What’s changing from 2026-27
Australia’s 2026-27 Federal Budget introduced two key reforms aimed at helping workers keep more of their income. (budget.gov.au)
| Reform | When it starts | Key mechanics |
|---|---|---|
| Working Australians Tax Offset (WATO) | Income earned from 1 July 2027 (2027-28 income year) (budget.gov.au) | Permanent $250 tax offset for eligible workers; increases your effective tax-free threshold by almost $1,800, meaning more income becomes untaxed. (budget.gov.au) |
| $1,000 Instant Work-Related Expense Deduction | From 1 July 2026 (2026-27 income year) (budget.gov.au) | Allows workers to claim up to $1,000 for work-related deductions without needing receipts. Only applies to work-related expenses; larger claims still require records. (budget.gov.au) |
Who benefits and what the savings might look like
- If you earn average Australian wages, expect to save around $205 under the instant deduction alone, with $250 more on your tax bill from WATO once in effect. (budget.gov.au)
- Over time, for many workers the combined impact of these plus other already legislated tax cuts could add up to savings of $2,500-$3,000 annually. (budget.gov.au)
- Sole traders or side hustlers with work-related expenses will benefit directly from the instant deduction; employees will enjoy simpler tax returns. WATO applies broadly, including those earning wages from employment. (budget.gov.au)
Practical examples
- If you're a nurse working full time who spends $500 on uniform and education costs in a year, under the $1,000 instant deduction you claim the $500 without receipts. You’re better off than keeping paperwork.
- If you're a part-time retail assistant earning $25,000 p.a., WATO may lift your tax-free threshold enough that you pay less tax or even move more income into the non-taxed zone.
What to watch out for / take action on now
- Keep records for expenses over $1,000— if you claim more than the instant deduction, ATO expects substantiation.
- Check eligibility for WATO— those with very low income, special categories, or non-residents may have special rules.
- Plan ahead for income shifts— if you're expecting a big income jump in 2027-28, knowing these offsets and deductions can reduce tax surprises.
Why this matters beyond your pay-packet
These reforms aren’t just small savings; they’re part of a broader tax reform package that reshapes how residential investment (negative gearing), capital gains, and trust taxation work. If those areas affect you, these worker-focused reforms can offset some of the negative tax-side changes. (budget.gov.au)