Tax brackets 2026–27: what you’ll actually pay

From 1 July 2026 the marginal rate on taxable income between $18,201 and $45,000 falls from 16% to 15%, the first of two legislated one-point cuts. For most employees the change is modest, but combined with the unchanged thresholds above $45,000 it shifts the effective rate enough to matter for salary packaging and trust distribution decisions.

What changed on 1 July

Only one number moved. The second bracket, which covers income from $18,201 to $45,000, dropped a percentage point. Everything else — the tax-free threshold, the 30% bracket running to $135,000, the 37% and 45% bands above it — stayed exactly where it was.

That narrowness matters. Because the cut applies to a band rather than to your total income, everyone earning above $45,000 receives the same dollar benefit: the full value of one percentage point across $26,799 of income. Someone on $50,000 and someone on $500,000 save the same amount. The proportional effect is therefore much larger at the bottom, which is the point of the design.

The second legislated cut, taking the same bracket to 14%, is scheduled for the following year. Nothing about it is automatic, and it can be deferred or amended in any budget, so we plan on the current year's rates rather than the announced ones.

The new rates and thresholds

The table below sets out the resident individual rates for 2026–27. Note that these exclude the 2% Medicare levy, and that the low-income tax offset continues to reduce tax payable for incomes under $66,667.

These are resident rates. Foreign residents pay from the first dollar with no tax-free threshold, and working holiday makers are taxed under a separate scale. If your residency changed during the year, the calculation is not a simple apportionment and is worth checking.

Worked examples

An employee on $90,000 saves $268 for the year. A sole trader on $45,000 saves the same amount, but because the saving lands entirely in the bracket they occupy, the effective rate change is proportionally larger. A trust distributing $45,000 to each of two beneficiaries saves $536 in total, which is why distribution planning matters more than the headline suggests.

Scale that across a family group. A discretionary trust distributing to four adult beneficiaries, each receiving income within the second bracket, captures the cut four times. The same total income streamed to a single beneficiary on the 37% rate captures it once, and then only on the first $26,799.

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For a trust distributing to adult beneficiaries, a one-point cut in the second bracket changes the optimal split. Review your distribution minutes before 30 June, not after.

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Medicare levy and offsets

The rates above sit on top of the 2% Medicare levy, which most taxpayers pay on their full taxable income. The Medicare levy surcharge is separate again: it applies where you earn above the income threshold and hold no private hospital cover, and it starts at 1% and rises with income. For a couple close to the threshold, the surcharge frequently costs more than a basic hospital policy would.

The low-income tax offset reduces tax payable by up to $700 and phases out entirely at $66,667. It is a rebate rather than a deduction, so it cannot generate a refund of its own, but it does mean the effective rate through the lower brackets is well under the headline number.

If you have a HECS-HELP debt, remember the repayment is calculated on repayment income, which adds back reportable fringe benefits, reportable super contributions and net investment losses. A salary-packaging arrangement that reduces your taxable income can leave your compulsory repayment untouched.

What to do before 30 June

Three things are worth reviewing while the year is still open.

If you operate through a discretionary trust, model the distribution split against the new bracket before you sign the resolution. The optimal allocation between beneficiaries has shifted, and the resolution has to be made by 30 June to be effective.

If you are considering a concessional superannuation contribution, the value of the deduction depends on the marginal rate it displaces. A contribution that saves 30% or 37% is a materially better trade than one that saves 15%.

And if you have a capital gain in prospect, the contract date determines the income year, not settlement. Where the gain would push you into a higher bracket, deferring the contract by a fortnight across 30 June can be worth more than any deduction you are likely to find.

None of this requires a restructure. It requires knowing your position before the year ends rather than after it.