Personal Tax Changes – What the Budget Means for You
The Budget confirmed a package of personal tax measures that, taken together, are designed to increase take‑home pay for working Australians and simplify tax compliance over the coming years. While no new headline tax rates were announced, previously legislated tax cuts will proceed, alongside a new permanent tax offset and a simplified deduction for work‑related expenses.
No New Tax Rates – But Tax Relief Is Still Coming
The Government did not announce any additional changes to personal tax rates in this Budget. However, already‑legislated tax cuts will apply from 1 July 2026 and 1 July 2027, reducing tax on lower and middle incomes.
Under existing law, the tax rate applying to taxable income between $18,201 and $45,000 will reduce as follows:
2025–26: 16%
2026–27: 15%
2027–28 onwards: 14%
What this means in practice
For resident taxpayers with sufficient income to receive the full benefit:
Tax payable will reduce by up to $268 from 1 July 2026 and up to $536 from 1 July 2027
All other tax brackets and rates remain unchanged.
New $250 Working Australians Tax Offset (WATO) from 1 July 2027
From 1 July 2027, a new Working Australians Tax Offset (WATO) will provide a permanent $250 tax offset for eligible workers.
Who is eligible?
The offset applies to income earned from work, including:
Wages and salaries
Business income earned by sole traders
It does not apply to passive income such as investment income.
What does it do?
The WATO effectively increases the tax‑free threshold for income derived from work by nearly $1,800, lifting it to:
$19,985 for most workers, or
Up to $24,985 for workers also eligible for the Low Income Tax Offset (LITO)
The offset will apply automatically when you lodge your 2027–28 tax return — no separate claim is required.
$1,000 Standard Deduction for Work‑Related Expenses from 2026–27
The Budget also confirmed the introduction of a $1,000 standard deduction for work‑related expenses, expected to apply from the 2026–27 income year, subject to legislation being passed.
What is the standard deduction?
Eligible taxpayers will be able to claim up to $1,000 for certain work‑related expenses without needing to incur or substantiate those expenses. The deduction is optional, meaning you can choose whether to use it or claim your actual expenses.
Who can claim it?
You must:
Be an Australian tax resident at some point during the year, and
Earn assessable labour income, such as salary and wages.
How it works in practice
The deduction is capped at the lesser of $1,000 or your assessable labour income
It is reduced dollar‑for‑dollar by certain work‑related deductions you actually claim, to prevent double dipping
In simple terms:
If your work‑related expenses are less than $1,000, you can claim the standard deduction instead of itemising
If your expenses are more than $1,000, you claim your actual deductions and receive no standard deduction
If your expenses fall somewhere in between, the standard deduction can “top up” your claim to $1,000
Some deductions (such as gifts, tax‑agent fees, income protection insurance and union fees) can still be claimed separately.
The standard deduction will replace existing concessions such as the $300 no‑receipt threshold and the $150 laundry deduction.
Key Takeaway
In simple terms, the Government is reducing the tax paid on income earned from work by lowering rates, increasing the effective tax‑free threshold, and simplifying deductions — meaning higher take‑home pay for many working Australians over the next few years.
These changes will impact your tax return, and we are here to assist you every step of the way.
As your trusted advisors, we will work with you to optimise your position.
This information is general in nature and based on Budget announcements and existing legislation. Individual outcomes will depend on personal circumstances.