2026-27 Tax Changes for Australian Expats: Key Updates from 1 July

A new Australian financial year always brings a fresh set of tax and superannuation rules, and the 2026-27 financial year is no exception. From 1 July 2026, a range of changes have come into effect, covering everything from personal income tax rates to superannuation caps and thresholds.

For Australians living overseas, it is not always obvious which of these updates actually apply to you. Many of the headlines around tax cuts and new thresholds are written with Australian residents in mind, and the position for non-residents can look quite different. This blog runs through the key 2026-27 tax changes for Australian Expats, and what each one means depending on your residency status and financial circumstances.

Personal Income Tax Rates Have Reduced

One significant change this financial year is a reduction in the second marginal tax rate, from 16% down to 15%, applying to taxable income between $18,201 and $45,000. For resident taxpayers, this delivers a modest tax saving of up to $268 per year.

This tax cut only applies to individuals who are classified as Australian tax residents. Non-resident Australian Expats are taxed under a separate set of rates, starting at 30% on the first dollar of Australian-sourced income, with no access to the tax-free threshold. The 16% to 15% reduction has no impact on non-resident tax rates, which remain unchanged for 2026-27.

If you are unsure of your residency status, or whether you may have transitioned between resident and non-resident during the year, this is worth reviewing carefully, as it materially affects which set of rates applies to you.

A New $1,000 Instant Deduction for Work-Related Expenses

From 2026-27, resident taxpayers can claim a $1,000 instant tax deduction for work-related expenses without needing to keep receipts, replacing the previous $300 receipt-free limit. This measure applies to the 2026-27 return lodged from July 2027 onwards, not to the 2025-26 return currently being lodged.

As with the rate cut above, this deduction is generally most relevant to Australian tax residents earning employment income, so its relevance to non-resident Australian Expats will depend on individual circumstances.

Superannuation Changes for 2026-27

Superannuation remains one of the most active areas of change each financial year, and 2026-27 is no different. Key updates include:

• Division 296 tax (Better Targeted Superannuation Concessions) 

From 1 July 2026, individuals with a total superannuation balance (TSB) above $3 million will face an additional 15% tax on the portion of investment earnings attributable to the excess. A further 10% tax applies where a TSB exceeds $10 million. This is assessed on an individual basis, so couples can hold up to $6 million between them before either person is affected.

Division 296 tax is not limited to Australian residents. If you are a non-resident Expat with an Australian super balance above $3 million, you are still assessed in the same way as a resident.

• Transfer balance cap increase

The general transfer balance cap, which limits how much super can be moved into a tax-free retirement income stream, has increased from $2.0 million to $2.1 million for 2026-27.

• Contribution caps

Concessional and non-concessional contribution caps have both increased for 2026-27, giving members additional room to build their super balance.

The concessional contribution cap has increased to $32,500, while the non-concessional contribution cap has increased to $130,000. The maximum bring-forward contribution available under the three-year rule has correspondingly increased to $390,000, subject to eligibility.

Where a member's TSB exceeds $2.1 million, however, the non-concessional cap is reduced to nil and the bring-forward rule no longer applies.

Whether you can make concessional or non-concessional contributions while living overseas depends on personal circumstances. For Australian Expats, this may create additional opportunities to: 

1.       build retirement savings while working overseas;

2.       make larger deductible contributions where eligible; or

3.       contribute proceeds from overseas employment before returning to Australia.

With contribution caps increasing for 2026-27, it may be worth reviewing whether you have unused concessional cap space available under the carry-forward rules before you lose access to earlier years.

• Payday Super

  Employers are now required to pay employee superannuation contributions at the same time as wages, rather than quarterly, reducing the risk of unpaid or delayed super.

  
  

If you are working for an Australian employer while based overseas or intend to return to Australian employment in the near term, the shift to paying super alongside wages is a welcome change.

For Australian Expats who maintain superannuation while living overseas, particularly those with larger balances built up over a long career, the Division 296 changes and the increased transfer balance cap are worth reviewing as part of your broader retirement planning strategy.

It's easy to lose track of super while living overseas. With balances, caps and thresholds changing most years, and mail or portal notifications sometimes missed while living abroad, it is worth periodically checking your total superannuation balance, consolidating any lost or inactive accounts, and confirming your contact details are up to date with your fund.

Other Notable Changes from 1 July 2026

A few additional updates rounding out the 2026-27 tax changes for Australian Expats to be aware of include:

• Capital gains tax and negative gearing reforms have been legislated but are not yet in effect. These changes are due to apply from 1 July 2027. With a start date more than 12 months away, there is time to plan properly, particularly around valuations for assets held at 1 July 2027, the timing of any planned sales, and whether existing investment property arrangements still make sense under the new rules.

  
  

• Cents per kilometre rate for work-related car expenses rising to 91 cents per kilometre, up from 88 cents.

  
  

• Employment Termination Payment (ETP) caps increasing to $270,000 for both life and death benefit termination payments.

  
  

• Genuine redundancy and early retirement payment limits increasing to $13,598 plus $6,801 for each completed year of service.

What the 2026-27 Tax Changes for Australian Expats mean

Many of the measures, such as the income tax rate cut and the $1,000 instant deduction, are designed around Australian residents and have limited or no application to non-resident Australian Expats.

At the same time, superannuation changes such as the Division 296 tax and the increased transfer balance cap apply regardless of residency and can have a meaningful impact on Australian Expats with significant super balances or long-term retirement plans involving Australian super assets.

Given the interaction between residency status, Australian-sourced income and superannuation rules, it is worth reviewing your position each financial year rather than assuming last year's planning still applies.

Key Takeaways

• The 16% to 15% tax rate cut and the new $1,000 instant deduction apply to Australian tax residents only, not to non-residents.

• Non-resident tax rates remain unchanged for 2026-27.

• Division 296 tax now applies from 1 July 2026 to individuals with a total super balance above $3 million.

• The transfer balance cap has increased to $2.1 million, and contribution caps have also risen for 2026-27.

• Payday Super requires employers to pay super contributions alongside wages rather than quarterly.

• CGT and negative gearing reforms have been legislated but do not take effect until 1 July 2027.

  
  

Conclusion

Rather than focusing solely on tax rates, the new financial year presents an opportunity to review your broader financial position and ensure your strategy remains aligned with current legislation and your long-term objectives. If any of the changes covered above raise questions about your own circumstances, it is worth speaking to a licensed, professional who specialises in the Australian Expat community and understands how these rules apply when you are living overseas.

Runway Wealth Management is the trusted Financial Adviser to the Australian Expat community. Our tailored advice is backed by expertise, education and experience, which allows us to be at the forefront of Australian Expat Financial Planning.

If you would like to speak to one of our Expat Financial Advisers about this blog or if you have other queries, we would be more than happy to speak with you. Feel free to send us an enquiry through the 'Contact Us' tab provided in the link below:

General Advice Disclaimer: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances, and objectives. We recommend you obtain professional financial advice specific to your circumstances.