Tax Planning
Working Australians Tax Offset & Negative Gearing Changes Explained
With the Budget 2026 reforms, Australians will see a permanent $250 tax offset and major changes to negative gearing—understand implications for your rental property or salary.
By NomadicTax Research Team • 5-8 min read • May 27, 2026
## What is the Working Australians Tax Offset (WATO)?
From the **2027-28 income year (i.e. for income earned from 1 July 2027)**, the Government introduces a **permanent $250 Working Australians Tax Offset**, applying to all income derived from work—wages, salaries and sole trader income. Over **13 million workers** will benefit, with most (97%) getting the full offset. It effectively boosts the tax-free threshold by about $1,800, depending on whether one qualifies for the Low Income Tax Offset. ([pm.gov.au](https://www.pm.gov.au/media/tax-reform-workers-businesses-and-future-generations?utm_source=openai))
## What’s Changing with Negative Gearing
- Starting **1 July 2027**, recentives properties only (new builds) will remain eligible for negative gearing for all types of income (wages, salary etc.). Existing properties will still allow rental loss deductions **only against rental income and capital gains**, not against other personal income.
- Properties held before **7:30pm AEST on 12 May 2026** are grandfathered—no change until sold. ([pm.gov.au](https://www.pm.gov.au/media/tax-reform-workers-businesses-and-future-generations?utm_source=openai))
## Impacts by Category
| Category | Change effected | What it means |
|---|---|---|
| Salary/wage earners | $250 offset from 2027-28 | Slightly lower tax payable; modest relief for middle and low income earners |
| Property investors (existing) | Loss deductions limited | Cannot offset losses against salary/income; may reduce incentive to hold existing rentals |
| Property investors (new builds) | Full deductions maintained | New build investors might face better returns relative to existing property investors |
| First home buyers / housing supply | Girther housing supply push | Reform favours new housing construction—incentive to build more new dwellings |
## Actionable Strategies
- If you own existing properties, **project after-tax cash flows** considering limited deductions post-2027.
- New build investors should model the retained benefits vs higher purchase costs and location risk.
- Renters and potential property investors may now find timing more crucial—existing stock loses some upside.
## Example: Case of a Dual Income Individual with Rental Losses
Mike earns $80,000 salary and holds an investment property (old build) that results in $5,000 of rental loss annually. Under current rules, he offsets that loss against his salary—saving tax at the marginal rate (say 32.5%) = ~$1,625 saved. Under new rules post-1 July 2027, for his existing property the rental loss only offsets against his other property income or capital gains—not salary: in absence of those, the benefit is lost. That changes investment valuations significantly.