Australia 2026-27 Tax Changes Guide

The 2026-27 financial year delivers a series of material tax changes for Australians — including a reduction in the second personal income tax bracket to 15%, a permanent $20,000 instant asset write-off for small business, the commencement of Payday Super and Division 296 tax on high super balances, and the final year of the 50% CGT discount before it is replaced by cost base indexation in July 2027. The Federal Budget handed down on 12 May 2026 confirms the major measures, while some remain subject to legislation. This guide covers every change that matters for individuals, investors, and business owners.

Data in this article reflects legislation and budget announcements as at 5 July 2026, sourced from the Australian Taxation Office, Treasury, and official budget papers.

Personal income tax: Stage 3 continues

The Stage 3 tax cuts remain the most consequential reform to Australia's personal tax system in a generation. From 1 July 2026, the marginal rate for the second tax bracket ($18,201 to $45,000) drops from 16% to 15%. This is the second-last step in the legislated pathway — the rate will fall again to 14% from 1 July 2027.

The 2026-27 resident tax brackets are as follows:

$0–$18,200: Nil (tax-free threshold)
$18,201–$45,000: 15 cents per dollar over $18,200
$45,001–$135,000: $4,020 plus 30 cents per dollar over $45,000
$135,001–$190,000: $31,020 plus 37 cents per dollar over $135,000
Over $190,000: $51,370 plus 45 cents per dollar over $190,000

No other bracket or threshold changes apply for 2026-27.

Low Income Tax Offset (LITO)

The Low Income Tax Offset provides a maximum offset of $700 for the 2026-27 year. The effective tax-free threshold with LITO is approximately $22,867. Note that the Low and Middle Income Tax Offset (LMITO) ended on 30 June 2022 and is no longer available.

Medicare Levy and Surcharge

The Medicare Levy remains at 2% of taxable income. The single threshold is $28,011 with a shade-in range from $28,011 to $35,014 at a rate of 10 cents per dollar. The family threshold is $47,238 with $4,338 per additional child.

The Medicare Levy Surcharge (MLS) applies to individuals and families who do not hold private hospital cover and earn above the relevant thresholds:

Tier 1 (1%): Single income $105,001–$123,000; Family income $210,001–$246,000
Tier 2 (1.25%): Single income $123,001–$164,000; Family income $246,001–$328,000
Tier 3 (1.5%): Single income over $164,000; Family income over $328,000

HECS/HELP repayment

From 2025-26, the repayment system moved to a marginal repayment model. The 2026 indexation rate applied on 1 June 2026 is 2.8%. Repayment brackets for 2026-27 are:

Below $69,528: No repayment
$69,528–$129,717: 15 cents per dollar above $69,528
$129,717–$186,050: $9,028 plus 17 cents per dollar above $129,717
Above $186,050: 10% of total repayment income

Company tax and small business

Permanent instant asset write-off

The $20,000 instant asset write-off was made permanent from 1 July 2026, announced in the 12 May 2026 Budget. This is a significant shift from previous years when the measure was repeatedly extended on a temporary basis. Key features:

Available to small businesses with aggregated turnover under $10 million
Applies on a per-asset basis — you can claim multiple assets
Assets costing $20,000 or more can still be placed in the simplified depreciation pool
Pool assets depreciate at 15% in the first year and 30% in subsequent years
Pool balances under $20,000 at year-end can be fully written off
The five-year re-entry restriction on the simplified depreciation regime has been suspended until 30 June 2027

The standard company tax rate remains unchanged at 30%, with base rate entities (aggregated turnover under $50 million, with no more than 80% passive income) paying 25%.

Superannuation: caps indexed, Division 296 begins

The Super Guarantee rate remains at 12% for 2026-27, having reached its legislated maximum. Several caps have been indexed, and the new Division 296 tax on high-balance super earnings takes effect.

Indexed caps for 2026-27

Concessional contributions cap: $32,500 (up from $30,000)
Non-concessional contributions cap: $130,000 (up from $120,000)
Bring-forward maximum: $390,000 (up from $360,000)
General transfer balance cap: $2,100,000 (up from $2,000,000)
Maximum contribution base: $270,830

The Division 293 income threshold remains unchanged at $250,000. Individuals earning above this threshold pay an additional 15% tax on concessional contributions (total 30%).

Division 296: tax on high super balances

Division 296 became law on 13 March 2026 and takes effect from 1 July 2026. It imposes additional tax on superannuation earnings for individuals with large total super balances:

Balances above $3 million: 15% additional tax on earnings attributable to the proportion above $3 million
Balances above $10 million: An additional 10% tax on earnings above $10 million

This is distinct from Division 293 — Division 296 taxes the earnings on high balances, while Division 293 taxes concessional contributions for high-income earners.

Payday Super

From 1 July 2026, employers must pay the Super Guarantee within 7 business days of each payday. This replaces the previous quarterly payment model and is designed to prevent unpaid super accumulating over months.

Carry-forward and downsizer contributions

The carry-forward rule remains unchanged: individuals with a total super balance below $500,000 at 30 June of the prior year can use unused concessional cap amounts from up to five previous financial years. Downsizer contribution rules are also unchanged.

Capital Gains Tax: final year of the 50% discount

The 50% CGT discount for individuals and trusts remains in place for the 2026-27 financial year — but this is the final year. From 1 July 2027, it will be replaced by cost base indexation plus a 30% minimum tax floor.

Other CGT measures to be aware of:

FRCGW withholding: The Foreign Resident Capital Gains Withholding rate is 15% on all Australian real property sales, with no minimum property value threshold. Australian residents must obtain an ATO clearance certificate to avoid withholding.
Negative gearing quarantine from 1 July 2027: Rental losses on established property acquired after 7:30 PM AEST 12 May 2026 can only offset rental income or property CGT. Pre-cutoff acquisitions are grandfathered.
Discretionary trust minimum tax: A 30% minimum tax on discretionary trust income from 1 July 2028, with restructure rollover relief available from 1 July 2027 to 30 June 2030.

Pre-CGT assets (acquired before 19 September 1985) will be brought into the tax net for gains realised after 1 July 2027, making the pre-CGT exemption a closing window.

FAQ

When do the tax bracket changes take effect?

The second-bracket rate reduction from 16% to 15% took effect on 1 July 2026. The next legislated reduction — to 14% — takes effect on 1 July 2027.

Who qualifies for the $20,000 instant asset write-off?

Small businesses with aggregated annual turnover of less than $10 million. The write-off is per asset, so you can claim multiple items. While it was announced as permanent in the 2026-27 Budget, the legislation has not yet been passed.

What is Division 296 and who does it affect?

Division 296 imposes a 15% additional tax on superannuation earnings attributable to balances above $3 million, and an additional 10% on earnings above $10 million. It applies from 1 July 2026 and affects individuals with very large super balances.

How does the negative gearing quarantine work?

From 1 July 2027, rental losses on established residential property acquired after 7:30 PM AEST 12 May 2026 can only be used to offset rental income or capital gains from residential property. They cannot reduce tax on other income such as salary. Losses can be carried forward indefinitely.

Is LMITO still available in 2026-27?

No. The Low and Middle Income Tax Offset (LMITO) ended on 30 June 2022. Only the Low Income Tax Offset (LITO), capped at $700, is available.