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)
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)
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.