2026-27 Federal Budget

What the Budget means if you earn a wage or salary

This is the simplest page of the eight, because all of it is settled law. Two more rate cuts, a $1,000 instant deduction from 2026–27, and a new $250 offset for working Australians from 2027–28 — all carried by the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, assented 26 June 2026, and by the previously legislated rate schedule. Here’s the practical impact from where you are now, not where you started in 2023.

Current as at 28 August 2026. Tax law is changing rapidly following the 2026–27 Budget. Measures marked Passed — awaiting assent, Before Parliament, Consultation or Announced are not law and may change or not proceed.

From 1 July 2026

Up to $268

Extra per year from the next rate cut, on top of what you already have

From 1 July 2027

Up to $786

Extra per year combined — both rate cuts plus the new WATO

If you don’t claim WRE

Up to $1,106

Adds the full $1,000 instant deduction. Less, or zero, if you already claim work expenses

What’s changing from here

Three changes between now and 2027–28

Law — all three

Two further rate cuts on the lower bracket, a new $1,000 instant deduction, and a new $250 offset for working Australians. All three are legislated and all apply automatically when you lodge — there is nothing to opt in to and nothing pending.

Law Passed and assented. Plan around it.

Passed — awaiting assent Through both Houses; commences on Royal Assent.

Before Parliament Introduced, not yet passed.

Consultation Treasury paper or exposure draft only.

Announced Budget announcement. No draft, no paper.

Change 01

Law

Two more tax cuts on the lower bracket

The 16% marginal rate that applies to income between $18,201 and $45,000 will drop to 15% from 1 July 2026, then to 14% from 1 July 2027. Worth up to $268 a year, then up to $536 a year combined.

From 1 July 2026 and 1 July 2027

Change 02

Law

$1,000 instant tax deduction, no receipts

A standard $1,000 deduction for work-related expenses, available without keeping records, so there is no need to itemise work expenses below $1,000. If your actual work expenses are higher, you can still claim the real amount the usual way — with records. Charitable donations, union fees and other non-work deductions are separate and stay claimable on top.

From 2026–27 tax returns

Change 03

Law

$250 Working Australians Tax Offset

A new $250 tax offset for income from work — wages, salary and sole-trader business income. Applied automatically when you lodge. Lifts the effective tax-free threshold by nearly $1,800.

From 2027–28 tax returns

The numbers

How much extra you’ll get from here

Savings are shown as the extra tax reduction from where you are right now — i.e., on top of your current 2025–26 position. For most clients above $45,000, the next rate cut delivers about $268 a year, and the cumulative impact by 2027–28 is modest in dollar terms.

The $1,000 instant deduction is not free money for everyone

If you currently claim more than $1,000 in genuine work-related expenses, the new instant deduction won’t change your outcome — you’ll just keep claiming your actual amount. The benefit applies in full only to workers who don’t itemise deductions, or whose work expenses are under $1,000.

Income from work	Extra from 1 July 2026 Rate cut only	Extra by 2027–28 Both rate cuts + WATO	Maximum extra If you don’t claim WRE
$40,000	$218	$686	$846
$60,000	$268	$786	$1,106
$75,000	$268	$786	$1,106
$90,000	$268	$786	$1,106
$130,000	$268	$786	$1,106
$150,000	$268	$786	$1,176
$200,000	$268	$786	$1,256

Indicative incremental annual tax savings from where you are now (i.e., the 2025–26 income year), compared with assuming the announced rate cuts, the Working Australians Tax Offset and the $1,000 instant deduction all apply as proposed. The “maximum” column adds the full $1,000 instant deduction benefit at your top marginal rate — subtract this if you already claim $1,000 or more in work-related expenses. Includes the basic tax scales and the 2% Medicare levy. Figures rounded. Source: Mastin Harris calculations.

Worked examples

Three workers, three different stories

The extra you’ll get depends on what you already claim. Same change, very different outcomes for different clients.

Sarah

Retail assistant

Earns $50,000

Doesn’t currently claim work expenses — gets the full instant deduction benefit.

From 1 July 2026$268
From 2027–28 (+ WATO)$786
+ instant deduction$1,106

Extra per year by 2027–28

$1,106 / year

Daniel

Chef

Earns $75,000

Already claims about $400 in work expenses — gets a partial top-up from the instant deduction.

From 1 July 2026$268
From 2027–28 (+ WATO)$786
+ instant deduction$978

Extra per year by 2027–28

$978 / year

Priya

Engineer

Earns $120,000

Already claims $1,500+ in genuine work expenses — the instant deduction doesn’t change her outcome.

From 1 July 2026$268
From 2027–28 (+ WATO)$786
+ instant deduction$786

Extra per year by 2027–28

$786 / year

When it happens

Four changes between now and 2027–28

The changes roll out in four stages over the next two financial years.

1 July 2026

Lower bracket rate drops to 15% — the 16% rate on income between $18,201 and $45,000 reduces. Worth up to $268 a year.

2026–27 tax returns

$1,000 instant deduction starts — available on returns lodged from July 2027. No receipts needed for work expenses under $1,000.

1 July 2027

Lower bracket rate drops to 14% — the rate that’s just dropped to 15% reduces further. Worth up to another $268 a year.

2027–28 tax returns

Working Australians Tax Offset starts — a $250 offset on income from work, applied automatically when you lodge.

What you should do

For most employees, very little — but a few things matter

The tax cuts and the WATO happen automatically through your tax return or PAYG withholding. A few items are worth thinking about before they start.

You don’t need to do anything to get the rate cuts

The rate cuts on 1 July 2026 and 1 July 2027 are built into PAYG withholding, so you’ll see them in your take-home pay automatically.

Keep tracking work expenses if you claim over $1,000

The $1,000 instant deduction is a floor, not a ceiling. If your genuine work expenses are higher, you still need records to claim the actual amount.

Charitable donations, union fees and professional memberships are extra

This is the most common misunderstanding we hear about the $1,000 instant deduction. It covers work-related expenses only. Charitable donations, union fees, professional memberships, income protection premiums and the cost of managing your tax affairs are separate deductions and are still claimable in full on top of the $1,000 — with records, as usual.

The personal tax cuts are only part of the picture

If you also own investments, run a business, have a trust or are close to retirement, other Budget changes may have a much bigger impact on your overall position than these tax cuts. Worth a conversation.

All three of these are law

The $1,000 instant deduction and the $250 Working Australians Tax Offset are legislated in the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Royal Assent 26 June 2026. The rate reductions on 1 July 2026 and 1 July 2027 were already legislated and were confirmed in the Budget. Nothing on this page is waiting on Parliament, so the figures shown are the figures you can plan on.

The measures that are not settled sit on the other pages — the trust minimum tax, the definition of a “new build”, the private health insurance rebate change. If any of those apply to you as well, read those pages for the status of each.

Other Budget changes that might apply to you

For most clients, these will matter more than the tax cuts

The personal tax cuts are the friendliest part of this Budget. If any of the following also apply to you, your overall position could look very different — sometimes meaningfully better or worse than the figures above suggest.

If this applies

I own (or am buying) an investment property

Now law. Losses quarantined from 1 July 2027 — but property held at 12 May 2026 is grandfathered.

Read about property changes If this applies

I hold shares or other investments

Now law from 1 July 2027. The 50% discount is replaced with CPI indexation and a 30% minimum tax.

Read about CGT changes If this applies

I run a business through a trust

A proposed 30% minimum tax on discretionary trusts from 1 July 2028. Consultation stage — no bill.

Read about trust changes If this applies

I run a small business

Permanent $20,000 write-off and loss carry-back passed Parliament 19 August 2026. PAYG changes announced only.

Read about small business changes If this applies

I have a Self-Managed Super Fund

Division 296 from 1 July 2026 affects balances over $3 million. Planning window matters.

Read about SMSF changes If this applies

I’m retired or close to it

The private health rebate cut for over-65s is a bill before Parliament, not law. CGT changes and Division 296 are law.

Read about retirement changes

Clarity around your numbers, not just everyone’s.

The Budget figures above are averages and stylised cameos. The actual impact on your situation depends on your income mix, deductions, family arrangements and longer-term plans. If you’d like us to run the numbers for your circumstances, we’d be happy to.

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