Personal tax rates cut from 1 July 2026 and 2027
The Government has proposed to cut the personal income tax rate for the income threshold ($18,200 to $45,000) from 16% to 15% (from 1 July 2026) and 14% (from 1 July 2027).
Under the proposed changes, every Australian taxpayer will receive a tax cut of up to $268 from 1 July 2026, rising to $536 from 1 July 2027.
The Government said the proposed tax cuts will provide “modest but meaningful” cost-of-living relief and “return bracket creep” by lowering average tax rates for all taxpayers, especially for low- and middle-income earners. The measure is expected to cost $17.1 billion.
Combined with the existing Stage 3 tax cuts from 2024–2025, the Treasurer said the average annual tax cut will increase to $2,229 in 2026–2027 and $2,548 (for 2027–2028) – so, around $50 per week (relative to 2023–2024 tax settings). A person on the average wage of around $79,000 will receive a total tax cut of $2,190 in 2027–2028 (compared to 2023–2024 tax settings).
The Government said the proposed tax cuts will reward workforce participation by encouraging part-time and lower income earners to take on more hours of work. According to the Government, the combined tax cuts will increase total hours worked by 1.3 million hours per week, equivalent to more than 30,000 full-time jobs, compared to 2023–2024 tax settings. This increase is anticipated to be driven mostly by women, who are expected to increase their labour supply by 900,000 hours compared to 2023–2024 tax settings.
The combined tax cuts are also estimated to increase nominal household disposable income by 1.9% by 2027–2028 (compared with 2023–2024 tax settings).
Current rates
The tax rates and income thresholds for residents for 2024–2025 and 2025–2026 (as already legislated) are:
- taxable income up to $18,200 – nil;
- taxable income of $18,201 to $45,000 – nil plus 16% of excess over $18,200;
- taxable income of $45,001 to $135,000 – $4,288 plus 30% of excess over $45,000;
- taxable income of $135,001 to $190,000 – $31,288 plus 37% of excess over $135,000; and
- taxable income of more than $190,001 – $51,638 plus 45% of excess over $190,000.
Proposed rates 2026–2027
The tax rates and income thresholds for residents for 2026–2027 (as proposed) are:
- taxable income up to $18,200 – nil;
- taxable income of $18,201 to $45,000 – nil plus 15% of excess over $18,200;
- taxable income of $45,001 to $135,000 – $4,020 plus 30% of excess over $45,000;
- taxable income of $135,001 to $190,000 – $31,020 plus 37% of excess over $135,000; and
- taxable income of more than $190,001 – $51,370 plus 45% of excess over $190,000.
Proposed rates 2027–2028
The tax rates and income thresholds for residents for 2027–2028 (as proposed) are:
- taxable income up to $18,200 – nil;
- taxable income of $18,201 to $45,000 – nil plus 14% of excess over $18,200;
- taxable income of $45,001 to $135,000 – $3,752 plus 30% of excess over $45,000;
- taxable income of $135,001 to $190,000 – $30,752 plus 37% of excess over $135,000; and
- taxable income of more than $190,001 – $51,102 plus 45% of excess over $190,000.
Low income tax offset (unchanged)
No changes were made to the low income tax offset (LITO) in the 2024–2025 Budget.
For completeness, and as a reminder, while the low and middle income tax offset (LMITO) ceased from 1 July 2022, low and middle income taxpayers remain entitled to the LITO.
The maximum amount of the LITO is $700. The LITO is withdrawn at a rate of 5 cents per dollar between taxable incomes of $37,500 and $45,000 and then at a rate of 1.5 cents per dollar between taxable incomes of $45,000 and $66,667.
Medicare levy low-income thresholds for 2024–2025
For the 2024–2025 income year, the Medicare levy low-income threshold for singles has been increased to $27,222 for 2024–2025 (up from $26,000 for 2023–2024). For couples with no children, the family income threshold is $45,907 (up from $43,846 for 2023–2024). The additional amount of threshold for each dependent child or student is $4,216 (up from $4,027).
For single seniors and pensioners eligible for the seniors and pensioners tax offset (SAPTO), the Medicare levy low-income threshold is $43,020 (up from $41,089). The family threshold for seniors and pensioners is $59,886 (up from $57,198), plus $4,216 for each dependent child or student.
Reduction of HELP debts
As announced in its mid-year economic and fiscal outlook (MYEFO), the Budget confirms that the Government intends to make changes that will reduce Higher Education Loan Program (HELP) and other student debts for more than three million Australians by around $19 billion. The measure will reduce outstanding student debts by 20% before indexation is applied on 1 June 2025 (subject to the passage of legislation) which will remove $16 billion in debt.
The Government has also confirmed it will commit $182.2 million over four years from 2024–2025 (and $402.3 million from 2028–2029 to 2034–2025) to reform the repayment system for the HELP and other student loan schemes. The reform will deliver a fairer student loan repayment system that is based on marginal rates and will increase the amount individuals can earn before they are required to start repaying their loan. It will take effect from 1 July 2025, subject to the passage of legislation.
The Government has already legislated a cap on HELP indexation based on the lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI). That change was backdated to 1 June 2023, and has already reduced outstanding student debt by around $3 billion, according to the Government.
Energy bill rebate extended: small business included
The Government will extend its energy bill rebate until the end of 2025 by providing a further two instalments of $75 (for a total of an additional $150) for households and small businesses.
From 1 July 2025, Mr Albanese said, households and around one million small businesses will see another $150 in rebates “automatically applied to their electricity bills in quarterly instalments, on top of the previous rebates already being rolled out”. Treasury estimates this will directly reduce inflation by 0.5 of a percentage point in 2025, and reduce household bills by 7.5% on average. The extra energy bill rebates will cost $1.8 billion.
Early childhood education: child care subsidy
The Government will provide $4.5 million over four years from 2025–2026 to Services Australia to make system changes to ensure consistency with the passing of recent legislation to implement the Child Care Subsidy (CCS) Three Day Guarantee. According to the Government, this will ensure families are entitled to at least three days a week of subsidised early childhood education and care.
The CCS Three Day Guarantee will replace the CCS activity test from January 2026.
The Government will also provide $2.5 million over two years from 2024–2025 as a one-off Business Continuity Payment of $10,000 to CCS approved services closed or partially closed for eight days or more due to impacts of Ex-Tropical Cyclone Alfred, subject to conditions, including providers agreeing to temporarily not charge families CCS gap fees during the closure period.
Help to Buy home scheme expanded; income and price caps increased
The Government will increase its equity investment in the Help to Buy scheme to $6.3 billion (up $800 million), and increase the income and price caps.
Under this shared equity loan scheme, the Commonwealth will provide an equity contribution up to 40% of the purchase price to assist up to 40,000 eligible first home buyers to purchase a new or existing home.
The Government said it will increase the scheme’s income cap from $90,000 to $100,000 for individuals, and from $120,000 to $160,000 for joint applicants and single parents.
The property price caps for eligible homes will also be increased and linked with the average house price in each state and territory, not dwelling price, so first home buyers have more choice. For example, the NSW capital city and regional centre price cap will be set at $1.3 million (rather than at the median house price of approximately $1.5 million) to ensure purchase prices remain within the borrowing capacity of first-home buyers. The cap will be $800,000 for NSW outside the capital city and regional centres.
The Minister for Housing, Claire O’Neil, said first home buyers on average rates with a $519,000 home will save about $900 per month when buying an existing home, and $1,200 per month when buying a new home.
Commonwealth legislation to establish the Help to Buy program was enacted on 10 December 2024, and the Help to Buy scheme is expected to be open for applications later in 2025, following registration of the Program Directions, passage of State legislation, and implementation by Housing Australia.