Your tax rate just dropped. Here is exactly how much more you will take home from 1 July

Something changed in every Australian worker’s pay packet this week.

From 1 July 2026, the tax rate on income between $18,201 and $45,000 dropped from 16% to 15%. This delivered a tax cut to almost every Australian taxpayer regardless of income level.

The cut is applied automatically through your employer’s payroll. You do not need to do anything to receive it.

The actual dollar amount

The size of the benefit depends on how much of your income falls in the $18,201 to $45,000 bracket.

For someone earning exactly $45,000, the benefit from this round of cuts alone is approximately $268 per year, or around $5.15 per week.

For someone earning above $45,000, the benefit is also $268, since the portion of income taxed at the lower rate also receives this benefit.

However, the government’s total tax cuts since 2024 are larger than this single round.

An average earner on $81,245 will receive $1,978 in total tax cuts in FY27 compared to 2023-24 settings, when all three rounds of legislated tax cuts are combined.

That is $38 per week more in take-home pay than two years ago.

From 1 July 2027, the same bracket rate drops again to 14%, adding an additional maximum of $268 per year in tax savings.

The $1,000 instant tax deduction

Alongside the rate cut, a new $1,000 instant tax deduction for work-related expenses starts this financial year.

Previously, workers could only claim up to $300 in work-related expenses without providing receipts.

From FY27, that cap rises to $1,000, meaning workers can reduce their taxable income by up to $1,000 from the first dollar of work expenses without keeping a single receipt.

For a worker paying the 32.5% marginal rate, claiming the full $1,000 deduction is worth approximately $325 in tax savings when they lodge their FY27 tax return.

The deduction does not apply to FY26 returns lodged from 1 July 2026. But it does apply to FY27.

What to do with the extra money

A tax cut of $268 per year is not life-changing.

But small, consistent amounts invested over time compound into meaningful outcomes.

An extra $268 per year invested into the share market, earning the historical ASX 200 average of approximately 8.5% per annum, grows to approximately $13,400 over 20 years.

For investors who want to put their tax saving to work immediately, Commonwealth Bank of Australia (ASX: CBA) remains one of the most widely held ASX shares among Australian retail investors. CBA shares offer a fully franked dividend yield and long-term earnings track record that suits a small, consistent investment approach.

Foolish takeaway for your tax bill

Your tax rate dropped on 1 July 2026.

The cut is small, worth up to $268 this year and $536 from 2027. But combined with the new $1,000 instant tax deduction, FY27 is meaningfully less taxing than FY26 was.

The smartest move is to direct that saving somewhere productive rather than letting it disappear into the household budget unnoticed.

The post Your tax rate just dropped. Here is exactly how much more you will take home from 1 July appeared first on The Motley Fool Australia.

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Motley Fool contributor Mark Verhoeven has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.