Australia 2026-27 Income Tax Rates: 16% to 15% Cut, How Much Extra Take-Home Pay You Get at Every Income Level

From 1 July 2026, the tax rate on income between $18,201 and $45,000 drops from 16% to 15%. This is the second step of the legislated tax cuts — it went from 19% to 16% in July 2024, now to 15%, and will fall again to 14% from 1 July 2027. For every taxpayer earning above $45,000, this means exactly $268 more in take-home pay this financial year. The saving is smaller for incomes below $45,000 and phases in proportionally from zero at the $18,200 tax-free threshold.

What Are the Full 2026-27 Australian Resident Tax Rates?

The following rates apply from 1 July 2026 for Australian residents for tax purposes. These amounts exclude the Medicare Levy (2% of taxable income for most taxpayers, with reductions and exemptions for low-income earners).

$0 to $18,200: Nil — the tax-free threshold remains unchanged.

$18,201 to $45,000: 15 cents for each dollar over $18,200. This is the bracket that changed — it was 16% in 2025-26 and will drop to 14% from 1 July 2027. The base amount of tax at $45,000 is $4,020 (down from $4,288 last year).

$45,001 to $135,000: $4,020 plus 30 cents for each dollar over $45,000. The top of this bracket is unchanged. At $135,000 total tax is $31,020.

$135,001 to $190,000: $31,020 plus 37 cents for each dollar over $135,000. At $190,000 total tax is $51,370.

$190,001 and above: $51,370 plus 45 cents for each dollar over $190,000.

These are the rates enacted in law. The 15% rate falls again to 14% from 1 July 2027 — a further $268 saving for taxpayers above $45,000. Use our income tax calculator to see your exact numbers.

Worked Examples: Take-Home Pay at Common Income Levels

The $268 annual saving flows through every bracket above $45,000 because the only change is 1 percentage point on the $26,800 of income between $18,201 and $45,000. Here is the math at four common salary levels, comparing 2025-26 (16% rate) with 2026-27 (15% rate). All figures are annual and exclude Medicare Levy.

$60,000 Salary

Under 2025-26: tax is $4,288 plus 30% of ($60,000 − $45,000) = $4,288 + $4,500 = $8,788. Take-home: $51,212.

Under 2026-27: tax is $4,020 plus 30% of ($60,000 − $45,000) = $4,020 + $4,500 = $8,520. Take-home: $51,480.

Extra in your pocket: $268 per year, or about $22 per month. After Medicare Levy, the net gain is approximately $232.

$80,000 Salary

Under 2025-26: $4,288 plus 30% of ($80,000 − $45,000) = $4,288 + $10,500 = $14,788. Take-home: $65,212.

Under 2026-27: $4,020 plus $10,500 = $14,520. Take-home: $65,480.

Extra in your pocket: $268 per year. At this income, the Medicare Levy adds approximately $1,600, so the net gain after levy is roughly $234.

$100,000 Salary

Under 2025-26: $4,288 plus 30% of ($100,000 − $45,000) = $4,288 + $16,500 = $20,788. Take-home: $79,212.

Under 2026-27: $4,020 plus $16,500 = $20,520. Take-home: $79,480.

Extra in your pocket: $268 per year. After Medicare Levy of approximately $2,000, the net gain is roughly $228.

$150,000 Salary

Under 2025-26: $31,288 plus 37% of ($150,000 − $135,000) = $31,288 + $5,550 = $36,838. Take-home: $113,162.

Under 2026-27: $31,020 plus $5,550 = $36,570. Take-home: $113,430.

Extra in your pocket: $268 per year. After Medicare Levy of approximately $3,000, the net gain is roughly $214.

The key takeaway: the saving is flat at $268 for everyone above $45,000. It is not a percentage of your income — it is exactly 1% of the $26,800 bracket. For someone earning $30,000, the saving is smaller: 1% of ($30,000 − $18,200) = $118. For someone earning exactly $18,200 or below, there is no saving because no tax was payable in the first place.

Non-Resident and Working Holiday Maker Rates for 2026-27

Foreign residents and working holiday makers do not receive the 15% bracket cut. Their tax scales are separate and were not adjusted in this round of legislated changes.

Foreign Residents (Non-Residents for Tax Purposes)

Foreign residents do not receive the $18,200 tax-free threshold and are not liable for the Medicare Levy. Their 2026-27 rates are:

$0 to $135,000: 30 cents per dollar — a flat 30% with no progression and no tax-free amount
$135,001 to $190,000: $40,500 plus 37 cents per dollar over $135,000
$190,001 and above: $60,850 plus 45 cents per dollar over $190,000

A foreign resident earning $80,000 pays $24,000 in tax — compared to $14,520 for an Australian resident earning the same amount. The gap is substantial because the foreign resident scale has no tax-free threshold and starts at a flat 30%.

Working Holiday Makers (Subclass 417 and 462 Visas)

Working holiday makers have their own concessional tax scale, separate from both residents and foreign residents:

$0 to $45,000: 15 cents per dollar
$45,001 to $135,000: $6,750 plus 30 cents per dollar over $45,000
$135,001 to $190,000: $33,750 plus 37 cents per dollar over $135,000
$190,001 and above: $54,100 plus 45 cents per dollar over $190,000

A working holiday maker earning $30,000 pays $4,500 in tax (15% on the full amount). The same worker earning $80,000 pays $6,750 plus 30% of $35,000 = $6,750 + $10,500 = $17,250. This is higher than a resident ($14,520) but lower than a foreign resident ($24,000). See our article on HECS-HELP repayments in 2026-27 for how HELP debt interacts with these tax categories.

How the Tax Cut Affects Mortgage Borrowing Power

Lenders assess serviceability on after-tax income. The $268 annual tax saving — roughly $22 per month — is too small on its own to meaningfully change borrowing capacity. At a 9.5% assessment rate (the APRA-mandated 3% buffer above a 6.5% loan rate), an extra $22 per month of net income translates to roughly $2,500 to $3,000 of additional borrowing power.

What matters more for borrowing is the cumulative effect of the Stage 3 tax cuts that started in July 2024. A taxpayer earning $100,000 paid approximately $22,600 in tax in 2023-24 (pre-cuts). In 2026-27 they pay $20,520 — a reduction of roughly $2,080 per year, or $173 per month. At a 9.5% assessment rate, that $173 per month adds approximately $18,000 to $20,000 in borrowing capacity.

The 2026-27 change alone does not move the needle. But combined with the 2024-25 and 2025-26 cuts, the cumulative effect is material for loan applications. Read our analysis of APRA's serviceability buffer to understand how lenders calculate your maximum loan amount.

What Is Not Changing in 2026-27

Several tax elements remain unchanged from 2025-26:

The tax-free threshold stays at $18,200
The 30%, 37%, and 45% bracket rates are unchanged
The bracket thresholds ($45,000, $135,000, $190,000) are unchanged — these are not indexed to inflation
The Medicare Levy remains at 2% for most taxpayers
The Medicare Levy Surcharge (1% to 1.5% for higher-income earners without private hospital cover) is unchanged
The Low Income Tax Offset (LITO) remains available: up to $700, phasing out between $37,500 and $45,000
The Low and Middle Income Tax Offset (LMITO) was removed after 2021-22 and does not return

Bracket creep — where inflation pushes taxpayers into higher brackets without real income gains — remains a feature of the system because thresholds are not indexed. The Treasury estimated that without the legislated cuts, bracket creep would have added roughly $4,000 to the average full-time taxpayer's bill over three years.

Data Sources and Verification

All rates and thresholds in this article are sourced from the Australian Taxation Office (ATO) 2026-27 tax tables, the Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024 as amended, and the ATO's individual tax rates schedule published for the 2026-27 income year. The foreign resident and working holiday maker rates are drawn from the ATO's Schedule 7 and Schedule 8 respectively.

Figures are verified as at July 2026. The 15% rate reduction from 16% took effect from 1 July 2026 under the legislated timetable. The further reduction to 14% from 1 July 2027 is enacted in the same legislation. These numbers are subject only to future legislative amendment — there is no sunset clause or review trigger.

For your specific tax position, use our income tax calculator which incorporates the 2026-27 rates, Medicare Levy, LITO, and HELP repayment thresholds.

FAQ

Does the tax cut apply from 1 July 2026 or do I need to wait for my tax return? Your employer will adjust PAYG withholding from 1 July 2026, so the lower rate flows through to your pay packet immediately. You do not need to wait for your 2026-27 tax return to receive the benefit. If your employer does not update their payroll system in time — which can happen, especially with smaller employers — any excess tax withheld will be refunded when you lodge your return.

What happens if I earn exactly $45,000 — do I get the full $268 saving? Yes. Tax at $45,000 under the 2026-27 rates is ($45,000 − $18,200) × 15% = $4,020. Under 2025-26 it was ($45,000 − $18,200) × 16% = $4,288. The saving is $268. The Low Income Tax Offset (LITO) may further reduce your tax payable if you are eligible.

I am on a temporary visa — which tax scale applies to me? It depends on your residency status for tax purposes, not your visa subclass alone. If you meet the ATO's residency tests (the resides test, domicile test, or 183-day test), you are taxed as an Australian resident and receive the 15% bracket. If you do not meet any test, you are a foreign resident and are taxed at the 30% flat rate up to $135,000. If you hold a 417 or 462 Working Holiday visa, the WHM scale applies regardless of your residency status. This is complex — speak to a registered tax agent about your specific situation.

Will the rate go lower than 15% in the future? Yes. The legislated timetable has the rate falling to 14% from 1 July 2027. After that, no further reductions are currently enacted. Whether future governments extend the cuts depends on the budget position and political priorities in the lead-up to the next federal election, which must be held by May 2028.

Does the tax cut affect my HELP repayment? The tax cut itself does not directly change HELP repayment amounts because repayments are calculated on repayment income, not tax payable. However, if your repayment income crosses a threshold — for example, moving from just below $69,528 to just above — a HELP repayment obligation arises. See our HECS-HELP repayment guide for 2026-27 for the full marginal rate system.

How do I check that my employer is withholding the correct amount? The ATO publishes a tax withheld calculator on its website. You can also use the ozloan.net income tax calculator to estimate your annual tax and divide by the number of pay periods. If your withholding seems too high, ask your payroll team to verify they are using the 2026-27 tax tables. If it remains unresolved, you can vary your withholding by lodging a PAYG withholding variation application with the ATO.

This is general information only, not financial, tax, or legal advice. Tax rates, thresholds, and offsets are subject to legislative change. Refer to the ATO or a registered tax agent for advice on your specific circumstances. Contact an Arrivau licensed finance advisor for questions about borrowing capacity and mortgage eligibility — expect a response within one business day.