Tax Bracket Changes From July 2026: How Much Will You Save?
Another Small Tax Cut Is Coming
From 1 July 2026, the marginal tax rate on income between $18,201 and $45,000 drops from 16% to 15%. It’s a modest change, but it puts a bit more money in the pockets of every Australian worker earning above the tax-free threshold.
The Updated Tax Brackets
Here’s how the personal income tax brackets will look from 1 July 2026:
| Taxable Income | Rate (2025-26) | Rate (2026-27) |
|---|---|---|
| $0 - $18,200 | 0% | 0% |
| $18,201 - $45,000 | 16% | 15% |
| $45,001 - $135,000 | 30% | 30% |
| $135,001 - $190,000 | 37% | 37% |
| $190,001+ | 45% | 45% |
The change applies to one bracket only, but because Australia’s tax system is progressive, anyone earning above $45,000 benefits from the lower rate on that slice of income.
What It Means in Dollar Terms
The maximum saving from this change is $268 per year, or roughly $5 per week. That’s the benefit for anyone earning $45,000 or more.
For someone earning $35,000, the saving is smaller (around $168 per year) because only part of their income falls in the affected bracket.
It’s not a life-changing amount, but combined with the Stage 3 tax cuts that took effect in July 2024, the cumulative reduction in tax burden is more significant.
The Bigger Picture
This tax cut sits alongside several other changes taking effect on 1 July 2026:
- Super contribution caps increase (concessional to $32,500, non-concessional to $130,000)
- Payday Super requires employers to pay SG with each pay run
- Division 296 tax on super balances above $3 million (if passed)
- SG rate stays at 12% (having reached the legislated ceiling)
Together, these changes create opportunities for workers to optimise their tax position, particularly when combining the tax cut with salary sacrifice into super at the higher concessional cap.
Salary Sacrifice Opportunity
Here’s where it gets interesting. With the concessional super cap rising to $32,500 and the lower tax bracket providing a small reduction in PAYG withholding, workers have a chance to redirect some of their take-home pay into super more efficiently.
For example, a worker on $90,000 could salary sacrifice an additional $2,500 into super (using the higher cap) and save roughly $575 in tax compared to taking it as income. Combined with the $268 bracket change, the net take-home difference is minimal while the super balance grows faster.
No Action Required for the Tax Cut
Your employer’s payroll system will automatically apply the new withholding rates from 1 July 2026. You don’t need to fill out a new tax file declaration or do anything differently.
However, if you want to take advantage of the salary sacrifice opportunity, you’ll need to set that up with your employer before your first pay in the new financial year.
Talk to an Accountant
Understanding how the tax bracket change interacts with your super contributions, deductions, and overall tax position is worth a conversation with a professional, especially if you’re looking to optimise your take-home pay and retirement savings together.
Find an accountant on WealthWorks who can help you plan for the new financial year.
Frequently Asked Questions
What tax bracket is changing from July 2026?
The marginal tax rate for income between $18,201 and $45,000 drops from 16% to 15%. All other brackets remain the same.
How much will I save from the tax bracket change?
The maximum saving is $268 per year (1% on $26,799 of taxable income). Most workers earning above $45,000 will see the full benefit.
Do I need to do anything to get the tax cut?
No. Your employer's payroll system will automatically apply the new withholding rates from 1 July 2026. You'll see the difference in your regular pay.
