Eternity Group

Technical Update

Individual income tax rates for 2026-27: what changed on 1 July

The enacted resident tax rates for 2026-27 — the legislated cut of the 16% rate to 15%, what did not move, how the Medicare levy and offsets sit alongside the table, and the other 2026 measures that touch this income year.

Published Updated Sources verified 5 min read

Applies to: FY2026-27 (1 July 2026 – 30 June 2027); enacted rates, verified current at 12 July 2026 · Australia

The direct answer

For 2026-27, Australian resident individuals pay nil on taxable income up to $18,200, 15% on the part 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 — excluding the 2% Medicare levy. The only change to the rate table from 2025-26 is the enacted cut of the 16% rate to 15% from 1 July 2026, with a further legislated cut to 14% from 1 July 2027.

Key points

  • The 2026-27 resident rates are enacted law — 15% ($18,201–$45,000), 30% ($45,001–$135,000), 37% ($135,001–$190,000) and 45% ($190,001+) — set by the Treasury Laws Amendment (More Cost of Living Relief) Act 2025, which received Royal Assent on 27 March 2025.
  • Exactly one number in the rate table moved from 2025-26: the rate on the $18,201–$45,000 band fell from 16% to 15%. No bracket threshold moved, and the $18,200 tax-free threshold is unchanged.
  • Derived from the legislated rates, the cut is worth up to $268 for the year — 1% of the $26,800 band — with the full amount reached once taxable income is $45,000 or more.
  • A further cut of the same band to 14% is already legislated for 2027-28 and later years. It is enacted law with a future start date, not a proposal.
  • The 2% Medicare levy sits on top of the rate table. Its low-income thresholds for 2026-27 had not been set at 12 July 2026 — the latest verified thresholds are for 2025-26.
  • Two other enacted measures matter. The up-to-$1,000 standard deduction for work-related expenses applies from the 2026-27 return — but it is not an automatic extra $1,000: it is reduced, dollar for dollar, by the work-related deductions you claim, so it is a floor beneath those claims rather than an addition to them. The up-to-$250 Working Australians tax offset starts only in 2027-28.
  • The ATO updated all 15 PAYG withholding schedules and 12 tax tables from 1 July 2026, so withholding during 2026-27 reflects the 15% rate.

2026-27 resident tax rates at a glance

These are the marginal rates applying to resident individuals’ taxable income for the year beginning 1 July 2026. They are enacted law — inserted into Schedule 7 of the Income Tax Rates Act 1986 by the Treasury Laws Amendment (More Cost of Living Relief) Act 2025, which received Royal Assent on 27 March 2025.

Resident individual rates for 2026-27 — excludes the 2% Medicare levy
Taxable incomeMarginal rate
$0 – $18,200Nil
$18,201 – $45,00015%
$45,001 – $135,00030%
$135,001 – $190,00037%
$190,001 and over45%

Scope

These rates are for Australian resident individuals entitled to the full tax-free threshold. Foreign resident and working holiday maker rates are different and are not covered here, and the table excludes the 2% Medicare levy and any Medicare levy surcharge.

What changed on 1 July 2026 — and what did not

Exactly one number in the rate table moved: the rate on the $18,201–$45,000 band fell from 16% to 15%. The ATO confirms the measure — announced in the 2025-26 Federal Budget — is now law. Every bracket boundary, the $18,200 tax-free threshold, the 30%, 37% and 45% rates and the 2% Medicare levy rate are unchanged from 2025-26. Other 2026-27 changes sit outside the rate table — the SAPTO thresholds below, and the measures in the next section.

Rate comparison by band, 2025-26 vs 2026-27
Taxable income band2025-26 rate2026-27 rate
$0 – $18,200NilNil
$18,201 – $45,00016%15%
$45,001 – $135,00030%30%
$135,001 – $190,00037%37%
$190,001 and over45%45%

Derived from the legislated rates, the change is worth up to $268 for the year — 1% of the $26,800 between the tax-free threshold and $45,000 — with the full amount reached once taxable income is $45,000 or more. That is arithmetic from the rate table, not a promised outcome for any particular taxpayer.

Already legislated for 2027-28

The same Act cuts the 15% rate to 14% for the 2027-28 income year and later, on the same bracket thresholds. Treat it as enacted law with a future start date — it does not apply in 2026-27.

Medicare levy, LITO and SAPTO

The Medicare levy is 2% of taxable income and applies in addition to the rates above, subject to low-income reductions and exemptions. The low-income thresholds for 2026-27 had not been set as at 12 July 2026 — the latest verified thresholds are for 2025-26: singles pay no levy at or below $28,011 of taxable income, with a reduced levy up to $35,013 ($44,268 and $55,335 for singles entitled to the seniors and pensioners tax offset, SAPTO). Different thresholds apply for families.

The low income tax offset is unchanged on current ATO guidance (updated 8 June 2026): up to $700 for taxable income of $37,500 or less, reducing by 5 cents per dollar to $45,000, then by 1.5 cents per dollar until it cuts out at $66,667. No legislated change to LITO for 2026-27 was identified.

SAPTO rebate-income thresholds rise for 2026-27 as a consequence of the rate cut; the maximum offset amounts are unchanged.

SAPTO thresholds for 2026-27 (maximum offset amounts unchanged)
CategoryMaximum offsetShading-out thresholdCut-out threshold
Single$2,230$36,034$53,874
Each partner of a couple$1,602$31,847$44,663
Each partner of an illness-separated couple$2,040$34,767$51,087

Other enacted measures that touch 2026-27

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49 of 2026, assented 26 June 2026) legislated a standard deduction of up to $1,000 for work-related expenses. It applies to assessments for the 2026-27 income year and later — the return you lodge from July 2027 — and does not apply to the 2025-26 return being lodged now.

The $1,000 standard deduction is a floor, not a bonus

It is not an automatic extra $1,000, and it is not a payment. The amount starts at the lesser of $1,000 and your assessable labour income, and is then reduced — dollar for dollar, but not below zero — by the work-related deductions you claim. Claim $600 of those deductions and the standard deduction is $400; claim $1,000 or more and it is nil. It is also a deduction, so its value is the amount deducted multiplied by your marginal rate, not $1,000 in cash. Eligibility is limited to individuals who derive assessable labour income of the types the provision lists, so it is not available on business income alone.

Our standard deduction update sets out the mechanics, the eligibility limits and the substantiation rules that change with it. People with more than $1,000 of work-related expenses claim under the ordinary rules instead; for vehicle claims, see our comparison of the cents-per-km and logbook methods.

The same Act legislated the **Working Australians tax offset** — a non-refundable offset of up to $250 for resident individuals whose net labour income exceeds the tax-free threshold. The $250 is a ceiling, not an entitlement, and it is not a cash payment. Its application clause starts it at the 2027-28 income year: it is enacted, but it does not reduce 2026-27 tax. Higher earners should also keep Division 293 tax on concessional super contributions in view — it sits outside the rate table entirely.

PAYG withholding from 1 July 2026

The ATO updated all 15 PAYG withholding schedules and 12 tax tables to apply from 1 July 2026, reflecting the 15% rate. Employers and other payers using the updated tables generally withhold slightly less from payments made on or after that date; software providers apply the same schedules. Withholding is only an estimate across the year — each person’s final position is settled on assessment of their return.

Hypothetical example — the 2026-27 rates applied to $80,000 of taxable income

Illustrative only — a hypothetical resident, not a client. Priya has taxable income of $80,000 in 2026-27. On the legislated rates: the first $18,200 attracts nil; ($45,000 − $18,200) × 15% = $4,020; ($80,000 − $45,000) × 30% = $10,500 — income tax of $14,520 before offsets. Medicare levy at 2% adds $1,600, assuming no reduction or exemption applies. On the 2025-26 rates the same income produced $14,788 of income tax ($4,288 + $10,500), so the 15% rate reduces her tax by $268 — the maximum effect of the 2026-27 change. Actual outcomes depend on individual circumstances, deductions, offsets and levies.

This example is entirely hypothetical and illustrates the mechanics only. It is not a client outcome, a prediction, or advice.

Limitations of this information

  • Rates shown are for Australian resident individuals entitled to the full tax-free threshold; foreign resident and working holiday maker rates differ and were not verified for this update.
  • Medicare levy low-income thresholds shown are the 2025-26 thresholds — the 2026-27 thresholds had not been set at 12 July 2026. Medicare levy surcharge thresholds and rates are not covered here at all.
  • The $1,000 standard deduction is summarised here only as far as its start year and its cap-and-reduce mechanic in s 25-130(2). The full eligibility list, the deductions that are disregarded, the depreciating-asset changes and the repeal of the $300 and $150 substantiation concessions are covered in our standard deduction update, not here. No ATO administrative guidance on the measure had been published at the verification date.
  • The 2026 amending Acts contain further measures that are outside this update’s scope: CGT changes (applying to CGT events on or after 1 July 2027), the quarantining of excess residential property deductions (from the 2027-28 income year), SMSF limited recourse borrowing changes (for arrangements entered into on or after 10 August 2026) and a rate of extra income tax on minimum tax capital gains. None of them alters the resident rate brackets for 2026-27.
  • Current at 12 July 2026. The 2026-27 rate table is drawn directly from the amending Act as enacted and the ATO’s new-legislation guidance.

Practical next steps

  1. If you are lodging your 2025-26 return now, use the 2025-26 rates — the 15% rate and the standard deduction do not apply to that year. Our individual tax return service sorts out which rules apply to which year.
  2. Check that your payer or payroll software is applying the ATO’s updated tax tables from 1 July 2026.
  3. Factor the 15% rate, the standard deduction and your offsets into 2026-27 estimates — structured properly through tax planning rather than guesswork.
  4. For background on how the bracket system works, read our Australian tax brackets guide, or contact the practice with the specifics of your situation.

Frequently asked questions

For the 2026-27 income year (1 July 2026 to 30 June 2027), resident rates are: nil on taxable income up to $18,200; 15% on the part 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. These rates exclude the 2% Medicare levy.

Official sources

The facts in this resource are drawn from the following official sources, each read on the date shown. If a source has changed since, the source prevails.

Discuss your situation with us

This resource is general information for Australian residents, not tax advice. It does not consider your circumstances, and tax outcomes depend on individual facts. Speak to a registered tax agent before acting. It is also not financial product advice — we are not an Australian financial services licensee. Decisions about superannuation or other financial products should be discussed with a licensed financial adviser.

Last verified against official sources: · Next scheduled review by 12 October 2026 · Update sensitivity: high

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