For individual taxpayers, the 2026-27 Budget confirms previously legislated income tax rate cuts and adds two new measures designed to ease cost-of-living pressures: a $250 Working Australians Tax Offset and a $1,000 standard deduction for work-related expenses.

Income tax rate cuts confirmed

The Government confirmed the following previously legislated reductions to the lowest marginal tax rate:

The rate cut from 16% to 15% takes effect from 1 July 2026 (the current financial year - already locked in). The further reduction to 14% follows from 1 July 2027. The saving for a taxpayer earning $45,000 or more is up to $268 per year from the first cut and up to $536 per year once both cuts are in effect.



The $250 Working Australians Tax Offset

From 1 July 2027, a new Working Australians Tax Offset (WATO) of $250 per year will be available to Australian resident taxpayers who earn income from work - including salary and wages, and the business income of sole traders.

The WATO will be paid automatically through the tax return process. It increases the effective tax-free threshold for income derived from work by approximately $1,800, to $19,985 (or up to $24,985 for those also eligible for the Low Income Tax Offset).

The $1,000 standard deduction for work-related expenses

From 1 July 2026, Australian resident taxpayers who earn income from work will be able to claim up to $1,000 in work-related deductions without needing to substantiate individual items or keep receipts.

This is an opt-in simplification measure. Individuals whose actual work-related expenses exceed $1,000 can continue to claim the higher amount in the usual way, with substantiation. The standard deduction does not replace other categories of deduction - charitable donations, union fees, and professional association memberships can still be claimed separately on top.

Medicare levy threshold increases

The Medicare levy low-income thresholds have been increased by 2.9% from 1 July 2025:

• Singles: $28,011 (up from $27,222)
• Families: $47,238 (up from $45,907)
• Single seniors and pensioners: $44,268 (up from $43,020)
• Family threshold for seniors and pensioners: $61,623 (up from $59,886)
• Additional amount per dependent child or student: $4,338 (up from $4,216)

obSeeker recipients who realise a capital gain in the same year in which they receive an income support payment will be exempt from the 30% minimum tax. This exemption applies only in the year the gain is realised.

Private Health Insurance rebate: age-based uplift removed

From 1 April 2027, the age-based uplift to the Private Health Insurance Rebate will be removed. Currently, Australians aged 65 and above receive a higher rebate percentage. Under the change, the standard rebate will apply to all age groups. This will increase the net cost of private health insurance for older Australians.



Please contact us if you have any questions - email us or phone our team on 02 9899 3044.