The July 2026 Microsoft 365 price increase is now in effect, and it's the biggest single jump in Australian pricing since the subscription model launched. If you're an MSP or an engineer working with M365, this changes the economics of everything.
The Price Change Breakdown
| SKU | Old Price (A$/user/mo) | New Price (A$/user/mo) | Increase |
|---|---|---|---|
| M365 Business Basic | $9.40 | $11.30 | +20.2% |
| M365 Business Standard | $18.70 | $23.00 | +23.0% |
| M365 Business Premium | $29.70 | $36.00 | +21.2% |
| M365 E3 | $43.20 | $52.00 | +20.4% |
| M365 E5 | $67.10 | $81.00 | +20.7% |
| Copilot for M365 | $38.40 | $43.00 | +12.0% |
Why This Matters for MSPs
Margin Compression
Most MSPs include M365 licensing in their managed services pricing. With a 20% cost increase hitting all at once, the typical MSP margin on licensing drops from 15% to effectively zero β unless they pass the increase through.
The Pass-Through Challenge
MSPs face a difficult choice:
- Absorb the cost β lose 3-5% margin on every managed seat
- Pass it through β risk client pushback and churn
- Bundle and reprice β renegotiate contracts entirely
Our data shows that 40% of Australian MSPs are planning to bundle the increase into their next contract renewal, 35% are passing it through as a line item, and 25% are absorbing it (mostly smaller MSPs who can't afford the churn).
What Engineers Need to Know
Your Skills Just Got More Valuable
Every M365 user in Australia just got 20% more expensive. That means:
- Migration projects are accelerating β clients want to optimise licensing
- Governance work is booming β the M365 Governance guide is one of our most-read articles this month
- Skilled M365 engineers are in higher demand than ever
The Copilot Question
Microsoft Copilot for M365 going up to $43/user/month is the sleeper story here. At that price point, most Australian SMBs will not adopt it. Our survey of 200 MSP decision-makers found:
- 72% say their clients are "not interested" at current pricing
- 18% say "maybe for select users"
- Only 10% are rolling out Copilot broadly
If you're a Copilot specialist, the market is smaller than Microsoft claims. Diversify.
The Bigger Picture
This is the third major M365 price increase in four years. The cumulative effect:
| Year | Cumulative Increase |
|---|---|
| 2023 | +15% (Copilot launch) |
| 2025 | +10% (security features) |
| 2026 | +20% (this increase) |
| Total | +51% since 2023 |
Clients are noticing. The "Microsoft tax" is becoming a real conversation in boardrooms. We're seeing more interest in alternative productivity suites than at any point in the last decade.
What to Do
If you're an MSP: Start the repricing conversation now. Don't wait for clients to notice on their bill.
If you're an engineer: Use this as leverage. If you're certified in M365, you're more valuable than you were three months ago. Use the Salary Calculator to benchmark your worth.
If you're considering a move: The Exit Navigator can help you time your transition.
Data sources: Microsoft partner portal pricing (AU/NZ), MSP Playbook survey of 200 Australian MSPs (June 2026)
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