Australia Income Tax Brackets 2026-27 Explained

Australia's 2026-27 financial year (1 July 2026 to 30 June 2027) brought a genuine rate cut, not just the usual inflation adjustment. This guide covers the current ATO brackets, exactly what changed and when, the Low Income Tax Offset, Medicare levy thresholds, superannuation, and worked take-home examples at five income levels.

What changed for 2026-27, and exactly when

One rate changed, and everything else held steady. Here's the precise before and after:

The bracket change is the second phase of a legislated cost-of-living tax cut sequence: the same $18,201–$45,000 bracket dropped from 19% to 16% back on 1 July 2024, dropped again to 15% on 1 July 2026, and is already legislated to fall once more to 14% from 1 July 2027. The maximum benefit is $268 a year for anyone earning $45,000 or more (1 percentage point on the full $26,800 width of the bracket); below $45,000, the saving scales down proportionally, for example $118 a year at a $30,000 income.

If you're comparing a 2025-26 payslip to a 2026-27 one and the numbers look different despite no change in salary, this bracket cut is almost always why. The change flows through automatically via updated ATO PAYG withholding schedules from the first pay period on or after 1 July 2026; there's nothing an employee needs to do.

2026-27 resident tax brackets

Marginal rates, not flat rates

Being in the 30% bracket doesn't mean 30% of your whole income goes to tax. Each rate only applies to the portion of income within that specific band. Someone earning $90,000 pays 0% on the first $18,200, 15% on the next portion up to $45,000, and 30% only on the remainder up to $90,000, so their effective (average) rate ends up well below 30%.

The Low Income Tax Offset (LITO)

LITO reduces the tax you owe, not your taxable income, and it's applied automatically when you lodge; there's nothing to claim separately. The maximum offset is $700, available in full for taxable income up to $37,500. It then phases out in two steps: reducing by 5 cents per dollar between $37,500 and $45,000, then by a further 1.5 cents per dollar between $45,000 and $66,667, disappearing entirely above that point. Combined with the $18,200 tax-free threshold, LITO effectively pushes the real tax-free point for most residents to somewhere around $22,575 to $22,867, depending on exact income.

The Medicare levy is separate from income tax

A 2% Medicare levy applies on top of income tax for most residents, funding Australia's public healthcare system, and it's calculated on your whole taxable income, not just the tax-payable amount. For 2026-27, singles with taxable income up to $28,011 pay no levy at all. Between $28,011 and $35,014, it phases in at 10 cents per dollar above the threshold. Above $35,014, the full 2% applies. Higher earners without appropriate private hospital cover may also face the separate Medicare Levy Surcharge (1% to 1.5%, on top of the standard levy), which kicks in around $101,000 for singles and $202,000 for families in 2026-27, income thresholds that are distinct from the standard levy's low-income thresholds above.

Worked examples at five income levels

Notice that the dollar saving from the bracket cut caps out at $268 once you earn $45,000 or above, since the cut only applies to the fixed-width $18,201–$45,000 band. Someone on $150,000 gets exactly the same $268 saving as someone on $50,000, just as a much smaller share of their total tax bill.

Superannuation, HECS, and what else sits outside this calculation

Superannuation Guarantee contributions (12% of ordinary time earnings, paid by your employer on top of your salary, not deducted from it) reached their final legislated rate on 1 July 2025 and are not scheduled to rise further. HECS/HELP student loan repayments are a separate, income-tested obligation calculated on top of everything above; the 2026-27 repayment threshold is $69,528, using a marginal system similar to income tax brackets rather than a single flat percentage. Neither superannuation nor HECS repayments are included in the worked examples above.

Non-residents pay a different scale entirely

Foreign residents for tax purposes have no tax-free threshold at all, and pay 30% from the very first dollar of Australian-sourced income up to $135,000, then 37% and 45% at the same thresholds as residents above that. Non-residents also don't pay the Medicare levy, since it funds a healthcare system they're not accessing as residents. This makes the effective tax rate meaningfully higher for a non-resident than a resident earning the identical amount, especially at lower incomes where the resident tax-free threshold and LITO would otherwise apply.

Common mistakes people make

• Assuming the tax cut is bigger than $268. The 1-point rate cut only applies to the $18,201–$45,000 slice, so the maximum saving is fixed regardless of how much you earn above that.
• Forgetting LITO phases out in two separate steps. The reduction rate changes at $45,000, not just at the final cutoff of $66,667, so the offset shrinks faster in the second phase-out zone.
• Confusing the Medicare levy with the Medicare Levy Surcharge. Nearly everyone pays the standard 2% levy above the low-income threshold; the surcharge is a separate, additional charge that only applies to higher earners without private hospital cover.
• Assuming superannuation is still increasing. The Superannuation Guarantee finished its multi-year phase-up at 12% on 1 July 2025 and is not legislated to rise further.
• Using resident brackets for a non-resident calculation. The two scales are structured completely differently, and using the wrong one significantly under or overstates the true tax bill.

Calculate your exact income tax plus Medicare levy with the Australia Income Tax Calculator.

Frequently Asked Questions