2026-27 Federal Budget

What the Budget means if you earn a wage or salary

Two more rate cuts to come, a $1,000 instant deduction starting 2026–27, and a new $250 offset for working Australians from 2027–28. Here’s the practical impact for PAYG employees from where you are now — not where you started in 2023.

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

Two further rate cuts on the lower bracket, a new $1,000 instant deduction, and a new $250 offset for working Australians. Most apply automatically when you lodge.

Change 01

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

$1,000 instant tax deduction, no receipts

A standard $1,000 deduction against work-related expenses, available without keeping records. If your actual work expenses are higher, you can still claim them the usual way. Donations, union fees and professional memberships stay claimable on top.

From 2026–27 tax returns

Change 03

$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

These are not work-related expenses for the purposes of the $1,000 instant deduction. You can still claim them separately, on top of the $1,000.

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.

One thing to keep in mind

The $1,000 instant deduction has been released as draft legislation but is not yet law. The Working Australians Tax Offset is a Budget announcement and still needs to pass Parliament. The tax rate reductions on 1 July 2026 and 1 July 2027 are already legislated. Figures shown here will be confirmed as the legislation finalises.

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

Negative gearing limited to new builds from 1 July 2027, plus the end of the 50% CGT discount.

Read about property changes If this applies

I hold shares or other investments

The 50% CGT discount is being replaced with indexation and a 30% minimum tax on real gains.

Read about CGT changes If this applies

I run a business through a trust

A 30% minimum tax on discretionary trusts from 1 July 2028, with rollover relief to restructure.

Read about trust changes If this applies

I run a small business

$20,000 instant asset write-off made permanent, loss carry-back returns, PAYG flexibility.

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

Private health insurance rebate cut for 65+, CGT changes, pension supplement updates.

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.

Book an appointment Contact us