Welcome to our Federal Budget Spotlight Series: Individual Tax Changes – What Workers Need to Know
Supporting household income pressures
The 2026–27 Federal Budget includes a number of proposed changes aimed at supporting individuals, particularly those on low to middle incomes.
Key measures include:
- A new Working Australians Tax Offset (WATO)
- An increase in Medicare levy low-income thresholds
The proposed $250 Working Australians Tax Offset
From 1 July 2027, the Government proposes to introduce:
- An annual $250 tax offset for eligible workers
- Applied automatically via tax returns
- Applicable to employment income and eligible business income
What’s the potential impact?
If enacted, the offset may:
- Increase the effective tax-free threshold for some taxpayers
- Provide modest additional income support, particularly for lower-income earners
- The overall benefit will depend on individual income levels and eligibility for other offsets.
Medicare levy threshold increases
From 1 July 2025, the Budget includes increases to low-income thresholds of approximately 2.9%, including:
- Singles: $27,222 → $28,011
- Families: $45,907 → $47,238
- Higher thresholds for seniors and pensioners
Why this matters
These changes may:
- Reduce or remove the Medicare levy for eligible taxpayers
- Help maintain thresholds in line with income growth
Combined effect
Together, these measures are designed to:
- Improve after-tax income for some individuals
- Provide targeted support amid rising living costs
- Adjust thresholds to reflect economic conditions
Planning considerations
While relatively modest in isolation, these changes may still influence:
- Personal tax planning
- Household budgeting
- Sole trader income structuring
Our perspective
These proposals form part of a broader policy approach to support workforce participation and household resilience.
While outcomes will vary, understanding how these measures interact with your overall tax position may help optimise your personal tax outcomes.
Disclaimer
This article provides general information only and is based on the proposed measures announced in the 2026–27 Federal Budget. These measures are subject to legislation and may change. This content does not constitute tax, financial or legal advice. You should not act on this information without obtaining professional advice tailored to your circumstances.
