The 2026 brackets vs the old Stage 2 brackets
Stage 3 was originally legislated in 2018 by the Morrison government as part of a 7-year tax plan. Stages 1 and 2 (low-income offsets) ran 2018-2022. Stage 3 was due - the Labor government redesigned it in early 2024 before implementation.
2026 brackets (Stage 3 as redesigned): • $0 - $18,200: 0% (tax-free threshold, unchanged) • $18,201 - $45,000: 16% (was 19%) • $45,001 - $135,000: 30% (was 32.5% up to $120K) • $135,001 - $190,000: 37% (threshold raised from $120K) • $190,001+: 45% (threshold raised from $180K)
The Morrison original (never implemented): • $45,001 - $200,000: 30% • $200,001+: 45%
The redesign kept the same total budget cost (~$320B over 10 years) but redistributed cuts toward sub-$150K earners. Above ~$150K, Labor's version delivers smaller cuts than Morrison's would have.
Savings by income level
Compared to FY2023-24 (pre-Stage 3) tax, the annual saving in 2026 is:
• $30,000: saves $354/yr (1.2% of income) • $45,000: saves $804/yr (1.8%) • $60,000: saves $1,179/yr (2.0%) • $80,000: saves $1,679/yr (2.1%) • $90,000: saves $1,929/yr (2.1%) • $100,000: saves $2,179/yr (2.2%) • $120,000: saves $2,679/yr (2.2%) • $135,000: saves $3,729/yr (2.8%) • $150,000: saves $3,729/yr (2.5%) • $180,000: saves $3,729/yr (2.1%) • $200,000: saves $4,529/yr (2.3%)
The peak absolute saving is for earners between $135K-$200K - they get the full benefit of both the rate cut (32.5% → 30%) AND the threshold increases.
| Annual income | Annual tax saving | % of income |
|---|---|---|
| $30,000 | $354 | 1.2% |
| $45,000 | $804 | 1.8% |
| $60,000 | $1,179 | 2.0% |
| $80,000 | $1,679 | 2.1% |
| $100,000 | $2,179 | 2.2% |
| $135,000 | $3,729 | 2.8% |
| $180,000 | $3,729 | 2.1% |
| $200,000 | $4,529 | 2.3% |
Medicare Levy and bracket creep
The Stage 3 cuts are before the 2% Medicare Levy (which still applies on most income over the levy thresholds). For a $100K earner:
• Income tax 2026: $20,288 • Plus Medicare Levy (2%): $2,000 • Total: $22,288
Compare to FY2023-24: • Income tax: $22,467 • Plus Medicare Levy: $2,000 • Total: $24,467
Net saving: $2,179 in 2026 dollars.
Bracket creep is now your biggest tax problem: Australia's brackets are not indexed to inflation (unlike the US, where they auto-index). Inflation around 3-4% per year means you push into higher brackets even when your real income is flat.
For an earner who started at $90K in July 2024 with 3.5% annual pay rises: • July 2025: $93,150 • July 2026: $96,410 • July 2027: $99,785 (now nearer the 37% bracket - though still $35K away) • July 2030: $111,520 (still in the 30% bracket)
The redesigned Stage 3 made the 30% bracket much wider ($45K - $135K), so bracket creep is less painful for mid-income earners than under the old structure.
What you should actually do with the savings
For most earners, the Stage 3 cut shows up as a modest fortnightly bump in take-home - $40-$120 depending on income. Easy to spend, easy to miss.
Salary sacrifice into super: still the highest-ROI move. With a 30% marginal rate (most earners $45K-$135K), you save 15% by routing extra income through super (taxed at 15% instead of 30%).
Pay down high-interest debt first: credit cards at 20%+, personal loans at 8-12% - guaranteed return. Mortgage at 6%+: depends on whether you have an offset account.
HECS-HELP overpayment: indexation on 1 June each year is now CPI-or-WPI, whichever is lower (a 2024 reform). Average ~3.5% indexation - the threshold for compulsory repayment is $54,435 in 2025-26. Voluntary repayments before 1 June save you indexation on the amount repaid.
First Home Super Saver Scheme: voluntary super contributions taxed at 15% you can later withdraw for first home deposit - max $50K release per person. Couples can stack to $100K+.
Comparison: Stage 3 vs other countries' 2026 cuts
Australia's Stage 3 is one of the most generous tax cut packages in the OECD over 2024-2026:
UK: National Insurance dropped from 12% → 8% (Jan 2024 + April 2024) - saves $90K earner ~£754/yr. Income tax thresholds frozen until 2028 (fiscal drag).
US: TCJA (Trump cuts) expired Dec 31 2025 - rates went UP for most middle-income earners in 2026. A $90K (US) earner now pays roughly $1,800 MORE per year than in 2025.
Canada: brackets indexed to CPI (auto-rises each year). No standalone cut package - federal marginal rates unchanged.
Germany: 2026 raised tax-free threshold from €11,604 → €12,096, saves median earner ~€90/yr.
Australia's mid-income cuts ($1,200-$3,700/yr) are larger than any other major economy's 2026 changes. The political question is whether they're inflationary - the RBA cited Stage 3 as one reason for keeping cash rate higher for longer through 2024-2025.
Run the math for your situation
Use our 🇦🇺 Australia calculator to plug in your own numbers.