22 May 2026

Working Australians Tax Offset

BUDGET MEASURE: A new $250 permanent tax offset for income from work, from the 2027–28 income year, lifting the effective tax-free threshold to $19,985 (or $24,985 with LITO).

Key points

The impact of this measure is to effectively increase the tax-free threshold for work income by to $19,985, or up to $24,985 when combined with the Low Income Tax Offset. The Treasurer has called it the largest permanent increase in the effective tax-free threshold since 2012–13.

A FEW POINTS WORTH NOTING:

• It’s automatic, meaning no claim required on the return.
• Limited to work income (wages, salaries and sole trader business income). Investment income, trust distributions and company dividends don’t qualify. This is consistent with the budget’s broader shift in tax weight from labour toward capital, paired with the negative gearing and CGT reforms.
• It’s a non-refundable offset, so it reduces tax payable but doesn’t generate a cash refund of its own. 97% of the 13 million eligible workers are expected to receive the full $250 and the remaining 3% are very low earners whose tax bill is already below that.
• The first cash impact lands when 2027–28 returns are lodged from mid-2028.

Worth being precise with clients: the WATO stacks with the legislated rate cuts (16% → 15% from July 2026, then 14% from July 2027), the $1,000 instant tax deduction, and the existing LITO. The government’s “five tax cuts” headline figure combines all of these — the WATO alone is a modest $250.