FY27: Changes taking effect from 1 July
The start of a new financial year often brings changes to tax, superannuation, wages and government payments.
From 1 July 2026, a number of changes take effect that may impact household cashflow, retirement planning, business owners and families. For some people, the impact will be modest. For others, particularly those making super contributions, receiving government payments, running a business or holding larger superannuation balances, the changes may be worth reviewing more closely.
Here are the main financial changes to be aware of.
Income tax cuts
From 1 July 2026, the lowest marginal tax rate reduces from 16% to 15% for taxable income between $18,201 and $45,000.
For many taxpayers, this will mean a small increase in take-home pay across the 2026-27 financial year. The maximum saving is expected to be around $268 for the year.
A further reduction is scheduled from 1 July 2027, when the same rate is due to reduce again from 15% to 14%.
While any tax relief is welcome, it is important to keep the change in context. For many households, the benefit will help at the margin, rather than materially changing their overall financial position.
A new standard deduction for work-related expenses
From the 2026-27 financial year, eligible workers will be able to claim a standard deduction of up to $1,000 for work-related expenses.
This is intended to simplify tax time for people with relatively straightforward work-related deductions. Those with higher work-related expenses should still be able to claim their actual expenses instead, where they meet the usual requirements.
It will still be worth keeping records, particularly where your deductions are likely to exceed $1,000, or where you also claim items such as investment expenses, charitable donations, professional memberships or income protection insurance.
Minimum wages are increasing
The National Minimum Wage and modern award minimum wages increase from the first full pay period on or after 1 July 2026.
The National Minimum Wage will rise to $26.44 per hour, or $1,004.90 per week based on a 38-hour week.
For employees, this may provide some relief against cost-of-living pressures. For business owners, it is another reminder to check payroll settings, award rates, cashflow and employment costs for the new financial year.
Payday super begins
One of the more significant structural changes is the introduction of Payday Super.
From 1 July 2026, employers are required to pay superannuation guarantee contributions at the same time they pay wages, rather than paying them quarterly.
This does not increase the amount of compulsory super an employer must pay. It changes the timing.
For employees, the benefit is greater visibility and the potential for super to be invested sooner. It may also make it easier to identify missed or delayed super contributions.
For employers, the change may require adjustments to payroll systems and cashflow management.
Super contribution caps are increasing
Super contribution caps also increase from 1 July 2026.
The concessional contributions cap, which includes employer super, salary sacrifice and personal deductible contributions, increases from $30,000 to $32,500.
The non-concessional contributions cap, which applies to after-tax contributions, increases from $120,000 to $130,000.
The general transfer balance cap also increases from $2 million to $2.1 million. This is the general cap that limits how much can be transferred into the tax-free retirement phase.
These changes may create additional planning opportunities, particularly for those approaching retirement, selling assets, receiving an inheritance or looking to build retirement savings. However, contribution rules remain highly personal. Age, total super balance, work status, prior contributions and carry-forward amounts can all affect what is available.
New tax rules for larger super balances
From the 2026-27 financial year, new tax rules apply to individuals with very large superannuation balances.
Where a person’s total super balance exceeds $3 million at the end of the financial year, an additional tax may apply to the proportion of earnings connected with the balance above that threshold. A further additional tax can apply where balances exceed $10 million.
This will only affect a relatively small number of Australians, but for those impacted, it is an important planning issue.
The response should not be automatic. The right approach will depend on the structure of the super fund, liquidity, investment strategy, estate planning, tax position and the purpose of the funds.
Paid parental leave expands
For children born or adopted from 1 July 2026, government-funded Parental Leave Pay increases to 130 days, equivalent to 26 weeks based on a five-day week.
The number of days reserved for the other parent also increases to 20 days.
This is relevant for families planning parental leave, as it may affect household cashflow, leave timing and superannuation contributions during time away from work.
Separately, superannuation is now being paid on government-funded Parental Leave Pay for eligible parents, with contributions paid by the ATO after the end of the financial year.
Medicare Levy Surcharge and private health thresholds
The income thresholds for the Medicare Levy Surcharge and private health insurance rebate increase from 1 July 2026.
The Medicare Levy Surcharge threshold increases to $105,000 for singles and $210,000 for families.
This may affect whether some households are liable for the surcharge if they do not hold eligible private hospital cover. It may also change the level of private health insurance rebate available.
For those close to a threshold, it may be worth reviewing income estimates, cover levels and how the rebate is being claimed.
Government payments and thresholds
A number of government payment rates and thresholds increase through regular indexation from 1 July 2026.
This includes some family payments, income thresholds and asset thresholds. The impact will vary depending on personal circumstances, income, assets and family structure.
For retirees, even small changes to Age Pension income and asset test thresholds can affect entitlement levels. For families receiving Family Tax Benefit or Child Care Subsidy, it is also a timely reminder to update income estimates for the new financial year.
Small business instant asset write-off
A permanent $20,000 instant asset write-off has been announced for eligible small businesses from 1 July 2026.
The measure is intended to allow small businesses with aggregated turnover below $10 million to immediately deduct eligible assets costing less than $20,000.
Business owners should take care before relying on the measure, as eligibility, timing, asset use and tax position all matter. Large purchases should still be considered in the context of genuine business need, cashflow and broader tax planning.
What should you do?
Most 1 July changes do not require immediate action. But they do provide a useful prompt to review your broader financial position.
For some people, the key question will be whether to adjust super contributions. For others, it may be reviewing retirement income, family cashflow, private health insurance, tax deductions or business planning.
The best place to start is not with the rule change itself, but with your own circumstances. A small change in legislation can sometimes create a larger planning opportunity when it is considered in the context of your broader financial life.
As always, seek advice before making decisions that affect your tax, superannuation or retirement planning position.
General Advice Warning:
Any general advice on this page does not take account of your personal objectives, financial situation and needs, and because of that, you should, before acting on the advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. Information contained on this page was correct at the time of posting.
