Australian Income Tax Rates 2026-27: 15% bracket kicks in, how much you save

Australian Income Tax Rates 2026-27: 15% bracket kicks in, how much you save HEHomeLoanAI Editorial·1 July 2026 Australian income tax rates 2026-27: what the 15% rate means for your take-home pay From 1 July 2026, Australia's second-highest income tax bracket drops from 16% to 15% for the $18,201–$45,000 income band. This is now law, and it affects every Australian resident earning above the $18,200 tax-free threshold. Here is what changes in hard numbers: someone earning $45,000 pays $4,020 in tax for 2026-27, compared to $4,288 under the old 16% rate — a saving of $268 per year. Someone on $80,000 pays $14,520 — $268 less than under the old system. The saving is identical for anyone earning above $45,000 because the cut only applies to income inside the $18,201–$45,000 band, worth exactly $268 for every full-band earner.

The full 2026-27 resident tax table

Australia uses marginal tax rates — you only pay the higher rate on the portion of income that falls into each bracket. Here are the 2026-27 resident rates, excluding the 2% Medicare Levy: $0–$18,200: nil (tax-free threshold) $18,201–$45,000: 15% (down from 16% on 1 July 2026) $45,001–$135,000: $4,020 + 30% of the excess over $45,000 $135,001–$190,000: $31,020 + 37% of the excess over $135,000 $190,001 and above: $51,370 + 45% of the excess over $190,000 These figures exclude the Medicare Levy. Add approximately 2% of taxable income for most earners to get your total tax bill. Some low-income earners qualify for a Medicare Levy reduction or exemption.

How much tax will you pay? Worked examples

To make this concrete, here is the income tax payable (excluding Medicare Levy) at common income levels for 2026-27: Taxable income $30,000: tax on $18,200–$30,000 at 15% = $1,770 Taxable income $45,000: $4,020 exactly (the top of the second bracket) Taxable income $60,000: $4,020 + 30% × ($60,000 – $45,000) = $4,020 + $4,500 = $8,520 Taxable income $100,000: $4,020 + 30% × ($100,000 – $45,000) = $4,020 + $16,500 = $20,520 Taxable income $150,000: $31,020 + 37% × ($150,000 – $135,000) = $31,020 + $5,550 = $36,570 Taxable income $200,000: $51,370 + 45% × ($200,000 – $190,000) = $51,370 + $4,500 = $55,870

What changes again in 2027

The 15% rate is not the final destination. From 1 July 2027, the rate for the $18,201–$45,000 band falls again to 14%. That means the same full-band saver who saves $268 in 2026-27 will save another $268 in 2027-28 — for a total tax cut of $536 per year compared to the old 16% rate.

What this means for borrowing power

Lower income tax means slightly higher take-home pay, which can marginally improve your borrowing capacity. For a single borrower earning $80,000, the $268 annual saving works out to roughly $22 per month in extra after-tax income. While this alone does not dramatically change what a bank will lend you, every dollar of higher net income counts in the serviceability assessment — particularly now that APRA enforces a 3% serviceability buffer and a 6x debt-to-income cap on new lending. If you are planning a mortgage application in 2026-27, factor in your new tax position when estimating your borrowing power. A precise calculation should always include the Medicare Levy and any HELP/HECS repayment obligations. Data sources and limitations All tax rates above are verified against the Australian Taxation Office (ATO) as at July 2026. The 15% rate for 2026-27 and the scheduled 14% rate for 2027-28 are legislated. These figures do not include the 2% Medicare Levy, the Medicare Levy Surcharge (MLS), HELP/HECS repayments, or any offsets and deductions that may apply to your individual circumstances. Tax payable in practice depends on your total taxable income, deductions, offsets, and whether you are a resident for tax purposes. Non-residents and working holiday makers are taxed under different schedules entirely. Frequently Asked Questions Q: When does the 15% rate start? A: 1 July 2026 — the start of the 2026-27 financial year. Your employer should adjust your PAYG withholding from the first pay period on or after that date. Q: How much will I actually save? A: If your taxable income is $45,000 or more, you save exactly $268 per year (the difference between 16% and 15% on the $26,800 band from $18,201 to $45,000). If you earn less than $45,000, your saving is 1% of the portion of your income that falls in the $18,201–$45,000 band. Q: Does the cut affect the Medicare Levy? A: No. The Medicare Levy remains 2% of taxable income for most earners. The levy is calculated separately and added to your income tax bill. Q: What if I am a non-resident or working holiday maker? A: Non-residents are taxed from the first dollar at 30% up to $135,000, with higher rates above that — they do not benefit from the 15% resident rate. Working holiday makers pay 15% on their first $45,000. These schedules are unchanged for 2026-27. Next steps Your income tax position affects how much you can borrow, how much you can save for a deposit, and how quickly you can service a mortgage. If you are planning to buy a home in 2026-27, getting an accurate picture of your after-tax income is the first step. Speak with an Arrivau licensed mortgage adviser for a personalised borrowing capacity assessment that accounts for your actual tax position. An adviser will respond within one business day. Disclaimer: This article provides general information only and does not constitute tax, financial, or legal advice. Tax rates, thresholds, and legislation may change. Always confirm your individual position with the ATO or a registered tax professional before making decisions based on the information above. #income-tax#tax-rates#2026-27 Not sure what rate you'd get? Ask the AI — free, unbiased, and no sign-up required. It knows current Australian lending rules and can run the numbers for you. Ask the AI assistant → Keep reading Tax & Policy HELP/HECS Repayments 2026-27: How the Marginal System Changes What You Owe