How the 2025–26 Income Tax Cuts Affect Your Take-Home Pay
Tax time in 2025 brings meaningful changes to how Australians are taxed. The 2025–26 income tax cuts, part of the Stage 3 reforms, aim to ease inflation and rising cost-of-living pressures. But how much difference will these tax changes make to your take-home pay?
What’s Changing from 1 July 2025
From 1 July 2025, the tax brackets shift:
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The 16% rate for incomes between $18,201 and $45,000 stays in place.
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In 2026–27, that rate falls to 15%, and again to 14% in 2027–28.
These cuts mean modest but real relief for many Australians.
Impact on Middle-Income Earners
For those earning around $70,000–$90,000, savings will be noticeable but not dramatic. For example, a worker earning $90,000 may see small weekly increases in take-home pay once the brackets adjust.
However, these cuts don’t fully eliminate bracket creep—where inflation pushes your income into higher tax brackets without a real boost in purchasing power. Over time, this can still erode the benefits for many middle-income Australians.
Why Planning Ahead Matters
If you’re earning in the low-to-middle income range, you will benefit from the upcoming bracket reductions—especially from July 2026 onwards. But the gains are modest, so it’s important to:
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Check your current bracket
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Forecast your income for the next few years
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Calculate how much you’ll save under the new rates
Speaking with a tax advisor or lawyer can help you plan ahead, particularly if your income is rising and you risk moving into higher brackets.
Final Thoughts
The 2025–26 income tax cuts deliver small but welcome savings for many Australians. They’re a step toward easing cost-of-living pressures, but they won’t fully shield households from inflation or bracket creep. Careful planning remains essential.
– Need tailored advice? Read our latest post on ATO enforcement for insights into when you may need legal help.
– For official rates and updates, see the ATO’s income tax thresholds.