Two things are happening at once this tax time, and it’s easy to mix them up. You’re likely finalising your 2025-26 tax return, which is still governed by the rates that applied for the full year to 30 June 2026.
At the same time, the new Stage 3 rates quietly kicked in from 1 July 2026 and are already showing up in your pay packet. Here’s what’s actually changed, why your refund might look different this year, and what’s worth checking now that the new financial year is underway.
A Quick Recap: What Changed in 2024
The Stage 3 tax cuts were originally designed to simplify Australia’s tax brackets and provide broad-based relief for taxpayers. From 1 July 2024, a new set of marginal rates applied: a tax-free threshold up to $18,200, then brackets of 16%, 30%, 37% and 45%.
If you didn’t notice much difference at the time, you’re not alone. Many employees didn’t clock the change beyond a modest bump in take-home pay.
What’s Changed From 1 July 2026
For the 2026-27 financial year, the following marginal tax rates now apply:
| Taxable Income | Marginal Tax Rate |
|---|---|
| $0 – $18,200 | 0% |
| $18,201 – $45,000 | 15% |
| $45,001 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| $190,001 and above | 45% |
The only change from the 2024 rates is the rate on income between $18,201 and $45,000, which has dropped from 16% to 15%. Every other bracket stays exactly where it was. It’s a modest adjustment on paper, but for most taxpayers it means a small, ongoing increase to take-home pay rather than a one-off refund.
Why Your 2025-26 Refund Might Look Different
If you’re lodging your return for the year just gone and noticing a smaller refund than expected, it’s worth understanding that this has nothing to do with the new rates above, since those only started applying from 1 July 2026.
What we’re actually seeing is that payroll and PAYG withholding software has become considerably more accurate over the past couple of years. Withholding now tracks much closer to an employee’s actual annual tax liability than it used to, particularly for employees without negatively geared properties or other deductions that used to create a bigger gap between what was withheld and what was owed.
In practice, that means smaller refunds aren’t necessarily a sign anything has gone wrong. It’s often simply that less tax was overpaid throughout the year in the first place. That said, it’s a frustrating shift for a lot of clients, and we understand why. Nobody enjoys a smaller refund than they were expecting, even when the underlying maths checks out.
What to Check in Your Pay Packet Now
With the new rates live since 1 July, it’s worth taking a few minutes to check your payslip reflects them correctly, particularly if your employer uses in-house payroll software rather than a major provider. A few things worth confirming:
Your PAYG withholding has adjusted to the new rate on income in the $18,201 to $45,000 bracket.
If you’ve had a change in income, whether a pay rise, reduced hours, or a new job, your withholding still lines up with your expected annual liability.
Any salary packaging arrangements you have in place still make sense under the new rates.
Getting Ahead for the Rest of FY 2026-27
Rather than waiting until next June to think about tax planning, this is a good time to get ahead of it for the year now underway. A couple of things worth prioritising early:
Superannuation carry-forward contributions: If you have unused concessional contributions cap amounts from previous years, you may be able to make additional deductible super contributions now using the carry-forward provisions, rather than scrambling at the last minute next financial year.
This is one of the most common questions we get from clients, and one of the most useful levers available for reducing taxable income if your circumstances allow it.
Investment and property deductions: If you hold investment properties or other income-producing assets, start your record-keeping habits for the year now rather than trying to reconstruct them at tax time in 2027.
Salary packaging: If your employer offers salary packaging, it’s worth reviewing whether the arrangement still stacks up given the adjusted rates, rather than assuming last year’s setup is still optimal.
Looking Ahead: Future Changes
Tax policy doesn’t stand still, and further adjustments are likely in the years ahead as governments respond to bracket creep, budget pressures, and economic conditions. Staying on top of these changes as they’re announced, rather than reacting once they take effect, puts you in a much stronger position to plan around them.
When to Speak With an Accountant
No two taxpayers’ circumstances are the same. We all earn different income, pay different amounts of tax, have different deductions, and are at different stages of our lives. Tax planning is an important part of wealth creation, and the approach should be tailored, considered and calculated rather than generic.
It’s particularly worth speaking with an accountant if you’ve had a large change in income, have salary packaging or investment income to manage, or are dealing with more complex deductions or property investments.
If you’re unsure how these changes affect you, speaking with a professional is the best way to make sure you’re maximising your tax position rather than leaving it to guesswork.
We’ll be able to talk you through what these changes are and what they could mean for you in the future.
