Tax Time 2026: Key ATO Changes Every Australian Needs to Know

by | Feb 3, 2026 | Business News, Business Training, Payroll, Tax & Compliance

ATO

As we move through the 2025/26 tax year, there are several important changes from the Australian Taxation Office (ATO) and the Federal Government that taxpayers and small business owners should be aware of. Being informed will help you plan better and make the most of your tax position when lodging your next return.

1. Personal Income Tax Cuts on the Way

One of the biggest changes affecting individuals is the announcement of further tax rate reductions. From 1 July 2026, the middle tax rate for incomes between $18,201 and $45,000 will reduce from 16% to 15%, and then to 14% from 1 July 2027. These measures are part of staged reforms aimed at lowering overall tax burdens for middle and low-income earners.

đź“Ś What this means for you:
If you earn within this bracket, you could see more money in your pocket come tax time, with average tax reductions estimated at up to a couple of thousand dollars in future years.

2. ATO Interest Charges Are No Longer Deductible

From 1 July 2025, the tax deduction for interest charged on late tax payments (including General Interest Charge and Shortfall Interest Charge) are no longer allowable. This change discourages late payments and means that businesses and individuals who delay lodgement or payments may face higher net costs.

đź“Ś What this means for you:
Timely compliance will be more important than ever, as late payment interest cannot be offset against taxable income.

3. Small Business Tax Breaks and Amendments

Small business owners should also note a few changes:

  • The $20,000 instant asset write-off continues to apply for assets first used between 1 July 2025 and 30 June 2026, with multiple assets able to be claimed if eligible.
  • The amendment period for business tax returns has been extended, allowing eligible businesses up to 4 years to request tax return amendments.

These measures can provide cashflow advantages and give more flexibility to revisit past tax positions.

4. ATO Compliance and Reporting Updates

The ATO continues to modernise its systems and compliance approach. Some recent changes include:

  • Adjustments to how long-standing back pay amounts must be reported in Single Touch Payroll reporting.
  • The Small Business Clearing House is closing ahead of the new payday super regime being introduced mid-2026.
  • Payday Super (Effective 1 July 2026): Employers must align SG payments with pay cycles (weekly, fortnightly, etc.).

This signals that digital reporting and real-time compliance are expanding, a trend likely to continue in future years.

Final Thoughts

Tax legislation and ATO practices evolve regularly, and staying up to date is essential for maximising your tax position and avoiding pitfalls. Whether you’re an individual taxpayer or a business owner, consider reviewing how these changes apply to your circumstances well before you lodge your next return.

If you’re unsure how any of these updates affect you, or you want help taking advantage of tax-saving opportunities, SWOT Accountants are here to help.

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