Australia's 2026-27 tax cut: what the 15% rate is worth at 45,000, 90,000 and 150,000
From 1 July 2026 the first income tax rate in Australia, the one above the tax free threshold, fell from 16% to 15%. It applies to taxable income between 18,201 and 45,000, so on the same taxable income the most anyone saves is 1% of 26,800, which is 268 a year, or about 5.15 a week. Everyone with taxable income of 45,000 or more gets the full 268. A salary gains a little more, because a 1,000 standard deduction for work expenses also starts in 2026-27. The Australia pay calculator applies the 2026-27 table with the deduction, the low income tax offset and the Medicare levy, and shows weekly, fortnightly and monthly pay.
All amounts are in Australian dollars (AUD). The 2026-27 income year runs from 1 July 2026 to 30 June 2027. The figures are for Australian residents for tax purposes who are paid a salary.
Resident tax rates 2026-27
| Taxable income | Tax on this income |
|---|---|
| 0 to 18,200 | Nil |
| 18,201 to 45,000 | 15c for each dollar over 18,200 |
| 45,001 to 135,000 | 4,020 plus 30c for each dollar over 45,000 |
| 135,001 to 190,000 | 31,020 plus 37c for each dollar over 135,000 |
| Over 190,000 | 51,370 plus 45c for each dollar over 190,000 |
The only change from 2025-26 is the second row, 16c to 15c, which lowers the fixed amount in every later row by 268 (the 2025-26 third row started at 4,288).
The Treasury Laws Amendment (More Cost of Living Relief) Act 2025 set the 15% rate for 2026-27 and 14% from 2027-28, and the compiled Income Tax Rates Act carries both tables. The ATO's page of resident tax rates shows the same 2026-27 table and the same fixed amounts, so the law and the ATO agree.
The 1,000 standard deduction
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 added section 25-130 to the Income Tax Assessment Act 1997. From 2026-27 a resident with salary or wages deducts 1,000 for work related expenses, or the expenses actually claimed if they come to more. It is one or the other, not both.
For someone who claims no work expenses, taxable income is now the salary less 1,000. At the 30% rate that is worth 300 of income tax and 20 of Medicare levy. The 268 figure in the rest of this page compares the same taxable income, so it leaves this extra out.
Low income tax offset and Medicare levy
Two more lines change the final figure.
The low income tax offset (LITO) is 700 for taxable income up to 37,500. It falls by 5c per dollar between 37,500 and 45,000, then by 1.5c per dollar until it reaches zero at 66,667. It is non refundable, so it can take tax to zero but not below, and it never reduces the Medicare levy.
The Medicare levy is 2% of taxable income for most people. A single person pays nothing on taxable income up to 28,011, and the levy is capped at 10% of the income above that until the full 2% applies at 35,013. Families have a higher threshold. The Medicare levy surcharge (1% to 1.5%) applies to higher earners without private hospital cover and is left out of the examples.
Three salaries worked
Resident, full year, salary paid with super on top, no HELP debt, private hospital cover, and no work expenses above the 1,000 standard deduction.
| Salary | Taxable income | Income tax | LITO | Medicare levy | Take home a year | A fortnight |
|---|---|---|---|---|---|---|
| 45,000 | 44,000 | 3,870 | 375 | 880 | 40,625 | 1,562.50 |
| 90,000 | 89,000 | 17,220 | 0 | 1,780 | 71,000 | 2,730.77 |
| 150,000 | 149,000 | 36,200 | 0 | 2,980 | 110,820 | 4,262.31 |
At 45,000: taxable income is 44,000, and 15% of 25,800 is 3,870. LITO at that income is 700 minus 5% of 6,500, which is 375. Medicare is 880. Take home is 45,000 minus 3,870 plus 375 minus 880 = 40,625.
At 90,000: taxable income is 89,000, so tax is 4,020 plus 30% of 44,000, which is 17,220. LITO has run out. Medicare is 1,780.
At 150,000: taxable income is 149,000, so tax is 31,020 plus 37% of 14,000, which is 36,200. Medicare is 2,980.
The same three salaries in 2025-26, with no standard deduction and the 16% rate, kept 40,137, 70,412 and 110,162. So the salary earners keep 488, 588 and 658 more in 2026-27: the 268 rate saving (258 at 45,000, where less income sits in the 15% band), plus the deduction at each person's own marginal rate.
On equal taxable income the 268 is the same at 45,000, 90,000 and 150,000. As a share of pay it means most to the lowest earner (0.6%) and least to the highest (0.18%).
The 2027-28 step
On 1 July 2027 the 15c rate becomes 14c. The saving against the 2025-26 rates doubles to 536 a year for anyone with taxable income of 45,000 or more. The Tax Reform No. 1 Act also adds a Working Australians tax offset from 2027-28: the lesser of 250 and the tax on net labour income, non refundable, for residents. Neither applies to 2026-27, so the calculators leave both out for now.
Super is on top, unless the package says otherwise
The super guarantee is 12%. Until 30 June 2026 it was 12% of ordinary time earnings, paid at least each quarter. From 1 July 2026 it is 12% of qualifying earnings, and under Payday Super employers pay it at the same time as wages. For a 90,000 salary, the employer pays 10,800 into your super fund on top of the salary. That money is not in your take home pay and is not in the tax figures above. It is taxed inside the fund at 15% on the way in. The super calculator shows what salary sacrifice on top of it does to take home pay and to the money that reaches the fund.
The exception is a job advertised as a "package including super". A 100,800 package including super is a 90,000 salary. Divide the package by 1.12 to get the salary while it is under the maximum contribution base of 270,830. The pay calculator does this when you set the pay entered to a package, and shows the employer contribution for the year.
HELP and other study loans
Compulsory repayments on HELP, VSL and other study loans start once repayment income passes 69,528 in 2026-27. They are marginal: 15c for each dollar above that line up to 129,717, then 9,028 plus 17c, and 10% of the whole income above 186,050. On a 90,000 salary, repayment income is 89,000 and the repayment is 2,920.80 a year, about 243 a month. The examples above leave it out; the calculator adds it when you switch the loan on.
What the examples leave out
This guide explains the 2026-27 rate table with worked examples, and it is not tax advice. Non residents and working holiday makers have different tables. Offsets other than LITO, the Medicare levy family reduction and the surcharge are not in the examples. The figures are the tax on assessment for a full year, so the PAYG amounts an employer withholds each payday can differ a little.
Work out your 2026-27 take home pay with the Australia pay calculator
Questions on the 2026-27 tax cut
How much is the 2026-27 tax cut worth? Up to 268 a year on the same taxable income. It is 1% of the income between 18,201 and 45,000, so anyone with taxable income of 45,000 or more saves the full 268, and someone with taxable income of 40,000 saves 218. The 1,000 standard deduction adds to that for a salary earner.
Did the tax free threshold change in 2026-27? No. The first 18,200 of taxable income is still tax free. The 16% rate changed to 15%, and the standard deduction is new.
Does the 15% rate apply to my whole income if my taxable income is 40,000? No. The first 18,200 is tax free. The 15% applies to the 21,800 above that, which is 3,270 of tax before the low income tax offset.
How do I compare my own salary across the two years? The Australia income tax calculator runs one salary on the 2025-26 and 2026-27 rates side by side and shows the change in dollars, line by line.
Sources
- Income Tax Rates Act 1986, Compilation No. 66 of 1 July 2026, Schedule 7 Part I: the resident rates for 2025-26, 2026-27 and 2027-28 checked 2 November 2026
- Treasury Laws Amendment (More Cost of Living Relief) Act 2025, Schedule 1: 15% from 1 July 2026 and 14% from 1 July 2027 checked 2 November 2026
- Australian Taxation Office, Tax rates for Australian residents, the 2026-27 table and fixed amounts (read from an Internet Archive capture of the official page) checked 2 November 2026
- Income Tax Assessment Act 1997, Compilation No. 268, volume 1, section 25-130: the standard deduction for work related expenses checked 2 November 2026
- Income Tax Assessment Act 1997, Compilation No. 268, volume 2, section 61-115: the low income tax offset checked 2 November 2026
- Treasury Laws Amendment (Tax Reform No. 1) Act 2026: Schedule 4, the standard deduction from 2026-27, and Schedule 3, the Working Australians tax offset from 2027-28 checked 2 November 2026
- Medicare Levy Act 1986, Compilation No. 53 of 1 July 2026: the 2% levy and the 28,011 and 35,013 thresholds checked 2 November 2026
- Australian Taxation Office, Super guarantee: 12% of qualifying earnings from 1 July 2026 and the maximum contribution base (read from an Internet Archive capture of the official page) checked 2 November 2026
- Australian Taxation Office, Study and training support loans rates and repayment thresholds for 2026-27 (read from an Internet Archive capture of the official page) checked 2 November 2026