Australian resident income tax rates for the 2026–27 financial year take effect from 1 July 2026. The headline change is the reduction of the bottom marginal rate from 16% to 15%, applying to taxable income between $18,201 and $45,000. This is the first of two legislated cuts: the rate falls again to 14% from 1 July 2027. All other thresholds and rates remain unchanged from the prior year. An individual earning $45,000 will pay $4,020 in tax (before the Medicare Levy), a saving of approximately $268 compared to the 2025–26 year. Someone on $90,000 will see a reduction of roughly the same amount because the benefit from the 15% bracket flows through irrespective of earnings above $45,000. The tax-free threshold stays at $18,200, the 30% bracket covers $45,001 to $135,000, the 37% bracket covers $135,001 to $190,000, and the top 45% rate applies above $190,000. This article sets out the full rate schedule, explains how bracket creep interacts with the cuts, and provides worked examples so readers can estimate their own take-home pay for the year ahead. For related information on student loan repayments see HELP/HECS repayment thresholds for 2026–27 and for the Medicare Levy see Medicare Levy and surcharge explained.
Resident tax rates for 2026–27
The Australian Taxation Office publishes the following resident rate schedule for the income year 1 July 2026 to 30 June 2027. These rates exclude the 2% Medicare Levy, which is calculated separately on taxable income.
- Taxable income $0 to $18,200: nil tax payable.
- Taxable income $18,201 to $45,000: 15 cents for each dollar over $18,200.
- Taxable income $45,001 to $135,000: $4,020 plus 30 cents for each dollar over $45,000.
- Taxable income $135,001 to $190,000: $31,020 plus 37 cents for each dollar over $135,000.
- Taxable income $190,001 and above: $51,370 plus 45 cents for each dollar over $190,000.
The only change from 2025–26 is the 15% rate (down from 16%) in the second bracket. The dollar amounts at the bracket boundaries — $4,020, $31,020, and $51,370 — are the cumulative tax payable at the top of each preceding bracket. These figures assume the taxpayer is a full-year Australian resident with no special offsets or adjustments.
Who benefits and by how much
Every taxpayer with taxable income above $18,200 receives a tax cut because the 15% rate applies to the entire band between $18,201 and $45,000. The maximum saving from this specific rate reduction is reached at $45,000 of taxable income and is worth approximately $268 per year. Because Australia uses a progressive marginal system, anyone earning above $45,000 also captures that full $268 — the higher brackets are unchanged, so the saving does not grow beyond that point.
Worked examples for 2026–27 (excluding the Medicare Levy):
- A taxpayer earning $35,000 pays tax of $2,520 (15% of $16,800).
- A taxpayer earning $60,000 pays $4,020 plus 30% of $15,000, which is $4,500 — total $8,520.
- A taxpayer earning $100,000 pays $4,020 plus 30% of $55,000 ($16,500), yielding $20,520.
- A taxpayer earning $160,000 pays $31,020 plus 37% of $25,000 ($9,250), yielding $40,270.
- A taxpayer earning $250,000 pays $51,370 plus 45% of $60,000 ($27,000), yielding $78,370.
The Medicare Levy of 2% applies on top of these amounts (subject to low-income relief thresholds). Higher-income earners without private hospital cover may also face the Medicare Levy Surcharge, covered in the Medicare Levy article.
The 14% rate from July 2027
The legislated pathway continues: the rate in the $18,201–$45,000 band drops from 15% to 14% for the 2027–28 financial year. At that point the cumulative tax at $45,000 becomes $3,752, meaning an additional saving of roughly $268 relative to 2026–27. The two-step cut together will reduce tax at that income level by around $536 relative to the 16% rate that applied in 2025–26. No announcements have been made regarding further rate changes beyond 2027–28.
How employers apply the new rates
Employers use ATO-issued tax withholding schedules to deduct PAYG withholding from salary and wages. The ATO updates these schedules before 1 July each year. For the 2026–27 year, the updated schedules incorporate the 15% rate from the first pay period on or after 1 July 2026. Employees do not need to take any action: the correct withholding amount is calculated automatically by payroll software. Sole traders and other self-employed individuals should adjust their quarterly PAYG instalments to reflect the new rates and avoid a year-end shortfall.
What the rates mean for tax planning
The marginal rate structure informs several practical decisions. Salary sacrifice into superannuation becomes marginally less attractive when the tax saving drops from 16% to 15% (and later to 14%), although the 15% contributions tax inside super still provides a spread for those in higher brackets. Individuals approaching the $45,000, $135,000, or $190,000 thresholds may wish to consider the timing of deductible expenses or income recognition, particularly where bracket creep pushes them into a higher marginal band. The HELP/HECS article explains how compulsory student loan repayments interact with these thresholds.
Frequently asked questions
Does the tax-free threshold change in 2026–27? No. The tax-free threshold remains at $18,200. No legislation has been passed to alter it.
If I earn $50,000, how much tax do I pay? Tax on $50,000 for 2026–27 is $4,020 plus 30% of $5,000, which equals $5,520. This is before the Medicare Levy.
Do foreign residents use the same rates? No. Foreign residents are subject to a different rate schedule and do not receive the tax-free threshold. The 15% rate cut applies to foreign residents as well, but their starting rate is 30% from the first dollar of Australian-sourced income.
Will the 2027 rate cut happen automatically? Yes. The reduction from 15% to 14% is already legislated and takes effect from 1 July 2027, assuming no amending legislation is passed in the interim.
Where can I confirm my withholding is correct? The ATO publishes a tax withheld calculator on its website, updated for each financial year. Employees can also check their year-to-date withholding on their payslip and compare against the published schedules.
Data sources
- ATO individual income tax rates for Australian residents
- ATO tax withheld calculator and PAYG withholding schedules
- Treasury legislation establishing the 2026 and 2027 rate cuts
- Australian Parliament – Treasury Laws Amendment (Tax Cuts) Bills
- ATO guidance on residency status and foreign resident rates
Disclaimer: This article provides general information only and does not constitute financial, tax, or legal advice. Readers should confirm current rates and thresholds with the Australian Taxation Office or a licensed professional before making decisions. Data current as at July 2026.