The July 2026 tax cut starts on 1 July 2026: the tax rate on income between $18,201 and $45,000 falls from 16% to 15%. A second cut to 14% is legislated from 1 July 2027. The thresholds and the other rates stay the same.
Who benefits
Every resident taxpayer earning more than $18,200. Because the cut only applies to the first bracket, the saving is capped: anyone earning $45,000 or more saves the maximum of $268 a year in 2026-27.
Your saving at different salaries
| Taxable income | Saving in 2026-27 | Saving from 2027-28 |
|---|---|---|
| $30,000 | $118 | $236 |
| $45,000 | $268 | $536 |
| $60,000 | $268 | $536 |
| $80,000 | $268 | $536 |
| $100,000 | $268 | $536 |
| $150,000 | $268 | $536 |
Compared with 2025-26 rates. The 2027-28 column assumes the 14% rate starts as legislated.
Resident tax rates for 2026-27
| Taxable income | Rate |
|---|---|
| $0 – $18,200 | Nil |
| $18,201 – $45,000 | 15% (was 16%) |
| $45,001 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| Over $190,000 | 45% |
What changes in your pay
Employers update PAYG withholding from the first pay after 1 July 2026, so the saving shows up gradually, about $10 per fortnight at the maximum.
Why the saving is capped at $268
The cut only changes the rate on income between $18,201 and $45,000: a band of $26,800. One percentage point of $26,800 is $268. Anyone earning more than $45,000 gets the full $268, and people earning less get a proportionally smaller saving.
Low-income earners
People earning under about $22,500 already pay little or no income tax thanks to the tax-free threshold and the low income tax offset, so the cut changes little for them.
The Medicare levy and HELP
The Medicare levy stays at 2%, and HELP repayment thresholds are indexed separately. The tax cut does not change your super guarantee, which stays at 12%.
Planning ahead
With a second cut to 14% legislated from 1 July 2027, the total annual saving compared with 2025-26 reaches $536 for anyone earning over $45,000. Small amounts, but they can be directed to savings or extra mortgage repayments automatically.
A short history of the recent cuts
The Stage 3 tax cuts in July 2024 reduced the 19% rate to 16%, cut the 32.5% rate to 30% and raised the thresholds for the 37% and 45% rates. The 2025 federal budget then legislated a further reduction of the 16% rate to 15% from July 2026 and 14% from July 2027.
What it means for your fortnightly pay
At the maximum saving of $268 a year, your fortnightly take-home pay rises by about $10. It is modest, but combined with any pay rise from 1 July, it is a good moment to review your budget and savings transfers.
See your 2026-27 pay with the Australia pay calculator or our guide to Australian tax rates.
How to check the July 2026 tax cut on your payslip
The saving from the July 2026 tax cut is small, so it is easy to miss. Here is how to confirm it with the figures in this article.
Worked example of the July 2026 tax cut
- $30,000 taxable income: $11,800 of your income sits above the tax-free threshold. One percentage point of $11,800 is $118 a year, or about $4.50 per fortnight.
- $60,000 taxable income: the whole $26,800 band is used, so you save the maximum $268 a year, about $10 per fortnight.
- $150,000 taxable income: the saving is exactly the same $268, because higher rates did not change.
Step by step
- Find your last payslip from June 2026 and your first full payslip after 1 July 2026.
- Compare the tax withheld line, not the net pay, because a pay rise or a change in hours also moves net pay.
- If your gross pay is unchanged, tax withheld should be around $10 lower per fortnight thanks to the July 2026 tax cut if you earn $45,000 or more.
- Check your income statement in myGov at the end of the financial year to see total tax withheld.
Common misunderstandings
- Expecting a large rise in pay: the July 2026 tax cut is worth at most $268 a year, much less than the Stage 3 changes in 2024.
- Thinking the Medicare levy changes: it stays at 2%.
- Waiting for a refund: the saving arrives through lower withholding in each pay, not as a lump sum.
If your withholding looks wrong after July, ask your payroll team first. The ATO resident tax rates page lists the official rates for each year.
Frequently asked questions
When does the tax cut start?
On 1 July 2026, for the 2026-27 financial year.
How much will I save?
Up to $268 a year from 2026-27, and up to $536 a year from 2027-28, compared with 2025-26.
Do I need to do anything?
No. Employers update PAYG withholding automatically.
Estimates for information only, not tax advice.
