Tax cuts for Australian workers: What you need to know

Every Australian worker will be getting $268 tax cut as part of Anthony Albanese’s bid to win over voters battling the cost-of-living crisis.

The relief is going up for two years in a row, adding up to $536, as income tax rates are reduced from 2026 and 2027 for Australians in part-time work.

From 1 July 2026, the 16 per cent tax rate for incomes earned between $18,201 to $45,000, will be reduced to 15 per cent – leading to tax relief of $268.

And from 1 July 2027, this tax rate will be reduced further to 14 per cent – producing relief of $536 over two years.

That means every Australian taxpayer earning above $45,000 will get an extra tax cut of $268 in 2026-27 and $536 from 2027-28.

Combined with the stage three tax cuts introduced last year, a worker with a middle income of $72,592 will receive a total tax cut of $1,762 in 2026-27 and $2,030 annually from 2027-28.

Treasurer Jim Chalmers said the tax cuts, worth $17.1billion plan over four years were part of a plan to give all Australians some relief from rising prices.

‘Every Australian taxpayer will get a tax cut next year and the year after, to top up the tax cuts which began last July,’ he told Parliament.

‘This will take the first tax rate down to its lowest level in more than half a century.

‘The Government’s tax cuts reward participation, encouraging Australians, particularly women, part-time and lower income earners, to take on more hours of work.’

The Treasury Budget papers argued the relief was about addressing bracket creep where those in work pay higher levels of income tax as their pay levels rise to keep up with inflation.

‘These new tax cuts return bracket creep by lowering average tax rates for all taxpayers, especially for low- and middle-income earners,’ it said.

But H&R Block tax expert Mark Chapman told Daily Mail Australia tax thresholds would need to be indexed annually for inflation to tackle bracket creep where routine pay rises see Australians pay more tax.

Labor’s focus on providing tax relief to low-income earners extends the government’s rejigging of the former Coalition government’s stage three tax cuts, which were first legislated in 2019 to start in July 2024.

The Australian government’s tax take is expected to climb to $735.9billion by 2027-28, up from $645.2billion in 2024-25, making up 23.4 per cent of gross domestic product.

Government payments are expected to climb to $777.5billion in 2025-26.

The tax-free threshold is remaining at $18,200.

The 30 per cent marginal tax rate of 30 per cent remains in place for those earning $45,000 to $135,000, as the 37 per cent tax bracket stays in place for those earning between $135,000 and $190,000.

The 45 per cent tax rate remains in place for those on more than $190,000.

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