Report

Individuals adversely affected by the Middle-Class Tax Cut

Oct 30, 2025

In response to parliamentary interest, this report provides an analysis of tax filers that are adversely affected by the reduction in the personal income tax rate from 15 per cent to 14 per cent.

Highlights

The Parliamentary Budget Officer (PBO) estimates that the Government’s proposal to reduce the lowest personal income tax (PIT) rate from 15 per cent to 14 per cent will adversely affect 19,690 single (less than 1 per cent of single tax filers) and 19,420 couples (less than 1 per cent of couples) in 2026, increasing their federal tax payable by $141 and $155, respectively, on average.
Under the PIT rate reduction, adversely affected tax filers are individuals either subject to alternative minimum tax (AMT)—a parallel tax calculation designed to ensure high-income earners pay a minimum amount of income tax—or have taxable income and a value of non-refundable tax credits that exceed the lowest income threshold.
PBO estimates that adversely affected single tax filers subject to AMT will pay an average of $127 more in federal income tax ($132 for couples) in 2026.
Most adversely affected single tax filers not subject to AMT have high medical expense claims. PBO estimates they will pay an average of $166 more in federal income tax ($195 for couples) in 2026.
Roughly 17 per cent of adversely affected single tax filers (35 per cent of couples) not subject to AMT claim the disability amount, though they represent less than 1 per cent of all single tax filers (less than 1 per cent for couples) claiming the disability amount.