Australia Tax Rate Cut 2026: 16% Drops to 15% from July 2026
Published: 2026-03-24
Starting 1 July 2026, Australian taxpayers will benefit from another reduction in the personal income tax rate, with the 16% bracket dropping to 15%. This change, announced in the 2025-26 Federal Budget, builds on the Stage 3 tax cuts that took effect in July 2024. Combined with the superannuation guarantee rising to 12%, the 2026-27 financial year brings meaningful changes to take-home pay for millions of Australians.
1. The 2026-27 Tax Cut: 16% to 15%
The Australian Government confirmed that the marginal tax rate for the $18,201–$45,000 income bracket will decrease from 16% to 15% from 1 July 2026. This delivers an additional tax cut of up to $268 per year for anyone earning above $45,000, on top of the savings already provided by the Stage 3 tax cuts.
2. Current Tax Brackets (2025-26)
| Taxable Income | Rate | Tax on This Income |
|---|---|---|
| $0 – $18,200 | 0% | Nil |
| $18,201 – $45,000 | 16% | 16c for each $1 over $18,200 |
| $45,001 – $135,000 | 30% | $4,288 + 30c for each $1 over $45,000 |
| $135,001 – $190,000 | 37% | $31,288 + 37c for each $1 over $135,000 |
| $190,001+ | 45% | $51,638 + 45c for each $1 over $190,000 |
3. New Tax Brackets from 1 July 2026 (2026-27)
| Taxable Income | Rate | Tax on This Income |
|---|---|---|
| $0 – $18,200 | 0% | Nil |
| $18,201 – $45,000 | 15% | 15c for each $1 over $18,200 |
| $45,001 – $135,000 | 30% | $4,020 + 30c for each $1 over $45,000 |
| $135,001 – $190,000 | 37% | $31,020 + 37c for each $1 over $135,000 |
| $190,001+ | 45% | $51,370 + 45c for each $1 over $190,000 |
The key change is in the second bracket: 16% becomes 15%. The base tax amount for the third bracket drops from $4,288 to $4,020, reflecting the 1 percentage point reduction on the $26,800 of income in the second bracket ($26,800 × 1% = $268 savings).
4. Stage 3 Tax Cuts Recap (July 2024)
To put the 2026 change in context, here is what the revised Stage 3 tax cuts delivered from 1 July 2024:
- The 19% rate was reduced to 16% (now dropping further to 15%)
- The 32.5% rate was reduced to 30%
- The 37% threshold was raised from $120,001 to $135,001
- The 45% threshold was raised from $180,001 to $190,001
These changes delivered tax relief of up to $4,529 per year for taxpayers earning $190,000 or more. The 2026-27 cut adds another $268 on top of that.
5. Medicare Levy
The Medicare Levy remains at 2% of taxable income for the 2026-27 year. It applies to most taxpayers and funds Australia's public healthcare system. Low-income earners may be eligible for a reduction or exemption:
- Singles: No levy if taxable income is $26,000 or below; reduced levy between $26,001 and $32,500
- Families: Threshold is $43,846 (plus $4,027 per dependent child)
- An additional Medicare Levy Surcharge (1%–1.5%) applies to higher-income earners without private hospital cover
6. Superannuation: 11.5% to 12%
From 1 July 2026, the Superannuation Guarantee (SG) rate increases from 11.5% to12%. This is the final scheduled increase in the series that began at 9.5% in 2021:
| Financial Year | SG Rate |
|---|---|
| 2021-22 | 10.0% |
| 2022-23 | 10.5% |
| 2023-24 | 11.0% |
| 2024-25 | 11.5% |
| 2025-26 | 11.5% |
| 2026-27 | 12.0% |
While superannuation is paid by your employer on top of your salary, it is important to understand how it affects your total remuneration package, especially if your contract is "total package inclusive of super."
7. Impact Example: $80,000 Salary
Let's compare the tax on an $80,000 salary under the current (2025-26) and new (2026-27) brackets:
2025-26 (16% rate)
$0 – $18,200: $0
$18,201 – $45,000: ($45,000 − $18,200) × 16% = $4,288
$45,001 – $80,000: ($80,000 − $45,000) × 30% = $10,500
Income Tax: $14,788
Medicare Levy (2%): $1,600
Total Tax: $16,388 | Take-Home: $63,612
2026-27 (15% rate)
$0 – $18,200: $0
$18,201 – $45,000: ($45,000 − $18,200) × 15% = $4,020
$45,001 – $80,000: ($80,000 − $45,000) × 30% = $10,500
Income Tax: $14,520
Medicare Levy (2%): $1,600
Total Tax: $16,120 | Take-Home: $63,880
Annual Savings
Tax Reduction: $16,388 − $16,120 = $268 per year
Additional Super (12% vs 11.5%): $80,000 × 0.5% = $400 more into super
8. Who Benefits Most?
The $268 annual saving applies equally to all taxpayers earning $45,000 or more, since the rate cut affects the entire second bracket ($18,201–$45,000). Those earning less than $45,000 but more than $18,200 will see proportional savings. For example:
- $30,000 salary: Saves ($30,000 − $18,200) × 1% = $118/year
- $45,000+ salary: Saves the full $268/year
- $200,000 salary: Same $268 saving (the cut only applies to the second bracket)
Use our Australian salary calculator to see your exact take-home pay under the 2026-27 rates.
Calculate your 2026-27 Australian take-home pay:
Australian Salary Calculator →Sources: Australian Taxation Office (ATO), Australian Federal Budget 2025-26, Treasury "Tax Cuts" fact sheet, budget.gov.au.
Frequently Asked Questions
When does Australia's 16% tax rate drop to 15%?
The reduction from 16% to 15% takes effect from 1 July 2026 for the 2026-27 financial year. This applies to taxable income between $18,201 and $45,000. The change delivers an annual tax saving of up to $268 for anyone earning above $45,000.
What are the Australian tax brackets for 2026-27?
For 2026-27: 0% on $0–$18,200 (tax-free threshold), 15% on $18,201–$45,000, 30% on $45,001–$135,000, 37% on $135,001–$190,000, and 45% on income over $190,000. The 2% Medicare Levy applies on top of these rates for most taxpayers.
What is the superannuation rate from July 2026?
The Superannuation Guarantee rate increases to 12% from 1 July 2026, up from 11.5% in 2025-26. This is the final planned increase under the current schedule, which has been gradually rising from 9.5% since July 2021. Your employer is required to contribute this amount on top of your ordinary time earnings.