What’s Changing from 1 July 2026 & 2027
- From 1 July 2026, the 16% second marginal tax rate (for taxable income between $18,201 and $45,000) will drop to 15%. (budget.gov.au)
- From 1 July 2027, this rate will fall further to 14%. (budget.gov.au)
- Also from 2026-27 comes the $1,000 instant deduction for work-related expenses, allowing eligible workers to deduct up to $1,000 without needing receipts. (budget.gov.au)
- Alongside those, the Working Australians Tax Offset (WATO) grants eligible workers a $250 permanent offset from 2027-28. (budget.gov.au)
Actions You Should Take to Stay Compliant
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Review your withholding and PAYG estimates: With changing tax brackets, ensure your employer or your PAYG instalments are updated so you don’t get caught with unexpected liabilities. |
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Document expenses through financial year 2025-26: The instant deduction kicks in from 2026-27, but traditional work-related deductions and records still matter for earlier years. |
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Understand eligibility: Not all deductions you used to claim without much proof may qualify under the new instant deduction, so make sure your expenses are genuinely work-related and within the rules. |
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Stay aware of timing: The WATO doesn't start until 1 July 2027, and tax rate cuts follow stages. Your planning and claims depend on correctly knowing which financial year you’re in. |
Compliance Challenges & Pitfalls
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Submitting claims incorrectly or prematurely can lead to adjustments or audits by the ATO.
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Overstating expenses without supporting evidence—even under instant deduction caps—can attract penalties. |
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Not adjusting PAYG classifications when your marginal rate changes could result in under-withheld tax amounts due. |
Hypothetical Example
Liam, a nurse earning $50,000/year, currently falls partly into the 16% bracket. Under new rates, his taxes will be slightly lower in 2026-27 and significantly more so in 2027-28. He regularly buys supplies for work and spends up to $800/year. Under instant deduction from 2026-27, he can claim that $800 without receipts (subject to eligibility), reducing both his tax and compliance burden. |
He should ensure his PAYG withholding reflects the 15% bracket post-July 2026 (not old rates), so he doesn’t face a large tax bill at year-end. |
Final Checklist Before Tax Time 2026 & Beyond
- Confirm income and deductions eligibility under both old and new rules.
- Keep records through 30 June 2026 for all work-related expenses you plan to claim.
- Estimate the impact of rate changes on your tax liability.
- Plan large financial moves (like selling assets) before 1 July 2027 to maximise current discounts.
Staying compliant under the new regime requires awareness of timing, eligibility, and documentation—but proper preparation can minimise your tax burden and avoid surprises.