A new tax offset
Start date: 1 July 2027
The Government will provide a $250 ‘Working Australians Tax Offset’ from the 2027–28 income year.
The offset will be a permanent feature of the tax system and is aimed at taxpayers who derive income from work, such as employees who receive salary or wages and sole traders who carry on a business.
The offset basically operates to increase the effective tax-free threshold for income derived from work by nearly $1,800 to $19,985 (or up to $24,985 for workers eligible for the Low Income Tax Offset).
| Resources New tax cuts for Australian workers |
$1,000 instant tax deduction for workers
Start date: 1 July 2026
During the 2025 federal election campaign the Labor party committed to introduce a $1,000 instant tax deduction for work-related expenses. On 20 April 2026 Treasury released draft legislation on this proposal for public consultation.
The key feature of the proposal is that Australian residents will be able to claim a standard deduction from the 2026-27 income year onwards for work-related expenses, with the deduction being capped at the lower of $1,000 and the individual’s assessable labour income. The normal substantiation rules would not apply when claiming the standard deduction.
Charitable donations, union fees and fees relating to professional association memberships would be claimed on top of the standard deduction.
Taxpayers who have incurred more than $1,000 in qualifying work-related expenses can instead choose to claim their actual expenditure as a deduction, but will need to substantiate these expenses.
The draft legislation contains some other proposed changes to the tax system including:
- Depreciating assets that are mainly used to generate labour income won’t qualify for the low-value pooling rules.
- Modified rules will apply to determine the tax impact on the sale of assets used in producing labour income.
- An FBT exemption that currently applies when certain work-related items are provided to employees under a salary packaging arrangement will be removed.
| Resources $1,000 instant tax deduction to deliver lower, simpler taxes for 6.2 million workers Instant tax deduction – exposure draft |
Income tax cuts
Start date: 1 July 2026
Legislation has already been passed to ensure that the 16% tax rate on taxable income between $18,201 and $45,000 will drop to 15%. The rate will then drop to 14% from 1 July 2027.
This was announced in the 2025-26 Federal Budget.
| Resources Tax cut calculator |
Medicare levy thresholds increased
Start date: 1 July 2025
The Government will increase the Medicare levy low‑income thresholds for singles, families, and seniors and pensioners.
The threshold for singles will be increased from $27,222 to $28,011.
The family threshold will be increased from $45,907 to $47,238.
For single seniors and pensioners, the threshold will be increased from $43,020 to $44,268.
The family threshold for seniors and pensioners will be increased from $59,886 to $61,623.
The family income thresholds will increase by $4,338 for each dependent child or student, up from $4,216.