Labor's Game-Changing Tax Cuts: What You Need to Know

In a significant announcement from Labor’s federal budget, new tax cuts for all taxpayers are set to roll out in 2026 and 2027, complementing the initial round of cuts that begin in July 2024. Here’s a breakdown of what these changes mean for you.

How Will the Tax Cuts Work?

Starting July 1, 2026, the tax rate for the lowest bracket will drop from 16% to 15%. This means taxpayers will pay one cent less for every dollar earned between $18,201 and $45,000. The rate will further decrease to 14% on July 1, 2027.

The tax brackets will look like this from July 1, 2026:

No tax on income up to $18,200
15% tax rate on income between $18,201 and $45,000
30% tax rate on income between $45,001 and $135,000
37% tax rate on income between $135,001 and $190,000
45% tax rate on income above $190,000

These brackets apply consecutively, allowing everyone to earn their first $18,200 tax-free and then pay the relevant rate for their income in each subsequent bracket.

Financial Impact on the Budget

This initiative will cost the budget approximately $17.1 billion, which Treasurer Jim Chalmers described as a “modest” measure aimed at enhancing the stage 3 tax cuts announced last year. “Whether you’re a truckie, a teacher, or a tradie, you will earn more and keep more of what you earn,” Chalmers stated alongside Prime Minister Anthony Albanese.

How Much Will You Save?

For those earning the average income of $79,000, the tax cuts will translate to an additional $268 in savings per year at the 15% rate, and up to $536 per year once the rate drops to 14%. For incomes below $45,000, the savings will be slightly less.

Breaking it down weekly, this equates to approximately $5 back in your pocket during 2026-27, increasing to $10 weekly in 2027-28.