Tax cuts: how much tax will you save in the new financial year?
Key takeaways
- Most Australian workers will pay less income tax in the 2026–27 financial year, thanks to changes to marginal tax rates.
- There's also a new $1,000 instant deduction workers are able to claim at tax time.
- What's next: There are several other small changes that should benefit more taxpayers.
It's a new financial year, and that means some of the May budget's proposed tax changes are now in effect (plus some ones scheduled from previous budgets).
This works out to lower taxes for most workers (unless you have over $3 million in super). Here's how you're saving on tax this financial year.
1. There's a tax cut for most workers
Last financial year, Australian workers paid 16 cents for every dollar they earned between $18,201 and $45,000.
From this month it's now 15 cents per dollar. That represents a small but meaningful tax cut for every worker.
Basically, if you earn $45,000 or more, you're paying $268 less in tax now.
There's another scheduled tax cut from July 2027, when the 15 percent rate drops even further to 14 percent.
2. The $1,000 instant deduction
There's also a new $1,000 instant tax deduction that applies in the current financial year. This allows workers to instantly deduct $1,000 from their taxable income without providing any receipts.
The federal government estimates this will save the average worker $205.
Of course, if you have more than $1,000 in deductions, you can claim those on your tax return as you normally would (just make sure you keep records).
3. Higher Medicare Levy Surcharge thresholds
Another tweak to the tax rules that will benefit some people is an increase to the Medicare Levy Surcharge thresholds.
These thresholds are the income level at which Australians get taxed extra if they don't have private hospital cover.
Last year, anyone earning over $101,000 ($202,000 for families) had to pay at least 1% extra in tax if they didn't have the right private health cover.
In the current financial year these thresholds have increased to $105,000 or $210,000 for families. This means more people will be able to avoid this extra tax.
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More tax changes you should know about
There are many other small tax changes that will affect your finances.
HECS/HELP repayment changes
The HECS/HELP repayment threshold has increased, meaning you won't have to repay any study loans until you're earning at least $69,529.
And the repayment rate has changed too. You have to repay 15 cents for every dollar you earn above the threshold. For every dollar you earn above $129,717 you have to repay 17 cents.
And if you earn over $186,051 you'll pay 10% of your income.
Super contribution cap increases
Superannuation concessional contribution caps have also increased. The cap was $30,000 last financial year. Now it's $32,500.
This means you can add more money to your super balance (and claim a deduction at tax time).
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There is some bad news in the new financial year. But only for people with over $3 million in super (must be nice). There's a new 15% tax on super fund earnings on balances above $3 million.
But it's just the earnings that are taxed, not the balance. And the tax only applies to the earnings on the proportion of your balance that exceeds $3 million. For most people, it's not a huge tax burden.
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