From 1 July 2026, the marginal tax rate on income between $18,201 and $45,000 drops from 16% to 15%. Every taxpayer earning above $45,000 saves $268 a year — roughly $5 a week. Earners between $18,201 and $45,000 save proportionally less. The cut is already law — it applies automatically through payroll and you don’t need to do anything. SAPTO rebate income thresholds also shift for 2026–27 as a flow-on, though maximum offset amounts are unchanged. A further cut to 14% from 1 July 2027 is also legislated, taking the total saving to up to $536 a year against 2024–25 settings.
For the 2026–27 financial year, there is one headline change to personal income tax: the rate applying to taxable income between $18,201 and $45,000 reduces from 16% to 15%. Every other bracket, threshold, and the top rates stay exactly where they were in 2025–26.
This isn’t a Budget promise waiting on Parliament — it was legislated back in 2024 as part of the second tranche of the personal income tax cuts (the same legislation that delivered the Stage 3 restructure from 1 July 2024). No further action is required for it to take effect, and the ATO has confirmed the measure is law.
Rates for Australian tax residents. The 2% Medicare levy applies on top for most taxpayers.
It’s the question every accountant in Penrith is fielding right now: what does the cut actually put in my pocket? Because it applies to a single bracket spanning $26,800 of income ($18,201 to $45,000), the maximum saving is 1% of that amount — $268 a year. Anyone earning $45,000 or more gets the full $268, regardless of whether they earn $50,000 or $250,000. Here’s how the numbers stack up at three common salary levels:
Income tax only, excluding the 2% Medicare levy and any offsets (such as LITO). Figures rounded to the nearest dollar.
Five dollars a week won’t change anyone’s life on its own. But it stacks on top of the much larger Stage 3 cuts already in place since July 2024 — and it compounds again from July 2027 when the same bracket falls to 14%, doubling the annual benefit to $536 against 2024–25 settings.
The Seniors and Pensioners Tax Offset (SAPTO) reduces — and often eliminates — tax for eligible Australians of Age Pension age, including self-funded retirees who don’t actually receive a pension.
Because the rate cut lowers the tax payable at any given income level, the ATO has confirmed that SAPTO rebate income thresholds will change from 2026–27 as a direct consequence. The maximum offset amounts themselves are unchanged — what shifts is the income range over which the offset applies and shades out.
In practical terms, the combination of the tax-free threshold, LITO, and SAPTO means eligible seniors will be able to receive slightly more income in 2026–27 before any tax becomes payable. For retirees managing account-based pension drawdowns, investment income, or part-time work alongside the Age Pension, the updated thresholds are worth factoring into this year’s planning — particularly if your rebate income has been sitting close to a shade-out point.
The tax cut flows through automatically. The ATO issues updated PAYG withholding schedules, and your employer applies them from the first pay period starting on or after 1 July 2026. You don’t lodge anything, tick anything, or submit a new TFN declaration. The one thing worth doing: check your first July payslip to confirm your take-home pay has nudged up. If it hasn’t, your employer’s payroll software may not have updated.
Sole traders pay tax at individual rates, so the same cut applies to business profit. You’ll see the benefit either through updated PAYG instalment rates or in your final assessment for 2026–27. If your instalments are based on prior-year figures, it’s worth asking a small business accountant in Penrith whether a variation makes sense before the first quarterly payment falls due.
The return you lodge from July 2026 is for the 2025–26 year — and it’s still assessed at the old 16% rate. The 15% rate only applies to income earned from 1 July 2026 onwards. Don’t be surprised when your 2025–26 notice of assessment doesn’t reflect the cut.
The same legislation locks in a third step: the 15% rate falls to 14% from 1 July 2027. At that point the cumulative benefit reaches up to $536 a year compared with 2024–25 settings. At i-accountant, we’re already building both steps into clients’ planning — salary packaging decisions, super contribution strategies, and trust distributions to lower-income beneficiaries all work better when you think across both years rather than just the one ahead.
One subtle planning point: as the bottom marginal rate falls toward 14%, the gap between that rate and the 15% contributions tax inside super narrows. For income in this bracket, concessional contributions become marginally less attractive purely on tax-rate arithmetic — though the bigger drivers (the 30% bracket above $45,000, compounding inside super, and Division 293 considerations at the top end) usually matter far more. It’s a conversation worth having before locking in salary sacrifice arrangements for 2026–27.
A $268 tax cut is automatic — but the bigger savings come from getting your structure, deductions, super contributions, and timing right before 30 June. Talk to a business accountant in Penrith who works through the detail with you.
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Disclaimer: This article provides general information only and does not take into account your personal objectives, financial situation or needs. Tax rates and thresholds referenced are based on legislation enacted as at June 2026 and ATO published guidance. You should seek advice tailored to your circumstances before acting. i-accountant Pty Ltd · Chartered Accountants · Penrith NSW.