Most Australians know the Stage 3 tax cuts happened in July 2024 — but fewer realise there's another round of cuts already legislated and starting just months from now on 1 July 2026. These aren't proposals or election promises. They're already law.
This article breaks down exactly what's changing, how much you'll save at different income levels, and what you can do right now to make the most of it.
The 2026 and 2027 tax cuts were legislated as part of the same package as the 2024 Stage 3 cuts. Unlike previous tax debates, these are locked in and will take effect automatically.
What's Actually Changing on 1 July 2026
Two of Australia's personal income tax rates are being reduced:
- The 16% rate (applying to income between $18,201 and $45,000) drops to 15%
- The 30% rate (applying to income between $45,001 and $135,000) drops to 29%
Then on 1 July 2027, they drop again — from 15% to 14%, and from 29% to 28%.
The top two rates (37% on income $135,001–$190,000 and 45% above $190,000) are not changing. Neither is the tax-free threshold of $18,200.
How Much Will You Save? — By Income Level
Here's the real-world impact at common Australian salary levels. All figures are annual savings compared to your current FY2025–26 tax bill:
| Annual salary | Current tax (FY2025-26) | Tax from Jul 2026 | Annual saving | Per week |
|---|---|---|---|---|
| $45,000 | $5,092 | $4,717 | +$375/yr | +$7/wk |
| $60,000 | $9,592 | $8,767 | +$825/yr | +$16/wk |
| $80,000 | $15,592 | $14,217 | +$1,375/yr | +$26/wk |
| $100,000 | $21,592 | $19,667 | +$1,925/yr | +$37/wk |
| $120,000 | $27,592 | $25,117 | +$2,475/yr | +$48/wk |
| $135,000 | $32,092 | $29,167 | +$2,925/yr | +$56/wk |
| $150,000 | $37,642 | $34,717 | +$2,925/yr | +$56/wk |
| $200,000 | $60,142 | $57,217 | +$2,925/yr | +$56/wk |
Note that the maximum saving is capped at $2,925/yr because the rate reductions only apply to income up to $135,000. Anyone earning above that still benefits — but the saving doesn't grow beyond that ceiling.
Full Tax Bracket Comparison: Now vs 2026 vs 2027
| Income range | FY2025–26 (now) | FY2026–27 (Jul 2026) | FY2027–28 (Jul 2027) |
|---|---|---|---|
| $0 – $18,200 | 0% | 0% | 0% |
| $18,201 – $45,000 | 16% | 15% | 14% |
| $45,001 – $135,000 | 30% | 29% | 28% |
| $135,001 – $190,000 | 37% | 37% | 37% |
| $190,001+ | 45% | 45% | 45% |
Why Are the Rates Being Cut?
These cuts are the continuation of a multi-year tax reform agenda that began with the original Stage 3 package. The stated goals were to reduce the proportion of Australians who face bracket creep as wages rise, and to lower the marginal tax rate faced by middle-income earners.
Bracket creep occurs when wage growth pushes workers into higher tax brackets even when their purchasing power hasn't really increased. By reducing the rates rather than just adjusting the thresholds, the government achieves more structural relief for a broader range of incomes.
How to Maximise the Benefit
The tax cuts happen automatically — you don't need to do anything to receive them. But there are strategies that can amplify the benefit:
1. Salary sacrifice into superannuation before July 2026
If you're considering increasing your super contributions, doing it before the rate cuts kick in means you get the current higher tax relief now. Once the 30% rate drops to 29%, the tax benefit of salary sacrifice in that bracket reduces slightly.
2. Time discretionary income for after 1 July 2026
If you run a business or have some flexibility over when you receive income — such as timing a bonus, consulting payment, or investment sale — receiving it after 1 July 2026 means it's taxed at the lower rates.
3. Review your PAYG withholding
From 1 July 2026, your employer's payroll system should automatically adjust withholding to reflect the new rates. But it's worth checking your first payslip of the new financial year to confirm you're seeing the reduction. If not, submit a new Tax File Number declaration to your employer.
4. Reconsider debt repayment strategy
With more take-home pay, you'll have an extra buffer each fortnight. Rather than letting it sit in a transaction account, directing it to an offset account or investment can meaningfully compound over time. At $80,000 salary that's roughly an extra $53/fortnight — over 5 years that's $13,000 before any investment return.
Enter your salary into our 2026 Tax Cut Calculator to see your exact weekly, monthly and 5-year savings — personalised to your income.
Use the Free 2026 Tax Cut Calculator
Rather than working through the maths manually, use our free calculator to see your personalised saving instantly. Enter your current salary and it shows you side-by-side comparisons for FY2025-26, FY2026-27 and FY2027-28 — including how much more you'll take home per week, per fortnight, per month, and cumulatively over 5 years.
Book a free call with Digitwise Consulting to discuss salary sacrifice, timing strategies and how to structure your finances for maximum benefit from July 2026.
Disclaimer: This article is for general information only. Tax figures are estimates based on current ATO rates and assume Australian residency, tax-free threshold claimed, and no HECS/MLS. Individual circumstances vary. Always verify at ato.gov.au or consult a registered tax agent.