Tax Cuts 2025-26 — How Much You Save Under the New Tax Brackets

About the Stage 3 tax cuts are a major reform to Australia's personal income tax brackets that took effect on 1 July 2024. Originally legislated by the Morrison Government in 2019 as part of a three-stage tax reform plan, the cuts were redesigned by the Albanese Government in January 2024 to spread the benefit more evenly across income levels. The original Stage 3 plan would have created a single 30% rate for all income between $45,001 and $200,000, abolished the 37% bracket entirely, and primarily benefited higher-income earners.

The short answer? The revised version instead lowered the bottom marginal rate from 19% to 16%, reduced the 32.5% rate to 30%, raised the 37% threshold from $120,000 to $135,000, and kept the top rate at 45% for incomes above $190,000. The result is that every taxpayer earning above $18,200 receives a tax cut, with the largest percentage savings going to low and middle-income earners.

Here is a direct comparison. Under the original proposal (never enacted): $0-$18,200 nil, $18,201-$45,000 at 19%, $45,001-$200,000 at 30%, $200,001+ at 45%. Under the revised Stage 3 (now in effect): $0-$18,200 nil, $18,201-$45,000 at 16%, $45,001-$135,000 at 30%, $135,001-$190,000 at 37%, $190,001+ at 45%.

The key differences are the lower 16% rate in the first bracket (instead of keeping 19%), the retention of the 37% bracket between $135,000 and $190,000, and the lower 45% threshold at $190,000 instead of $200,000. For someone earning $60,000, the revised plan delivers $1,304 in annual savings versus $804 under the original.

For someone on $200,000, the revised plan saves $4,529 compared to $9,075 under the original. The government argued the revised version was fairer and more fiscally responsible.

Compared to the pre-July 2024 tax rates, here are the annual tax savings under the revised Stage 3 cuts. At $40,000: save $654 per year ($12.58/week). At $50,000: save $1,304 ($25.08/week).

Quick version: At $60,000: save $1,304 ($25.08/week). At $70,000: save $1,304 ($25.08/week).

At $80,000: save $1,304 ($25.08/week). At $100,000: save $2,179 ($41.90/week). At $120,000: save $2,679 ($51.52/week). At $140,000: save $3,729 ($71.71/week).

At $160,000: save $3,729 ($71.71/week). At $180,000: save $3,729 ($71.71/week) (and yes, this applies to casuals too).

At $200,000: save $4,529 ($87.10/week). The biggest percentage saving goes to someone earning $45,000 — they save $804, which is a 14% reduction in their total tax bill.

For a dual-income household where both partners earn $80,000, the combined saving is $2,608 per year.

These savings are automatic through your PAYG withholding — you do not need to do anything to receive them.

Since the revised Stage 3 rates have now been in effect for a full financial year (and continue unchanged into 2025-26), the impact on your fortnightly or monthly take-home pay is already baked into PAYG withholding schedules. For an employee earning $80,000 gross, the fortnightly take-home pay (after tax and Medicare levy, before HECS) is approximately $2,413 — about $50 more per fortnight than under the old rates. At $100,000, fortnightly take-home is approximately $2,949 — roughly $84 more.

At $60,000, fortnightly take-home is approximately $1,906 — about $50 more. If your employer has not updated their payroll tax tables since July 2024, you may not be seeing the full benefit in your pay, but you will receive the difference as a refund when you lodge your tax return.

Use our Take-Home Pay Calculator to see your exact take-home figure under the current rates.

An important context for understanding the Stage 3 savings is the removal of the Low and Middle Income Tax Offset (LMITO). The LMITO provided up to $1,500 in tax relief for the 2021-22 financial year (including the one-off $420 cost of living bonus) and $1,080 for 2022-23, but it wasn't extended beyond 30 June 2023. This means that for workers earning $48,000 to $90,000, the end of LMITO in 2023 effectively increased their tax by up to $1,080 per year.

The Stage 3 cuts partially offset this loss, but not entirely for all income levels. Someone earning $60,000 lost $1,080 from the LMITO removal but gained $1,304 from Stage 3 — a net benefit of $224 compared to 2022-23.

However, someone earning $40,000 lost around $675 from LMITO and gained only $654 from Stage 3 — leaving them roughly $21 worse off in net terms. The Low Income Tax Offset (LITO) of up to $700 remains available and is separate from LMITO.

As of March 2026, there are no legislated changes to personal income tax brackets beyond the current rates. The Stage 3 cuts were presented as the final stage of the three-part reform program. However, there's ongoing policy debate about bracket creep — the phenomenon where wage growth pushes workers into higher tax brackets even if their real purchasing power has not increased.

With average wages growing at 3-4% per year, the fixed bracket thresholds mean more Australians are paying the 30% and 37% rates each year. Treasury forecasts show that by 2028-29, bracket creep will have effectively clawed back most of the Stage 3 tax cut for median-income earners.

Some economists and the opposition have called for indexing tax brackets to inflation, as countries like the United States and Canada do. For now, the best approach is to understand the current rates and plan accordingly. Use our Tax Calculator to model scenarios for your income.

The Stage 3 tax cuts reduced income tax, but your take-home pay is also affected by other deductions that did not change. The Medicare levy remains at 2% of taxable income for most taxpayers, with a low-income threshold below which no levy is payable (approximately $26,000 for singles in 2025-26). The Medicare levy surcharge (1-1.5%) applies to higher-income earners without private health insurance — singles above $93,000 and families above $186,000.

Neither of these were affected by the Stage 3 changes. HECS-HELP repayment thresholds were indexed separately.

For 2025-26, repayments start at 1% of income once you earn above $54,435, rising through a graduated scale to 10% for incomes above $151,201. A worker earning $70,000 with a HECS debt repays approximately 4% ($2,800 per year), which reduces their take-home benefit from the Stage 3 cuts by about $54 per week — still leaving a net gain. Superannuation contributions (12% employer SG) aren't affected by the tax cuts as they are paid by the employer on top of salary. However, voluntary salary sacrifice into super reduces your taxable income, potentially compounding the benefit of lower marginal rates.

For example, someone earning $140,000 who salary-sacrifices $10,000 into super reduces their taxable income to $130,000, meaning that $10,000 is taxed at 15% inside super instead of 30% outside — a saving of $1,500 plus the Stage 3 reduction. Understanding how these deductions interact helps you calculate your true take-home position accurately.

About the revised Stage 3 cuts were specifically designed to benefit lower and middle-income earners, which means part-time workers and casuals earning modest annual incomes see the largest proportional savings. For a part-time worker earning $35,000 per year, the annual tax saving is approximately $504 — a 12.7% reduction in their total tax bill. At $40,000, the saving is $654 (14.0% reduction).

At $45,000, the saving is $804 (13.5% reduction). For casual workers, the benefit flows through the PAYG withholding system each pay period.

If you work irregular hours and your income fluctuates, the withholding tables are designed to estimate your annual income from each pay and apply the correct rate — but this can sometimes result in over-withholding for casuals who work variable hours across multiple employers. If you work for two employers, each will withhold tax assuming they are your only employer. The first employer applies the tax-free threshold; the second should withhold at a higher rate. At the end of the financial year, your tax return reconciles the actual tax owed against what was withheld.

Many part-time and casual workers receive a refund because of over-withholding during the year. The Stage 3 rate reduction from 19% to 16% in the $18,201-$45,000 bracket is particularly beneficial for these workers because a larger proportion of their income falls in this lower bracket. Keep records.

A worker earning $30,000 has $11,800 taxed at 16% instead of the old 19%, saving $354 directly from the rate cut in this bracket alone.

Australia taxes individuals, not households, which means the Stage 3 cuts apply to each earner separately. For dual-income households, the combined saving can be substantial. Here are examples.

Household where both partners earn $60,000: each saves $1,304, combined saving is $2,608 per year ($50.15 per week). Household with incomes of $80,000 and $45,000: $1,304 + $804 = $2,108 per year ($40.54/week).

Household with incomes of $120,000 and $50,000: $2,679 + $1,304 = $3,983 per year ($76.60/week). Household with incomes of $150,000 and $70,000: $3,729 + $1,304 = $5,033 per year ($96.79/week). Household where both partners earn $100,000: $2,179 + $2,179 = $4,358 per year ($83.81/week). These combined savings are enough to make a noticeable difference to household budgets — $2,608 per year is roughly equivalent to a week's worth of groceries each month, or $50 per week toward a mortgage or investment.

For single-income households, the individual savings apply. A single earner on $100,000 supporting a family saves $2,179 per year — less than a dual-income household earning the same total, because the progressive tax system means one person earning $100,000 pays more tax than two people each earning $50,000.

This structural feature of individual taxation has been a long-running policy discussion in Australia, but there are currently no proposals to introduce household-based taxation.

Several misconceptions about the Stage 3 tax cuts lead people to incorrect conclusions about their pay.

It means only the income above $45,000 (up to $135,000) is taxed at 30%. Your average tax rate is always lower than your marginal rate.

For someone earning $80,000, the average tax rate is approximately 22% — not 30%.

Several misconceptions about the Stage 3 tax cuts lead people to incorrect conclusions about their pay.

• confusing marginal rates with average rates. When someone says 'I'm in the 30% tax bracket,' this doesn't mean 30% of all their income goes to tax
• expecting a lump sum payment. The tax cuts aren't a one-off payment — they're built into the PAYG withholding tables and show up as slightly higher take-home pay each pay period. You don't need to apply for anything
• assuming the cuts stack on top of LMITO. The Low and Middle Income Tax Offset ended on 30 June 2023 and wasn't replaced
• not realising bracket creep is ongoing

The Stage 3 cuts partially replaced the LMITO benefit but through lower rates rather than a refundable offset. Some workers earning $48,000-$90,000 received less net benefit than they expected because they were comparing to the LMITO year rather than the true pre-cut baseline.

Even though the rates were cut, the bracket thresholds are fixed in dollar terms. Each year that wages grow, more of your income is pushed into higher brackets.

A 4% pay rise on $80,000 pushes an extra $3,200 into taxable income — of which $960 goes to tax at the 30% rate. Over time, bracket creep erodes the value of the tax cut entirely.

The only remedy is future bracket adjustments, which are not currently legislated.