The 15% first tax band in 2026-27 vs 16%: what it changes

Rates checked 1 November 2026 · Go Home Early

The lowest taxed band of the resident tax rates fell from 16% to 15% on 1 July 2026. This guide shows what that does to the tax on a salary, who gets the full benefit, and what it does not change. All dollar figures are worked out by the same code as the pay calculator, with only the first-band rate changed between the two columns that are compared.

1. What changed

Schedule 7 of the Income Tax Rates Act 1986 sets the rates for resident taxpayers year by year. The first clause lists three sets: one for 2024-25 and 2025-26, one for 2026-27, and one for 2027-28 and later years. Only the first taxed band differs between them.

The tax-free threshold stays at $18,200 and the other thresholds do not move. The reduction applies to the part of your taxable income between $18,200 and $45,000, Everyone with income in that band pays less on that slice, and everyone above it pays less by the same fixed amount.

2. The most anyone saves is $268 a year

One percentage point of the $26,800 band between $18,200 and $45,000 is $268. Someone whose taxable income is $45,000 or more has the whole band taxed at 15%, so the saving is $268 compared with 2025-26 rates, and it does not grow as income rises. It is about $22.33 a month, $10.31 a fortnight or $5.15 a week.

Someone with income inside the band saves 1% of the amount over $18,200 instead. The table compares income tax at the 16% rate with income tax at the 15% rate, after the low income tax offset, for a resident who claims the tax-free threshold.

At $20,000 the low income tax offset (up to $700) already reduces the tax to nothing, so the lower rate changes nothing. At $30,000 the saving is $118. From $45,000 upwards it is a flat $268, which is 0.45% of a $60,000 salary and 0.13% of a $200,000 salary.

3. What is not affected

• The Medicare levy. It is 2% of taxable income, not of tax, so a lower first-band rate does not change it. On $100,000 it is $2,000 in both years.
• The low income tax offset. The offset is worked out from taxable income in section 61-115 of the Income Tax Assessment Act 1997 and its steps did not change. Its maximum is $700, and it ends at $66,667.
• HELP repayments. These follow their own table, covered in the HELP repayment guide.
• Super. The super guarantee is 12% of ordinary time earnings and does not depend on the tax rate. See the super payslip check.

4. Why your payslip may not show it as $268

Employers withhold tax during the year using the ATO withholding tables, which are set in a separate legislative instrument. The 2026 instrument applies from 1 July 2026, and its coefficients are the ones used by the pay calculator. If nothing else about your pay changed, the tax withheld across the year should be lower by roughly the amounts above. Any raise, bonus, second job, change in hours or change in HELP status will move your withholding by far more than $10.31 a fortnight, so comparing two payslips by eye is unreliable. The yearly figure is the one to compare, and it is settled when you lodge your tax return.

The table is for a resident for tax purposes, with one job and the tax-free threshold claimed. A foreign resident, a working holiday maker or someone with a different withholding declaration has different rates, which this guide does not cover.

5. The next step down in 2027-28

The same clause of the Act sets the first band at 14% for 2027-28 and later years. Compared with 2025-26, the yearly saving for anyone with taxable income of $45,000 or more would then be $536, twice the 2026-27 figure. At $30,000 the saving against 2025-26 would be $236. The 2027-28 figures depend on the Act staying as it is and on the other parameters for that year, which are not yet known, so treat them as a reading of the current law and not as a forecast of take-home pay.

6. What it means at tax return time

The rate is applied to your taxable income for the whole year when the ATO issues your assessment. Withholding during the year is only an estimate of that bill. If your employer withheld using the 2026 tables and your circumstances are plain, the amount withheld and the assessed tax should be close, and the lower first-band rate is already built into both. You do not claim the reduction anywhere and there is no form for it. A refund or a bill at the end of the year comes from the usual causes, such as deductions, a second job or income the employer did not know about, and not from the rate change itself.

7. Working it out for your own salary

1. Take your taxable income. Salary sacrifice and deductions come off before the tax is worked out, so use the figure after them.
2. Subtract $18,200. If the result is zero or less, the lower rate does not affect you.
3. Take the smaller of that result and $26,800.
4. Multiply by 0.01. That is the yearly saving compared with the 16% rate, before the offset limits it.

For $60,000 the smaller number is $26,800, and $26,800 times 0.01 is $268. The take-home pay guide carries the whole calculation through to take-home pay at three salaries.

This is general information about how the rates work, not advice about your tax return. If a figure matters for a decision, check it against the ATO or a registered tax agent.

Sources

• Income Tax Rates Act 1986, Schedule 7 clause 1 (rates for 2024-25 and 2025-26, 2026-27, and 2027-28 onward), in force 1 July 2026
• Medicare Levy Act 1986, in force 1 July 2026
• Taxation Administration (Withholding Schedules) Instrument 2026, Schedule 1
• Every rate used, with its source and check date: Sources and rates

This calculator is general information, not tax, legal or financial advice. It uses the legislation and official pages listed on the Sources page, and your payslip, award, agreement or tax return may differ. Rates as at 1 November 2026.

Written and checked against the legislation by the operator, who has run payroll for a small team firsthand. About: /au/about/