90,000 saves roughly $2,179/year compared to pre-Stage-3 settings — a meaningful improvement in take-home pay. [2][7][1]Low-income earners (below $45k) — benefited relative to original, but modestly
The revised design specifically shifted relief toward lower incomes by reducing the 19% rate to 16%. Treasury estimates roughly 2.9 million low-income taxpayers received a cut they would not have received under the original design. However, ANU policy analysis notes that because the tax-free threshold is unchanged and some offsets (LMITO) have phased out, some lower-income earners see a modest net benefit. Anyone already below the tax-free threshold gets nothing — there’s no tax to cut. [7][8][9][6]High-income earners ($180k+) — still cut, but less than promised
The original Stage 3 design would have abolished the 37% bracket and delivered much larger cuts to high earners. The revised design retained the 37% bracket and reduced the top threshold benefit. Someone on $200,000 still saves approximately $4,529/year versus pre-Stage-3 — a real saving — but less than they would have received under the original legislation. This was the politically contentious element, with debate centring on whether changing legislated policy was a “broken promise.” [9][7][8]What Comes Next — The 15% and 14% Cuts
The 2026–27 Federal Budget layers further cuts on top of the Stage 3 changes. The 16% rate (applying to income $18,201–$45,000) drops to 15% from 1 July 2026, and to 14% from 1 July 2027. H&R Block estimates these additional reductions are worth approximately $5 per week in 2027 and another $5 per week in 2028 for most taxpayers — roughly $260–$520 per year in additional savings layered on what Stage 3 already delivered. [5][6][11]From 1 July 2027, the Working Australians Tax Offset (WATO) of up to $250 will also be introduced. And separately, the $1,000 standard work-expense deduction from 1 July 2026 will interact with how much tax people actually pay versus what the bracket tables alone suggest. The net effect of all these measures is a continued multi-year reduction in personal income tax for most Australians, with the cumulative saving over 2024–28 likely to be the most significant personal tax reform period since the GST era. [11][6][5]✅ Three Actions to Take Now
Action 1: Use a Stage-3-aware calculator to see your exact dollar benefit
Plug your 2025–26 taxable income (gross income minus deductions) into a calculator that uses the current 2025–26 brackets (16% / 30% / 37% / 45%). Compare the result to the pre-Stage-3 scale (broadly the 2023–24 rates: 19% / 32.5% / 37% / 45%) to see exactly how many dollars less tax you’re paying this year. etax and H&R Block both publish updated calculators. This single exercise tells you whether your refund result is expected or whether something else is going on. [4][1][6]Action 2: Adjust your PAYG withholding if you don’t like surprises
If you’ve been getting large refunds and preferred that structure, ask your employer or the ATO about adjusting your withholding — Stage 3 rates are now baked into PAYG tables, meaning less will be withheld automatically. Conversely, if you’ve started getting bills instead of refunds (perhaps because you have investment income or a side hustle not reflected in your withholding), you can ask your employer to withhold an additional fixed amount each pay period to smooth out your next return. Neither outcome is permanent — you can recalibrate as your income situation changes. [6][3][1]Action 3: Plan large income events around 30 June with the rate step-downs in mind
The 16% rate applies in 2025–26. From 1 July 2026, it drops to 15%. For income that genuinely falls in the $18,201–$45,000 bracket — a bonus, share vesting event, freelance payment, or asset disposal with a gain that lands in this range — there is a 1 percentage point rate difference depending on which side of 30 June the income falls. That’s a modest difference for most, but for larger income events near the threshold, timing is worth modelling with a tax agent. If you’re near the $135,000 threshold, salary-sacrifice to super or timing of deductions can keep you in the 30% bracket rather than crossing into the 37% rate. [11][5][3]❓ Frequently Asked Questions
What are the Stage 3 tax brackets for 2025–26?
0% to $18,200 / 16% $18,201–$45,000 / 30% $45,001–$135,000 / 37% $135,001–$190,000 / 45% above $190,000. [1][2][3]Why is my 2026 refund smaller?
The cut was delivered via lower PAYG withholding since July 2024 — you received it in your pay throughout the year, not as a lump sum at tax time. A smaller refund means Stage 3 worked. [3][1][4]How much do I save at my income?
$50k → ~$929/yr; $90k → ~$2,179/yr; $150k → ~$3,729/yr; $200k → ~$4,529/yr vs pre-Stage-3. Middle incomes $60k–$130k save the most in dollar terms. [2][4][1]What changed from the original Stage 3?
Original plan abolished the 37% bracket and gave large cuts to top earners. Revised plan lowered 19% → 16% and 32.5% → 30%, kept the 37% bracket, and delivered proportionally more to low/middle incomes. [7][8][9]What further cuts are coming?
16% drops to 15% from 1 July 2026, then to 14% from 1 July 2027 — worth an extra ~$260–$520/year for most taxpayers on top of current Stage 3 savings. [5][6][11]⚖️ The Fine Print Verdict
The revised Stage 3 tax cuts did what they were redesigned to do: they delivered real savings across most of the income spectrum, with the largest dollar benefits to the $60k–$130k band that makes up the bulk of Australian workers. The controversy around changing the original design is largely a political debate — the practical reality for most people is that they’re paying several hundred to several thousand dollars less tax per year than they were two years ago. The confusion about smaller refunds is a communication failure, not a real problem. And the further cuts from 1 July 2026 and 2027 continue the trend. The one group with a legitimate grievance is very-low-income earners who don’t pay much tax to begin with and whose real cost-of-living pressures are not primarily a tax story. For everyone else: check the numbers, adjust your withholding if needed, and plan any big income events with the step-down rates in mind.
👉 Use a calculator to see your exact saving. A smaller refund means Stage 3 worked. And the cuts keep coming — 15% from July 2026, 14% from July 2027.
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- SavingsMate, “Tax return changes 2025–26,” savingsmate.com.au/blog/tax-return-changes-2025-26
- Kalkine, “What Australia’s Stage 3 tax cuts mean for middle-income earners in FY26,” kalkine.com.au/education/tax-insights/what-australias-stage-3-tax-cuts-mean-for-middle-income-earners-in-fy26
- PwC tax summaries, “Australia — Taxes on personal income,” taxsummaries.pwc.com/australia/individual/taxes-on-personal-income
- etax, “Stage 3 tax cuts explained,” etax.com.au/stage-3-tax-cuts-explained/
- H&R Block, “Income tax cuts 2027 and 2028,” hrblock.com.au/tax-academy/income-tax-cuts-2027-and-2028
- ATO, “Personal income tax — new tax cuts for every Australian taxpayer,” ato.gov.au/about-ato/new-legislation/in-detail/individuals/personal-income-tax-new-tax-cuts-for-every-australian-taxpayer
- Treasury, “Tax cuts government fact sheet January 2024,” treasury.gov.au/sites/default/files/2024-01/tax-cuts-government-fact-sheet.pdf
- Treasury, “Tax cuts Treasury advice (FOI) January 2024,” treasury.gov.au/sites/default/files/2024-01/tax-cuts-treasury-advice.pdf
- ANU Crawford School, “Policy brief — Paul Tilley March 2024,” crawford.anu.edu.au/sites/default/files/2025-03/Final PB Paul Tilley Mar 2024.pdf
- Treasury (FOI), “Stage 3 cost estimates,” treasury.gov.au/sites/default/files/2023-09/foi-3401.pdf
- ATO, “Standard deduction for work-related expenses,” ato.gov.au/about-ato/new-legislation/in-detail/individuals/standard-deduction-for-work-related-expenses
- PwC Australia, “Personal tax and superannuation — 2026–27 Federal Budget,” pwc.com.au/insights/federal-budget-tax-analysis-and-insights/personal-tax-and-superannuation.html
This article is general information only and does not constitute financial or tax advice. Tax savings are approximate and based on comparison of marginal rate tables; your actual outcome depends on deductions, offsets and individual circumstances. Consult a registered tax agent for advice tailored to your situation. The Fine Print 🇦🇺 is not affiliated with the ATO, Treasury or any firm mentioned.