Who This Guide Is For
This guide is for every Australian taxpayer preparing their FY2025-26 tax return. If you filed last year and want to know what's different — new tax brackets, revised thresholds, updated deduction rates — this is your one-stop summary. Whether you lodge through myTax, use a tax agent, or are still deciding, the 2026 tax season has meaningful changes you should not miss.
What Changed for FY2025-26
1. Stage 3 Tax Cuts Now in Effect
The redesigned Stage 3 tax cuts took effect on 1 July 2024 and continue to apply to all income earned in FY2025-26:
| Taxable Income | Tax Rate FY2023-24 (old) | Tax Rate FY2025-26 (current) |
|---|---|---|
| $0 – $18,200 | 0% | 0% |
| $18,201 – $45,000 | 19% | 16% |
| $45,001 – $135,000 | 32.5% | 30% |
| $135,001 – $190,000 | 37% | 37% |
| $190,001+ | 45% | 45% |
Key change: The 19% bracket dropped to 16%, and the 32.5% bracket was eliminated entirely — absorbed into the 30% band. According to the ATO, most taxpayers saw a reduction in tax withheld from 1 July 2024.
Example: Sarah earns $70,000. Under the pre-Stage 3 rates (FY2023-24) she paid about $14,617 in tax (including the 2% Medicare levy). Under the Stage 3 rates she pays roughly $13,188 — saving $1,429.
2. HECS-HELP Repayment Moved to a Marginal System
HECS-HELP repayments moved from a flat percentage of total income to a marginal system for FY2025-26:
| Repayment income | Repayment calculation |
|---|---|
| $0 – $67,000 | Nil |
| $67,001 – $125,000 | 15c for each $1 over $67,000 |
| $125,001 – $179,285 | $8,700 + 17c for each $1 over $125,000 |
| $179,286 and over | 10% of total repayment income |
The minimum repayment threshold increased from $54,435 (FY2024-25) to $67,000 (FY2025-26). Repayment is now calculated only on income above $67,000 — most people will repay less than under the old flat-rate system.
3. Working From Home — Revised Fixed Rate
The ATO's revised fixed rate method for WFH deductions remains at 70 cents per hour (up from 67 cents in FY2023-24) for FY2025-26.
| Method | Rate | Receipts Required? |
|---|---|---|
| Revised Fixed Rate | 70 cents (up from 67 cents in FY2023-24) per hour | No — but records of hours worked required |
| Actual Cost Method | Actual expenses × work-use % | Yes — all receipts |
According to ATO guidelines, you can claim 70 cents for each hour you work from home, covering energy, internet, phone, and stationery. You must keep a record of all hours worked from home (e.g. timesheet, roster, or diary).
Example: Michael works from home 3 days per week, 8 hours per day, for 48 weeks. That's 1,152 hours × $0.70 = $806.40 deduction.
4. Super Guarantee Rate at 12%
The Super Guarantee rate rose to 12% on 1 July 2025 for FY2025-26. This is the final scheduled increase in the legislated SG rate pathway. Employers must contribute 12% of your ordinary time earnings to super for all wages paid on or after 1 July 2025 (ATO guidelines).
5. Instant Asset Write-Off Extended
The $20,000 instant asset write-off for small businesses (aggregated turnover under $10 million) has been extended through to 30 June 2026. Sole traders can immediately deduct eligible assets costing less than $20,000 each.
According to the ATO, you must keep written evidence for all deductions claimed. Tax records should be retained for five years from the date you lodge your return (ATO guidelines).
Common Mistakes at Tax Time 2026
| Mistake | Why It's Wrong | What to Do Instead |
|---|---|---|
| Using pre-Stage 3 tax brackets to estimate your refund | Stage 3 cuts changed the brackets (from 1 July 2024) | Use the FY2025-26 rates above |
| Claiming WFH at 70 cents (up from 67 cents in FY2023-24)/hr without a timesheet or diary | ATO requires records of hours worked | Log your hours weekly |
| Forgetting HECS indexation was applied 1 June 2025 | Your HELP debt grew before repayments resumed | Check your myGov account |
| Missing the October 31 lodgment deadline | Late lodgment penalties may apply | Use a registered tax agent for the extended May deadline |
| Assuming nothing changed this year | Several material changes took effect | Read this guide carefully |
Records to Keep
- PAYG payment summaries (pre-filled in myTax, but verify)
- Bank statements for interest and dividend income
- WFH hours log (timesheet, calendar, or diary entry)
- Receipts for deductible expenses over $300
- Private health insurance annual statement
- HECS-HELP debt statement (from myGov)
Quick Checklist
- Check your income against the new tax brackets — did your tax rate drop?
- Log all WFH hours for the 70 cents (up from 67 cents in FY2023-24)/hr fixed rate method
- Confirm whether your HECS repayment threshold applies
- Verify your employer is contributing 12% super guarantee
- Small business? Review asset purchases eligible for the $20,000 instant write-off
- Decide: lodge yourself by 31 October, or engage a tax agent for the May 2027 deadline
*Disclaimer: This article is general information only and does not constitute tax advice. Individual circumstances vary. a registered tax agent (see the directory) Not sure if you need a professional? See our decision guide.*