From 1 July 2026, one income tax rate is changing: the marginal rate on earnings between $18,201 and $45,000 drops from 16% to 15%. It's a single, legislated change that applies automatically to every Australian taxpayer in that income range — no action required on their part. This article covers what the change means for take-home pay, and what payroll teams need to check to make sure their systems reflect the new rate correctly.

What's changing — and what isn't

Only one line in the tax table is changing:

*The above rates do not include the Medicare levy of 2%.

A small but automatic take-home pay increase

A tax saving of up to $268 per year applies — roughly $5 per week in additional take-home pay for anyone earning $45,000 or more. Employees will simply see a slight increase in their net pay from the first pay period starting on or after 1 July 2026, once payroll systems reflect the new rate.

*Figures are indicative. Medicare levy and tax offsets are not included.

Two things for payroll teams to confirm

1. Apply the updated ATO PAYG withholding tables

The ATO publishes new PAYG withholding tax tables for each financial year. Confirm that your payroll system is using the 2026–27 tables, which reflect the 15% rate from the first pay period starting on or after 1 July 2026. Most payroll software will apply this automatically — check with your provider if you are unsure. An incorrect setup can result in over-withholding or under-withholding of tax for employees.

2. Note the next change: 14% from 1 July 2027

The same bracket drops again to 14% from 1 July 2027 under existing legislation. The same payroll update process will apply again next financial year.

For rates and withholding tables, refer to the ATO sources below.

Official sources:

• ATO — Personal income tax: new tax cuts for every Australian taxpayer

• ATO — Tax rates for Australian residents

Last updated: June 2026