The 2026-27 tax cuts: what the new 15% rate means for you
From 1 July 2026, the second income tax bracket dropped from 16% to 15%. Here is what changed, how much you keep, and what is coming next.
A modest but universal tax cut took effect on 1 July 2026. If you earn above the tax-free threshold, you now keep a little more of your pay. Here is what actually changed and what it is worth.
What changed
The second tax bracket — income between $18,201 and $45,000 — dropped from 16% to 15% from 1 July 2026. Every other rate and threshold stayed the same.
The 2026-27 resident tax scale
For 2026-27 the rates are: nil up to $18,200; 15% from $18,201 to $45,000; 30% from $45,001 to $135,000; 37% from $135,001 to $190,000; and 45% above $190,000. The 2% Medicare levy applies on top.
How much you save
The cut is 1 percentage point across a $26,800 band, so the maximum saving is about $268 a year. Because it applies to the second bracket, everyone earning $45,000 or more gets the full $268; those earning between $18,200 and $45,000 get 1% of the income they earn inside that band.
One catch for tax time
The new rate applies to income earned from 1 July 2026. If you are lodging your 2025-26 return right now, that year still uses the old 16% rate — the cut does not apply retrospectively.
Worked example
Take someone earning $80,000. Under the old 16% rate, the slice of their income between $18,201 and $45,000 was taxed at 16%; now it is 15%. That 1% cut across the $26,800 band saves them about $268 for the year. Someone on $40,000 only earns part of their income inside that band, so they save 1% of ($40,000 − $18,200) = about $218. Anyone earning $45,000 or more gets the full $268.
See your take-home under the new rates
Our parental-leave calculator models your whole financial year of tax using the 2026-27 brackets.
This is general information, not personal advice. Rates can change with future budgets and legislation.
Frequently asked questions
How much will I actually save?
Up to about $268 a year. If you earn $45,000 or more you get the full amount; below that you save 1% of the income you earn between $18,200 and $45,000.
Does the cut apply to my 2025-26 tax return?
No. The 15% rate applies to income earned from 1 July 2026. Your 2025-26 return still uses the old 16% rate.
When does the 14% rate start?
The second bracket is legislated to fall again to 14% from 1 July 2027, which would roughly double the saving compared with the original 16%.
Do I need to do anything to get it?
No. The change is built into PAYG withholding, so your employer's pay run applies it automatically from the first pay of 2026-27.