Federal Budget 2026: Tax Measures That Affect Your Return

General information only. This is not tax or financial advice. Consult a registered tax agent for advice specific to your situation.

The 2026 Federal Budget was handed down in early May, and while much of the headline coverage focused on the macro numbers — surplus projections, GDP forecasts, and spending commitments — there are specific measures that change the arithmetic for individual taxpayers. This article focuses on what matters for your 2026-27 tax return and what, if anything, you should do before 30 June 2026.

The Big One: Personal Tax Cuts from 1 July 2026

The stage 3 tax cuts, legislated as part of the 2018-19 Budget and reaffirmed in subsequent budgets, take effect from 1 July 2026. Here is the bracket comparison:

The headline change is the second bracket rate dropping from 16% to 15% on income between $18,201 and $45,000. The 30%, 37% and 45% brackets are unchanged from 2025-26 — there is no cut to the 37% bracket in this round of legislated changes. Because the cut applies to a fixed slice of income ($26,800 at 1 percentage point), it flows through as the same flat dollar saving to everyone earning above $45,000, regardless of how much higher their income goes.

The dollar impact is essentially flat once you’re earning above $45,000:

These use the legislated 2025-26 and 2026-27 brackets plus the 2% Medicare levy (no other deductions or offsets). Because only the $18,201–$45,000 slice is taxed at a lower rate, the saving is a flat $268 per year (1% × $26,800) for anyone earning above $45,000 — including at $190,000, the top of the 37% bracket — or about $10 per fortnight. It does not scale up with income the way a rate cut to a higher bracket would.

How It Works in Practice

These are withholding-rate changes, which means your employer will adjust PAYG deductions automatically from the first pay period after 1 July 2026. You do not need to lodge any form or make any election to receive the cut — it will simply appear as a slightly higher net pay.

However, if you receive income from multiple sources, or have significant deductions that reduce your taxable income, your actual tax outcome depends on your total taxable income — not just your salary. The PAYG withholding tables are calibrated for a single-job employee with no adjustments. If your circumstances are more complex, checking the withholding against your expected actual liability is sensible — especially in the first year of the new rates when employers may still be adapting payroll systems.

Low and Middle-Income Earners

Earners with income in the $18,201–$45,000 band are exactly who the 2026-27 change targets — their marginal rate on that slice drops from 16% (already cut from 19% in July 2024) to 15%, and the $18,200 tax-free threshold is unchanged. Someone whose income sits entirely within that band gets a partial-year benefit scaled to how much of their income falls above $18,200; anyone earning $45,000 or more gets the full $268 flowed through, as shown above. The effective tax-free threshold including the Low Income Tax Offset (LITO) continues to apply. LITO provides up to $700 of offset for taxable incomes below $37,500, phasing out at 5 cents per dollar between $37,500 and $45,000, and then at 1.5 cents per dollar between $45,000 and $66,667.

Superannuation Changes

Super Guarantee at 12%

The super guarantee rate reached 12% on 1 July 2025 — the final step in the legislated increase from 9.5% that began in 2021-22. Budget 2026-27 makes no further change to the SG rate, which stays at 12% for the 2026-27 income year.

For an employee earning $90,000, the 12% rate means $10,800 in compulsory super contributions per year, up from $10,350 at the prior 11.5% rate. Over a 30-year career, the cumulative difference between 11.5% and 12% is material — roughly $30,000–$60,000 in additional retirement savings depending on investment returns.

Payday Super Starts 1 July 2026

From 1 July 2026, employers must pay super contributions on or before the day salary and wages are paid — not quarterly. This is a significant operational shift:

• Employers who currently pay super quarterly (by the 28th day after each quarter) must move to a per-pay-cycle process
• The ATO has confirmed a phased enforcement approach for the first 12 months, prioritizing education and voluntary compliance over penalties
• However, from day one, SG charge (the penalty for late payment) can still apply — the phased approach only affects ATO audit activity, not the legal obligation
• Employers using clearing houses should verify that their clearing house supports payday-frequency processing

The ATO estimates that payday super will recover approximately $1.7 billion in unpaid and late super over the first four years, largely by preventing employers from falling into arrears during the quarter.

Concessional Contribution Cap

The concessional contributions cap is indexed to wages growth (AWOTE) in $2,500 increments. For 2025-26 the cap is $30,000. It rises to $32,500 for 2026-27, effective 1 July 2026, as confirmed in the ATO’s key superannuation rates and thresholds.

Carry-forward of unused concessional cap amounts from the 2019-20 year onward continues. If your total super balance is below $500,000 on 30 June of the previous year, you can access unused cap amounts from up to five prior years.

EOFY Planning Before 30 June 2026

The 37% Bracket Is Unchanged — Don’t Chase a Timing Benefit That Isn’t There

Unlike the second bracket, the 37% bracket (currently $135,001–$190,000) is not cut by this Budget — it stays at 37% in 2026-27. If your income is in that range, salary-sacrificing into super offsets at the same 37% (plus 2% Medicare levy) in both 2025-26 and 2026-27, so there is no bracket-driven reason to bring a large contribution forward into 2025-26 specifically because of this round of tax cuts.

For someone earning $160,000 and salary-sacrificing $15,000 into super, the tax benefit is roughly $5,850 (39% including Medicare levy) in either year — the 2026-27 legislated change doesn’t touch this bracket.

The only bracket-driven timing benefit from this round of cuts applies to income sitting in the $18,201–$45,000 band, where the rate drops from 16% to 15% — a 1 percentage point difference, worth weighing only for genuinely large amounts.

Review Your HELP Repayment

HELP repayment thresholds and rates are adjusted annually. With the bracket restructure, your repayment income — which includes taxable income, reportable fringe benefits, and reportable super contributions — may push you into a different repayment tier. Check your position using the HELP repayment calculator once the ATO publishes the 2026-27 thresholds.

Consider the Medicare Levy Surcharge

The Medicare Levy Surcharge (MLS) of 1%, 1.25%, or 1.5% applies if you do not hold an appropriate level of private hospital cover and your income exceeds $101,000 (single) or $202,000 (family) for 2025-26 — rising to $105,000 (single) and $210,000 (family) for 2026-27 under standard indexation. If you are approaching the relevant threshold and do not hold hospital cover, the combined effect of the MLS plus the tax on income above the threshold justifies reviewing your health insurance position.

What Did Not Change

Several items were expected by some commentators but did not appear in this Budget:

• The 45% top rate remains above $190,000. There was speculation about reverting to a pre-stage-3 top threshold; this did not occur.
• Division 293 tax threshold ($250,000 on combined income and concessional contributions) is unchanged.
• GST rate and base remain at 10% with no broadening of the base announced.

Update — now legislated: Two items originally listed here as unchanged have since passed Parliament. The Budget’s CGT discount reform and the negative gearing quarantine were both enacted in the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received royal assent on 26 June 2026. From 1 July 2027, the 50% CGT discount is replaced by CPI cost base indexation plus a 30% minimum tax on individuals’ capital gains, and net rental losses on residential dwellings are quarantined to residential-property income and gains (with grandfathering for dwellings owned before 7:30pm AEST 12 May 2026 and an exemption for new residential dwellings). See the legislated reform explainer for the full detail on what passed.

State-Level Changes to Watch

While the Federal Budget dominates headlines, state budgets — typically delivered in June — often contain payroll tax, land tax, and stamp duty changes that affect your overall tax position. NSW and Victoria in particular tend to align state budget timing with the federal cycle. Keep an eye on your state’s budget for land tax threshold adjustments, stamp duty concession changes, and payroll tax rate movements if you are an employer.

Bottom Line

The 2026 Budget delivers the final stage of personal tax cuts on schedule. For most taxpayers, the primary action is awareness — understand what your July 2026 payslip should look like — rather than pre-30-June manoeuvring. The larger structural story is the combination of SG at 12% plus payday super, which together reshape employer compliance obligations and employee retirement savings trajectories.

The 37% bracket itself is unchanged, so there’s no bracket-driven incentive to pull forward deductible expenses or super contributions for the $135,000–$190,000 group specifically. The modest timing incentive that does exist from this round of cuts sits in the $18,201–$45,000 band, where the rate drops from 16% to 15%. For everyone else, the Budget is largely steady-as-she-goes on the personal tax front.

Check your 2026-27 take-home pay using our Income Tax Calculator and run super contribution scenarios with the Superannuation Calculator.