When the new financial year begins, so do updates to Australia’s tax system. In 2025–2026, the government implemented some of the most significant tax reforms that will impact individuals and companies, regardless of whether you are a property investor, sole proprietor, or salary worker.
These changes in tax are intended to promote company investment, relieve the burden on middle-class Australians, and simplify tax bands. But if you don’t understand them, you can end up paying more taxes than you should.
This is a brief summary of the main changes, how they impact your wallet, and what you should do about them.
1. Changes in Personal Income Tax Rates
Starting from July 1, 2025, new tax rates will apply to individuals. As part of the long-promised Stage 3 tax cuts, these changes have been made.
New Personal Income Tax Rates (2025–26):
Taxable Income | Tax Rate |
$0 – $18,200 | 0% (tax-free threshold) |
$18,201 – $45,000 | 16% |
$45,001 – $135,000 | 30% |
$135,001 – $190,000 | 37% |
$190,001 and above | 45% |
What This Means:
- Australians earning $45,000 to $135,000 will pay less in taxes.
- The old 19% and 32.5% rates have been replaced with a flat 30%.
- These changes in tax are designed to reduce “bracket creep” (when inflation pushes you into a higher tax bracket even though your purchasing power hasn’t improved).
2. Updated Sole Trader Tax Rate
As a sole trader, your income is taxed under the same system as individuals. Therefore, the rates above apply to you.
Impact for Sole Traders:
- If you earn less than $135,000, your income will now mostly be taxed at 30% instead of 32.5%.
- You may be able to save a significant amount on your taxes if your business is profitable.
- Take advantage of all deductions you are entitled to, like business expenses, home office expenses, and equipment depreciation.
3. Changes to Capital Gains Tax (CGT) on Property
Although capital gains tax on property has not changed significantly, it is still important to understand how it works.
Key CGT Rules in 2025–26:
- In the case of the sale of an investment property for a price greater than the original purchase price, CGT will apply.
- A 50% discount is available if you have owned the property for more than one year.
- Your taxable income is increased by CGT, which is then taxed at the new income tax rates.
Example:
You earn $100,000 from the sale of a rental property if:
- Hold it for over 12 months: $50,000 is added to your taxable income.
- That amount is taxed based on your personal bracket (e.g., 30% if under $135,000).
Tip: Capital gains tax (CGT) may be reduced if you time your sale and use legal deductions (for example, capital improvements).
4. Superannuation Contribution Changes
You can now contribute more to your super while reducing taxable income.
2025–26 Super Updates:
- Concessional cap (before-tax contributions): Increased from $27,500 to $30,000
- Non-concessional cap (after-tax): Still $110,000
- It is also possible to carry forward any unused caps from the previous five years if your super balance is less than $5,000.
This is especially useful for:
- Business owners nearing retirement
- Sole traders wanting to reduce their income tax bill
5. Work-From-Home & Business Dedication Changes
If you work from home or run your business from home, the ATO has revised its deduction methods:
Fixed Rate Method (New Rules):
- For work from home, you may claim 67 cents per hour.
- Covers include phone, internet, electricity, and stationery.
- You have to record your hours worked and receipts in a journal.
This applies to both:
- Workers who operate remotely Small business owners
- Sole proprietors who use their homes as headquarters
6. Instant Asset Write-Off Extended for Businesses
If you’re a business owner, good news: the $30,000 instant asset write-off has been extended until 30 June 2026.
What You Can Claim:
- Tools, machinery, tech equipment, business vehicles
- Each item must be under $30,000 and installed by June 2026
This helps you:
- Reduce taxable profit
- Improve cash flow
- Upgrade or modernise business assets
What You Should Do Next
These changes in tax offer real savings—but only if you know how to use them.
Here’s a quick to-do list:
- Examine your income and tax bracket
- Modify your business or salary plans to reflect the new rates
- Think about increasing your super before EOFY
- If you own real estate, prepare for CGT before selling
- Consult a tax accountant in Melbourne for personalised guidance
Feeling unsure about how these tax changes affect you? SMH Accountants & Advisors can help you understand the new income tax rates, claim qualified deductions, and maintain ATO compliance, whether you’re an investor, employee, or sole proprietor.
Don’t wait until EOFY; schedule your tax consultation now to confidently take charge of your financial situation in 2025–2026.
Final Thoughts
Finally, the big tax change will occur during the 2025–2026 fiscal year. With lower personal income tax rates, better circumstances for sole proprietors, and ongoing assistance for small firms, these changes are meant to simplify and streamline taxation.
However, it is not automatic; to take advantage of it, you will have to be proactive and work with tax agents in Melbourne. They can assist you in understanding these changes and in planning accordingly, whether you are employed, managing a business, or investing in real estate.
