Taxpayers earning between $80,000 and $87,000 will receive a tax cut after the government moved to address 'bracket creep' in the federal budget.
The 32.5 per cent tax threshold will be increased from $80,000 to $87,000, which the government claims will keep 500,000 Australians in the middle tax bracket for longer.
As a result, fewer Australians will be exposed to the 37 per cent marginal tax rate.
"In recent years, those on low incomes have benefited from tax cuts and the carbon tax compensation that have been retained despite the carbon tax being abolished," said the government.
"Without action, the average full-time wage earner would face the second highest marginal tax rate this year and nearly half of all taxpayers would be in the top two brackets in 10 years’ time."
The government said it would consider further measures to "reduce the burden of tax as fiscal settings allow".