While much attention has focused on newly proposed Budget measures, several important changes have already been legislated and are scheduled to commence from 1 July 2026.

These changes include:

• Personal income tax cuts
• Payday Super reforms
• The new Division 296 superannuation tax

These measures may significantly affect employees, retirees, high-balance superannuation members and employers over coming years.

Personal Income Tax Cuts

From 1 July 2026

Tax cuts for all Australian taxpayers will commence from 1 July 2026 through a reduction in the lowest marginal tax rate.

New Tax Rates

The tax rate applying to taxable income between $18,201 and $45,000 will reduce as follows:

• From 1 July 2026: reduced from 16% to 15%
• From 1 July 2027: reduced further from 15% to 14%

All other personal tax brackets will remain unchanged.

Updated Marginal Tax Rates

2026–27 Financial Year

• $0 – $18,200: Tax free
• $18,201 – $45,000: 15%
• $45,001 – $135,000: 30%
• $135,001 – $190,000: 37%
• Over $190,000: 45%

2027–28 Financial Year

• $0 – $18,200: Tax free
• $18,201 – $45,000: 14%
• $45,001 – $135,000: 30%
• $135,001 – $190,000: 37%
• Over $190,000: 45%

Estimated Tax Savings

The legislated tax cuts are expected to provide:

• Up to $268 in annual tax savings in 2026–27
• Up to $536 in annual tax savings in 2027–28

compared to current tax settings.

Increased Effective Tax-Free Thresholds

The reduction in the lowest marginal tax rate will also increase several effective tax-free thresholds.

Seniors and Pensioners Tax Offset (SAPTO)

For singles:

• The SAPTO income shading-out threshold increases from $34,919 to $36,033 in 2026–27
• Increasing further to $37,307 in 2027–28

For members of a couple:

• The threshold increases from $30,994 to $31,847 in 2026–27
• Increasing further to $32,821 in 2027–28

Effective Tax-Free Thresholds

For individuals eligible for Low Income Tax Offset (LITO) only:

• Threshold increases from $22,575 to $22,866 in 2026–27
• Increasing further to $23,200 in 2027–28

For singles eligible for both LITO and SAPTO:

• Threshold increases from $35,813 to $36,960 in 2026–27
• Increasing further to $38,147 in 2027–28

For couples eligible for both LITO and SAPTO:

• Threshold increases from $31,888 to $32,773 in 2026–27
• Increasing further to $33,783 in 2027–28

Potential Impact

The higher effective tax-free thresholds may particularly benefit:

• Retirees
• Part Age Pension recipients
• Lower income earners
• Older Australians receiving SAPTO

Payday Super Reforms

From 1 July 2026

The Payday Super reforms will require employers to pay Super Guarantee (SG) contributions at the same time as salary and wages instead of quarterly.

Key Objectives

The changes are designed to:

• Improve visibility of super contributions for employees
• Reduce unpaid superannuation
• Improve retirement savings outcomes
• Increase employer compliance

Additional Administrative Changes

The reforms also include:

• Changes to the SG earnings base calculations
• Changes to the Maximum Contributions Base rules
• New reporting and administration requirements

Potential Impact for Employers

Employers may need to review:

• Payroll systems
• Cash flow management
• Payroll processing procedures
• Superannuation payment systems

Businesses using older payroll systems may require upgrades before the commencement date.

Potential Impact for Employees

Employees may benefit from:

• Faster superannuation contributions
• Improved tracking of SG payments
• Earlier investment of retirement savings
• Reduced risk of unpaid super

Division 296 Superannuation Tax

From 1 July 2026

The new Division 296 tax will apply to individuals with Total Super Balances exceeding $3 million.

The first assessments will generally be issued after 30 June 2027 based on the 2026–27 financial year.

How Division 296 Works

The new rules impose:

• An additional 15% tax on earnings attributable to balances above $3 million
• A further 10% tax (total additional tax of 25%) on earnings attributable to balances above $10 million

The additional tax is assessed to individuals rather than directly to their super fund.

Payment Options

Individuals affected by Division 296 may choose to:

• Pay the tax personally, or
• Elect to release funds from superannuation to pay the liability

New Reporting Requirements

Superannuation funds will be required to:

• Calculate each member’s attributable earnings
• Report Division 296 information to the ATO
• Apply different attribution methods depending on fund type

Treatment of Capital Gains

The legislation confirms:

• Only realised capital gains accruing from 1 July 2026 onward will be taxed under Division 296
• Transitional relief measures will apply in the first year
• Special provisions will apply following a member’s death
• Threshold indexation rules will also apply

Potential Impact on High-Balance Super Members

The changes may significantly affect:

• SMSF members with large balances
• Investors with concentrated asset holdings
• Individuals with rapidly growing superannuation balances
• Estate planning strategies

Clients with balances approaching or exceeding the thresholds may need to review:

• Contribution strategies
• Investment structures
• Asset ownership arrangements
• Retirement income planning

Key Takeaways

Several major financial and taxation reforms have already been legislated and are scheduled to commence from 1 July 2026.

Key measures include:

• Personal income tax cuts
• Increased effective tax-free thresholds
• Payday Super reforms
• Division 296 superannuation tax

These changes may have important implications for:

• Employees
• Employers
• Retirees
• SMSF members
• Higher balance superannuation investors

With commencement dates approaching, individuals and businesses may benefit from reviewing their financial, tax and superannuation strategies well in advance.

Professional financial and tax advice can help ensure appropriate planning ahead of the new rules taking effect.

Source: Federal Budget 2026–27 FirstTech Briefing Paper.

 

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Disclaimer and Warning

The information above is of a general nature only.  It should not be used as a source to make financial decisions. It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.