Key takeaways
- From 1 July 2026 the second bracket rate is 15%, down from 16%. Worth $268 a year to anyone earning $45,000 or more.
- The cut arrives automatically through lower withholding. Nothing to claim, no form to lodge.
- The HECS repayment threshold rose to $69,528 and the 17c band now starts at $129,717.
- Medicare levy surcharge thresholds were indexed: the single base tier now ends at $105,000.
- A second cut, 15% down to 14%, is legislated for 1 July 2027, worth another $268.
- The 30%, 37% and 45% rates, their thresholds, the $18,200 tax-free threshold and the 2% Medicare levy are all unchanged.
Every 2026-27 change at a glance
| What changed | 2025-26 | 2026-27 |
|---|---|---|
| Rate on $18,201–$45,000 | 16% | 15% |
| HECS repayment threshold | $67,000 | $69,528 |
| HECS 17c band starts at | $125,000 | $129,717 |
| Medicare levy surcharge base tier (single) | $101,000 | $105,000 |
| Medicare levy surcharge base tier (family) | $202,000 | $210,000 |
The full 2026-27 scale, including non-resident and working holiday maker rates, lives on the 2026-27 tax brackets page. To see the change in your own pay, run your salary through the PAYG calculator, which uses the new 15% rate.
The 15% bracket cut, explained
The cut was legislated in the 2025-26 Federal Budget as a two-stage reduction of the lowest taxed bracket, pitched by the government as cost-of-living relief and a partial return of bracket creep. Stage one took the rate on income between $18,201 and $45,000 from 16c to 15c in the dollar on 1 July 2026. Because the band is $26,800 wide, one percentage point is worth at most $268 a year, and anyone with taxable income of $45,000 or above banks the full amount. Below $45,000 the saving is one cent per dollar earned above $18,200.
On a payslip, the change is small enough to miss: $268 spread over 26 fortnights is $10.31 a pay. It arrived through the reissued withholding schedules rather than as any separate credit, so the only visible evidence is a slightly lower tax-withheld line from your first pay after 1 July 2026.
Worked example: $60,000 taxable income
What the cut is worth at 6 salaries
Each row compares gross tax under the 2025-26 scale with the 2026-27 scale, holding everything else constant. Offsets and the Medicare levy sit on top of both and do not change the difference.
| Taxable income | Tax at 16% band (2025-26) | Tax at 15% band (2026-27) | Saving |
|---|---|---|---|
| $30,000 | $1,888 | $1,770 | $118 |
| $45,000 | $4,288 | $4,020 | $268 |
| $60,000 | $8,788 | $8,520 | $268 |
| $80,000 | $14,788 | $14,520 | $268 |
| $100,000 | $20,788 | $20,520 | $268 |
| $150,000 | $36,838 | $36,570 | $268 |
The flat $268 above $45,000 is the design, not a rounding quirk: only the second bracket was cut, so higher earners gain nothing extra from it. As a share of tax paid, the cut matters most between roughly $45,000 and $70,000.
HECS threshold indexation to $69,528
The HELP repayment thresholds are indexed each 1 July. For 2026-27 the minimum threshold moved from $67,000 to $69,528, and the start of the 17c band moved from $125,000 to $129,717. If your income sits between the old and new thresholds, roughly $67,000 to $69,528, you owed a repayment last year and owe nothing this year. Full rate tables and repayments at eight income levels are in the HECS repayment rates guide. To work out your own figure, use the HECS repayment calculator.
Medicare levy surcharge thresholds moved
The surcharge income tiers were indexed for 2026-27: the base tier for singles now runs to $105,000 (was $101,000) and to $210,000 for families (was $202,000). If a pay rise pushed you just past the old threshold, check the new tiers before buying hospital cover purely for tax reasons. Rates, tiers and exemptions are covered in the Medicare levy guide.
The 14% rate from 1 July 2027
Stage two of the same measure cuts the 15% rate to 14% on 1 July 2027. It is already legislated, not a proposal: the ATO lists the measure as law. The arithmetic repeats, so expect another $268 a year at $45,000 and above, taking the combined value of both stages to $536 against the 2025-26 scale.
One knock-on effect is already published: the Seniors and Pensioners Tax Offset thresholds move from 2026-27 because the offset interacts with the lower rates. The maximum offset amounts are unchanged; only the income points shift.
| SAPTO 2026-27 | Maximum offset | Shading-out threshold | Cut-out threshold |
|---|---|---|---|
| Single | $2,230 | $36,034 | $53,874 |
| Each partner of a couple | $1,602 | $31,847 | $44,663 |
| Each partner, illness separated | $2,040 | $34,767 | $51,087 |
What did not change for 2026-27
Unchanged
- Tax-free threshold: $18,200
- 30% rate on $45,001–$135,000
- 37% rate on $135,001–$190,000
- 45% rate above $190,000
- Medicare levy: 2% of taxable income
- Low income tax offset: up to $700
- HECS repayment rates: 15c and 17c bands
Changed
- 15% rate on $18,201–$45,000 (was 16%)
- HECS thresholds indexed up
- Medicare levy surcharge tiers indexed up
- SAPTO thresholds adjusted for the cut
- Withholding tax tables reissued from 1 July
Because the scale changed, the ATO reissued its withholding schedules from 1 July 2026. If you run payroll or want to check a payslip line by line, the updated tax tables hub has the weekly, fortnightly and monthly versions. Whether to claim the $18,200 tax-free threshold is a separate setting and did not change.
Frequently asked questions
Are these the Stage 3 tax cuts?
How much is the 2026-27 tax cut worth?
Do I need to do anything to get it?
Why is my pay only a few dollars a fortnight higher?
Did the tax brackets themselves move?
What happened to the HECS repayment threshold?
Does the cut change my HECS repayment?
Do non-residents get the 2026-27 tax cut?
Is the 14% rate guaranteed?
Sources and further reading
- ATO: Personal income tax: new tax cuts for every Australian taxpayer (accessed 28 July 2026)
- ATO: Tax rates: Australian residents
- ATO: Study and training loan repayment thresholds and rates
- ATO: Medicare levy surcharge income, thresholds and rates
Related resources
2026-27 Tax Brackets
The full resident, non-resident and WHM scales
Open →HECS Repayment Rates
The new thresholds and what you repay
Open →Medicare Levy & Surcharge
The 2026-27 surcharge tiers in detail
Open →
Narelle Hartigan is a CPA-qualified tax accountant with over a decade of experience in Australian personal taxation and payroll. She founded PAYG Calculator Australia to make tax withholding easy for every Australian worker to understand.