Each tax year brings changes that can affect how much tax you pay or what you need to report. The government may introduce new tax cuts, adjust thresholds, or update existing rules, which can make it hard to keep up.
At TaxReturn.com.au, our aim is to make these updates easy to understand. This guide explains what has changed for the 2025/26 tax year and how those changes may affect your tax return.
The Simple Tax Changes for 2025/26 in Australia
The 2025/26 tax year includes several updates that impact both individuals and businesses. These changes focus on income tax rates and thresholds, ongoing cost of living measures, and other adjustments that may influence how much tax you pay or receive back.
Understanding what is new for 2025/26 helps you plan ahead, avoid surprises, and ensure your tax return is lodged correctly when tax time arrives.
Summary of Tax Changes for 2025-26
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Income tax rates: No new personal income tax rate or bracket changes apply from 1 July 2025, with individual tax rates remaining the same as the previous year.
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Superannuation guarantee: Increased from 11.5% to 12% from 1 July 2025, marking the final scheduled rise in employer super contributions.
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Paid Parental Leave superannuation: Superannuation contributions of 12% now apply to government Paid Parental Leave for children born or adopted from 1 July 2025.
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Student loan indexation: HELP and other student loan balances continue to be indexed using the lower of inflation or wage growth, limiting how quickly debts increase.
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Electric vehicles (EVs): The fringe benefits tax exemption continues for eligible electric vehicles, while plug-in hybrid vehicles generally no longer qualify from 1 April 2025 unless transitional rules apply.
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Small business instant asset write-off: The $20,000 instant asset write-off remains available for eligible small businesses for assets first used or installed ready for use up to 30 June 2026.
Tax Brackets and Rate of Tax for 2025/26
The income tax brackets and rates for the 2025/26 tax year are unchanged from 2024/25. The following rates apply to Australian residents and do not include the 2% Medicare levy.
| Tax Brackets | Tax Rates |
|---|---|
| $18,000 or below | No taxes |
| $18,201 to $45,000 | 16c for every $1 over $18,200 |
| $45,001 to $135,000 | $4,288 + 30% for every $1 over $45,000 |
| $135,001 to $190,000 | $31,288 + 37% for every $1 over $135,000 |
| $190,001 or more | $51,638 + 45% for every $1 over $190,000 |
There are no new income tax rate or threshold changes for individuals in 2025/26. The major changes to personal tax rates occurred in the previous year, and those rates now carry forward.
This means:
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Your marginal tax rate is determined in the same way as last year
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Any difference in tax payable is usually due to changes in income, deductions, offsets, or Medicare-related thresholds rather than new tax brackets
What Are the Main Tax Changes for 2025/26
There are no new personal income tax rate or bracket changes for the 2025/26 tax year. The rates introduced in the previous year continue to apply from 1 July 2025.
This means your marginal tax rate is calculated the same way as last year. Any change in the amount of tax you pay is more likely due to changes in your income, deductions, offsets, or Medicare-related thresholds rather than new tax brackets.
From 1 July 2025, the superannuation guarantee increases from 11.5% to 12%. This is the final planned increase under current legislation.
If you are an employee, your employer must pay this higher rate on your ordinary time earnings. While this does not change how your tax return is calculated, it can affect your overall take-home pay and long-term retirement savings.
A new change applies to parents receiving government Paid Parental Leave for children born or adopted from 1 July 2025.
The government will now pay 12% superannuation on Paid Parental Leave amounts. This super is paid directly into your nominated super fund after the end of the financial year, starting from July 2026.
This change helps close the retirement savings gap for parents who take time out of the workforce.
For the 2024/25 financial year, the government has extended the $20,000 Instant Asset Write-Off for eligible small businesses.
Key Details:
- Eligible businesses: Small businesses with an annual turnover of less than $10 million.
- Threshold: Businesses can immediately deduct assets costing up to $20,000.
- Applies to: New or second-hand assets first used or installed ready for use between 1 July 2023 and 30 June 2025.
- Multiple purchases allowed: Businesses can claim multiple assets, provided each item costs less than $20,000.
Eligible Assets
Eligible assets must be used for business purposes and can include:
- Business vehicles (excluding passenger vehicles above the luxury car tax threshold)
- Machinery and equipment
- Computers, office furniture, and technology
- Tools and work-related devices
Assets not eligible for the write-off include capital works (such as buildings) and some leased assets. For a full list of eligible assets, refer to the Australian Taxation Office:
👉 ATO Instant Asset Write-Off Guide
How It Helps:
- Reduces taxable income in the year of purchase, lowering tax bills.
- Encourages investment in business equipment and growth.
- Simplifies tax reporting by allowing immediate deductions instead of depreciation over time.
Businesses purchasing assets over $20,000 will need to depreciate them over time using the small business simplified depreciation rules.
The fringe benefits tax (FBT) exemption continues for eligible electric vehicles under the relevant value thresholds.
However, plug-in hybrid electric vehicles generally stopped qualifying from 1 April 2025, unless transitional rules apply. This change mainly affects salary packaged vehicles and employer-provided cars.
If you salary package a vehicle, eligibility should be checked carefully before assuming the FBT exemption applies.
Eligible small businesses can continue to immediately deduct assets costing up to $20,000 under the instant asset write-off.
For the 2025/26 tax year, the write-off applies to assets that are first used or installed ready for use by 30 June 2026. This measure helps improve cash flow and reduces the need to depreciate lower-cost business assets over several years.
While the 2% Medicare levy rate itself does not change, income thresholds linked to Medicare, including the Medicare levy surcharge, update for the 2025/26 tax year.
These thresholds can affect whether you pay extra Medicare levy if you do not hold appropriate private hospital cover, particularly if your income has increased.
As a taxpayer, many of these reforms may have changed how you should pay your taxes. Be sure to stay updated with any alterations that may impact your obligations. To make everything easier, have experts sort your tax return for you. Contact TaxReturn.com.au today.
