A tax cut for the lowest bracket that was announced by the Australian government this week. They’re going to phase it down from 16 percent to 15 percent. This provision will go into effect on July 1, 2026 and is estimated to spend $17.1 billion from the budget. Treasurer Jim Chalmers characterized the tax cut as a “modest” measure that would deliver “targeted, cost of living relief to help Australians doing it tough, right now.” This reduction is a step in the right direction. In that, it tries to build on positive changes made to the stage 3 tax cuts, which were announced last year. That’s an additional $5 in taxpayers’ pockets for the 2026-27 fiscal year alone. In the out years, they could really be counting on $10 per week annually beginning in 2027-28.
Implementation and Impact
The tax rate reduction will take effect in two rounds, beginning in 2026 and going into effect fully in 2027. The first round of tax cuts started even sooner, back in July 2024. Beginning on July 1, 2026, tax brackets will change. You won’t pay any tax on income up to around $18,200. If you have an income between $18,201 and $45,000, you will pay a 15 percent tax rate. Further brackets include a 30 percent rate on income from $45,001 to $135,000, a 37 percent rate from $135,001 to $190,000, and a 45 percent rate on income above $190,000.
For the typical income earner earning $79,000 per year, that will translate into an additional tax cut of $268 annually. That includes imposition of the new 15 percent tax rate. The benefit will eventually increase to $536/year. This increase will only take place when the federal cigarette tax rate decreases to 14 percent on July 1, 2027.
Financial Reactions and Criticism
The opposition criticized the measure as inadequate, arguing it doesn’t do enough to ease the mounting cost pressures on Australian households.
"Seventy cents a day, in a year's time, is not going to help address the financial stress Australian families are currently under," said Angus Taylor, the opposition's treasury spokesperson.
Additionally, Taylor expressed concerns about the impact on household budgets.
"It will do nothing to restore your household budget now, at a time when the typical Australian household with a mortgage is $50,000 worse off."
The government argues that these cuts provide an opportunity for all Australians across various professions to retain more of their earnings.
"Whether you're a truckie, a teacher or a tradie, whether you're in manufacturing, mining or the care economy, you will earn more and keep more of what you earn," stated Treasurer Jim Chalmers.
Future Tax Bracket Savings
The projected savings disproportionately favor higher tax brackets. Taxpayers with an income of between $18,201 and $45,000 would receive a benefit of up to $1,340 by 2027-28. Those with incomes between $45,001 and $135,000 would save on average from $1,340 to $4,265. For still higher incomes, between $135,001 and $190,000, the savings would be between $4,265 and $5,065. People making over $190,000 will see an average benefit of almost $5,065.
