Unlocking Savings: Your Guide to Australia’s New Tax Benefits!
Budget 2025–26: New Tax Cuts for Every Australian Taxpayer
The Australian Government is introducing new tax cuts for every taxpayer from 1 July 2026, continuing its commitment to support working Australians and ease cost-of-living pressures. These tax cuts build on those already delivered from 1 July 2024.
New Tax Cuts
From 1 July 2026, every Australian taxpayer will receive an extra tax cut of up to $268 per year compared to 2024–25 tax settings. From 1 July 2027, that benefit increases to up to $536 per year. These amounts are in addition to the existing tax cuts that started in 2024.
Lower Tax Rates
The Government will reduce the tax rate that applies to taxable income earned between $18,201 and $45,000:
- From 16% to 15% in 2026–27
- From 15% to 14% in 2027–28
Other tax thresholds and rates remain unchanged, meaning the same rates apply to higher incomes (30% from $45,001 to $135,000; 37% from $135,001 to $190,000; and 45% for incomes above $190,000).
Medicare Levy Thresholds
The Government will increase the Medicare levy low-income thresholds by 4.7% from 1 July 2024. This will ensure that more than one million Australians on lower incomes remain exempt from paying the Medicare levy or continue to pay a reduced rate. For example:
- Singles: threshold increases from $26,000 to $27,222
- Single seniors/pensioners: threshold increases from $41,089 to $43,020
- Families (non-seniors/pensioners): threshold increases from $43,846 to $45,907 (plus additional amounts per child).
Average Annual Tax Cut
By 2027–28, a taxpayer earning the average annual income of $79,000 will receive a combined annual tax cut of $2,190 compared to 2023–24 tax settings. This represents around $42 per week in additional disposable income.
Bracket Creep Relief
The new tax cuts will help offset bracket creep — the hidden tax increase that happens when wage growth pushes taxpayers into higher tax brackets. According to the factsheet, a worker on average earnings is expected to pay $30,000 less in tax over the period from 2024–25 to 2035–36 compared to 2023–24 tax settings.
Boosting Workforce Participation
The combined tax cuts are expected to incentivize more Australians, especially women, part-time workers, and lower-income earners, to work more hours. The Government estimates an increase of 1.3 million hours worked per week by 2027–28 — equivalent to over 30,000 full-time jobs. Women are expected to contribute around 900,000 additional hours of work each week.
Combined Annual Tax Cut Examples
Compared to 2023–24 tax settings, by 2027–28:
- Full-time minimum wage earner ($47,627): annual tax cut of $1,406
- Median income earner ($72,592): annual tax cut of $2,030
- Average income earner ($79,000): annual tax cut of $2,190
- Average full-time income earner ($103,000): annual tax cut of $2,790
Additional Cost-of-Living Relief
These tax cuts complement other government measures, including more energy bill relief, strengthening Medicare, cheaper medicines, cheaper childcare, student debt relief, free TAFE, support for increases to minimum and award wages, and higher rent assistance and working-age payments.
Summary
The new tax cuts represent a modest but meaningful step toward ensuring Australians keep more of what they earn while also encouraging economic growth and participation in the workforce. They are part of the Government’s broader effort to make everyday life more affordable for Australian families.
