TL;DR
- •From 1 July 2026, the bracket on income between $18,201 and $45,000 drops from 16% to 15%
- •Maximum saving: $268/year for anyone earning $45,000+
- •Workers under $45,000 save 1% of their income above $18,200
- •Stacks with the Working Australians Tax Offset (up to $250)
- •No action needed — your PAYG withholding updates automatically
What's changing
2025-26 (current)
2026-27 (new)
How much you save by income
The bracket-change saving alone tops out at $268 (1% of the $26,800 covered by the bracket). When stacked with the maximum Working Australians Tax Offset of $250, the combined saving can reach $518.
| Annual Salary | Saving from 15% bracket | With max WATO |
|---|---|---|
| $25,000 | $68 | up to $318 |
| $35,000 | $168 | up to $418 |
| $45,000 | $268 | up to $518 |
| $60,000 | $268 | up to $518 |
| $80,000 | $268 | up to $518 |
| $100,000 | $268 | up to $518 |
| $150,000 | $268 | up to $518 |
| $200,000 | $268 | up to $518 |
WATO is a non-refundable offset of up to $250. The actual offset depends on income and tax payable.
Why is the rate dropping?
The 1-percentage-point cut on the second bracket was announced in the 2026-27 Federal Budget on 12 May 2026, alongside a new Working Australians Tax Offset. The Government framed the package as cost-of-living relief targeted at low- and middle-income workers.
The change applies to every taxpayer who earns more than $18,200 — the tax-free threshold — but because everyone's saving on the same $26,800 slice of income, the dollar saving is capped at $268 regardless of how much you earn. This makes the policy mildly progressive in percentage terms.
See your exact saving
Type your salary into the 2026-27 vs 2025-26 tax comparison calculator and see the dollar difference instantly.
Open Tax Comparison Tool →Frequently Asked Questions
When does the new 15% bracket start?
From 1 July 2026 (the start of the 2026-27 financial year). Your employer's payroll system will use the new rate from your first 2026-27 pay run.
How much will I save?
A worker earning $45,000 or more saves $268 per year ($26,800 × 1%). If you earn less than $45,000, you save 1% of your income above $18,200. For example, if you earn $30,000 you save $118 per year.
Do I need to do anything to claim this saving?
No. Your employer will use the new PAYG withholding scales from 1 July 2026. You'll see a slightly higher net pay automatically.
Does the WATO offset stack with this?
Yes. The Working Australians Tax Offset (up to $250) is separate and applied at tax time. A worker earning $45,000+ could save the $268 from the bracket change plus up to $250 from WATO = up to $518.
Are the other tax brackets changing?
No. The other brackets (30%, 37%, 45%) and thresholds ($45,000, $135,000, $190,000) stay the same for 2026-27. Only the 16% bracket on $18,201–$45,000 drops to 15%.
Is this on top of the Stage 3 tax cuts?
Yes. The Stage 3 tax cuts already took effect from 1 July 2024 (dropping the 19% bracket to 16% and reshaping the higher brackets). This is an additional cut on top of Stage 3.
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Related Resources
Information is general only and not financial or tax advice. Tax rates from the 2026-27 Federal Budget. Subject to passage of legislation.
Last updated: 25 May 2026