What's Changing in Australian Tax 2026-27 — Stage 3+ Phase 2 + Budget 2026 Measures
Last reviewed:
Primary tax-year context: 2026-27
This article is general information only. We maintain pages using primary-source checks and date-based reviews. See editorial policy.
General information only — not tax or financial advice. Updated 12 May 2026 with confirmed Federal Budget measures.
The Australian financial year flips on 1 July 2026. The 2026-27 Federal Budget was handed down at 7:30 pm AEST on Tuesday 12 May 2026 by Treasurer Jim Chalmers. This page now covers the legislated rate drop, the confirmed Budget measures, and the pre-1-July action list to capture or defer.
If you want the side-by-side technical reference, see 2025-26 vs 2026-27 tax changes. For Budget night live updates, the Budget 2026 hub is the dashboard.
The one change that’s already legislated
Second marginal rate drops from 16% to 15% on taxable income between $18,201 and $45,000.
This is phase 2 of 3 of the Stage 3+ tax cut package legislated under the Treasury Laws Amendment (Cost of Living Tax Cuts) Act 2024. Phase 1 landed on 1 July 2024 (cut the 19% rate to 16% and the 32.5% rate to 30%). Phase 3 — dropping the second rate again from 15% to 14% — is legislated to commence on 1 July 2027.
| Taxable income band | 2025-26 rate | 2026-27 rate |
|---|---|---|
| $0 – $18,200 | 0% | 0% |
| $18,201 – $45,000 | 16% | 15% ⬇ |
| $45,001 – $135,000 | 30% | 30% |
| $135,001 – $190,000 | 37% | 37% |
| Above $190,000 | 45% | 45% |
The maths: every dollar between $18,201 and $45,000 is taxed 1% less. That’s a maximum saving of $268.00 per year for everyone earning above $45,000 (1% × $26,800). Below $45,000 the saving scales with how much of that band you actually fill.
How much you actually save
Tax + Medicare levy at representative incomes (no LITO, no MLS):
| Taxable income | 2025-26 tax | 2026-27 tax | Saving |
|---|---|---|---|
| $25,000 | $1,792 | $1,724 | $68 |
| $45,000 | $4,788 | $4,520 | $268 |
| $65,000 | $11,488 | $11,220 | $268 |
| $90,000 | $19,288 | $19,020 | $268 |
| $120,000 | $30,288 | $30,020 | $268 |
| $180,000 | $52,038 | $51,770 | $268 |
| $250,000 | $90,000 | $89,733 | $267 |
The headline isn’t enormous — but it’s automatic, applied via your payroll PAYG schedule from the first pay period that starts on or after 1 July 2026. Try the income tax calculator with the dual-year toggle to see your own number.
What stays exactly the same
These are legislated at their current values and won’t move on Budget night:
- Superannuation Guarantee 12% — permanent since 1 July 2025, the SGAA 1992 legislated maximum
- Medicare levy 2% — unchanged since 2014-15 (shade-in thresholds index, but the rate doesn’t)
- CGT discount 50% — for individuals on assets held > 12 months (unchanged for 2026-27; replaced by CPI cost-base indexation + 30% minimum tax on gains accruing from 1 July 2027 — see CGT reform explainer)
- FBT rate 47% — locked to the top marginal + Medicare equivalent
- Company tax 25% / 30% — base rate entities (turnover ≤ $50M, ≤ 80% passive income) at 25%, otherwise 30%
- GST 10% — unchanged since introduction; out of scope for any Budget
- Tax-free threshold $18,200 — first marginal rate at 0%
If you read a news headline claiming any of those is changing on 1 July 2026, double-check against the ATO rates page before changing anything in your tax planning.
What Budget 2026 confirmed
Treasurer Chalmers handed down the 2026-27 Federal Budget at 7:30 pm AEST on 12 May 2026. The new measures that affect personal tax:
Effective for 2026-27 (1 July 2026 onward)
- $1,000 Instant Tax Deduction — employees and sole traders can reduce taxable income by up to $1,000 of work-related expenses with no receipts. ~6.2 million workers (42% of taxpayers) benefit, average saving $205. Claimable on 2026-27 returns lodged from 1 July 2027. See Instant Tax Deduction explained.
- Medicare levy low-income thresholds raised 2.9% — retroactive to 1 July 2025. Over 1 million Australians on lower incomes remain exempt or pay a reduced levy. See Medicare levy uplift.
- Instant Asset Write-Off — made permanent at $20,000 from 1 July 2026 (no more annual extensions).
- Loss carry-back — made permanent with a 2-year lookback from 1 July 2026.
- Division 296 ($3M super balances) commences 1 July 2026 as legislated — not modified by Budget. +15% on earnings for $3M–$10M balances; +25% above $10M.
- 497 nuisance tariffs abolished from 1 July 2026 (compliance saving ~$157M/year).
Effective 1 July 2027
- $250 Working Australians Tax Offset (WATO) — permanent annual offset for ~13 million workers (including sole traders). Raises the effective tax-free threshold by ~$1,800 to $19,985 ($24,985 with LITO). 97% receive the full $250. See WATO explained.
- Negative gearing reform — established residential property bought after 7:30 pm AEST 12 May 2026 can only offset losses against other residential property income from 1 July 2027 onward. Properties held at the announcement timestamp are grandfathered forever. New builds retain full negative gearing. See NG reform — 4 buckets.
- 50% CGT discount replaced by CPI cost-base indexation + 30% minimum tax on real capital gains. Applies to all CGT assets held ≥12 months by individuals, trusts and partnerships. Main residence, 60% affordable housing discount and four small-business CGT concessions all retained. See CGT discount reform.
- Legislated Stage 3+ phase 3 — second marginal rate drops a further 15% → 14% (already locked in by the Cost of Living Tax Cuts Act 2024).
Effective 1 July 2028
- 30% minimum tax on discretionary trusts — trustee-paid, with non-refundable credits flowing to non-corporate beneficiaries. ~95% of individual taxfilers unaffected; rollover relief into companies or fixed trusts available for 3 years from 1 July 2027 (until 30 June 2030). See trust minimum tax.
- R&D Tax Incentive reform announced; venture-capital tax incentives expanded from 1 July 2027.
Confirmed unchanged on Budget night
Treasury did not announce changes to the headline super caps, MLS tiers, LITO max, FBT rate, c/km car rate, car depreciation cost limit, LCT thresholds, or PHI rebate tiers in this Budget. Index-driven thresholds still flip per ATO’s annual cycle — austax calculator config picks up indexed values once the ATO publishes them (typically June for super, September for the rest).
For the full measure-by-measure list, see the Budget 2026 summary and the Budget 2026 hub.
Pre-1-July action list (what to do before EOFY)
Even though most numbers stay similar, every dollar of taxable income shifted from 2026-27 back to 2025-26 sits in the higher 16% second-rate band rather than the 15% one. That makes the timing call sharper than usual for low-to-mid earners.
If your taxable income falls between $18,201 and $45,000:
- Defer deductible expenses to 2026-27: prepay rental property interest, premium income protection, work-related course fees if eligible — every $1,000 of deductions is worth $10 more in 2025-26 tax than 2026-27
- Bring deductible income forward into 2025-26: opposite logic for high-income earners considering bonus timing — see does salary sacrifice still help on $300k?
Beyond the 1% rate effect, the standard EOFY moves don’t change:
- Concessional super contribution before 30 June if you have headroom — see carry-forward rules
- Realise capital losses to offset capital gains — see CGT planning
- Donate to DGR before 30 June — see DGR donation timing
- Instant Asset Write-Off for sole traders / small business — assets installed and ready for use by 30 June qualify under 2025-26 rules — see IAWO timing
Where to verify everything
- ATO rates: Individual income tax rates · Super rates · Study and training loan rates
- Treasury: Budget portal · Budget Paper 2 — Tax measures · Stage 3+ tax cut package
- Our coverage: 2025-26 vs 2026-27 technical comparison · Budget 2026 hub · Budget 2026 summary
Last updated 2026-05-12 (post-Budget). Reflects confirmed Federal Budget 2026 measures handed down 7:30 pm AEST 12 May 2026.