Starting on 1 July 2026, personal income tax rates will be revised. On the final day of Parliament’s session, the personal income tax rate reduction was confirmed from the 2025-26 Federal Budget. This modest 1% reduction affects the $18,201 – $45,000 tax bracket, reducing the existing rate from 16% to 15% as of 1 July 2026, and further to 14% starting in the 2027-28 year. The tax cut could generate savings of up to $268 for the 2026-27 financial year and $536 for 2027-28. Given the implementation date of 1 July 2026, the outcome of the federal election on 3 May 2025, along with subsequent budgets, will determine if this change comes to fruition.
Medicare Levy Threshold Change for Low-Income Earners
Additionally, the Medicare levy threshold for low-income earners will be revised. Low-income earners don’t need to pay the compulsory 2% Medicare levy until their assessable income exceeds a certain threshold, depending on whether the taxpayer is single, a pensioner, or has dependent children.
The increase to the Medicare levy threshold that was announced in the Federal Budget has been confirmed by the Parliament. This threshold adjustment will be backdated to 1 July 2024, allowing taxpayers to benefit when they submit their tax return for the 2024-25 year.