What Is the Working Australians Tax Offset?
The WATO is a new non-refundable tax offset for Australian resident individuals who earn labour income. The Government announced it in the 2026-27 Budget, and the ATO now lists the measure as law. It is available from the 2027-28 income year (1 July 2027 to 30 June 2028) for individuals who are Australian residents for tax purposes during that year and whose net labour income, meaning labour amounts less labour deductions, is above the $18,200 tax-free threshold.
The maximum benefit is $250, and you get all of it if the income tax payable on your net labour income is above $250. An offset is not a deduction. A deduction lowers your taxable income, so it saves tax at your marginal rate. An offset comes off the tax itself, dollar for dollar, so $250 is worth $250 whatever you earn. Because the WATO is non-refundable it can only reduce your tax to nil. Any unused amount is lost: it is not refunded, transferred or carried forward.
The 15% to 14% Tax Rate Cut From 1 July 2027
The second tax rate, on taxable income between $18,201 and $45,000, was 16% in 2025-26, fell to 15% on 1 July 2026, and falls again to 14% on 1 July 2027. The ATO says both stages are law. The thresholds and the 30%, 37% and 45% rates above $45,000 do not change. A person earning $45,000 or more pays $268 less tax a year than in 2026-27, and one earning $31,700 pays 1 cent less for every dollar above $18,200, which is $135.
| Taxable income | 2026-27 tax on this income | 2027-28 tax on this income |
|---|---|---|
| $0 to $18,200 | Nil | Nil |
| $18,201 to $45,000 | $0 plus 15c for each $1 over $18,200 | $0 plus 14c for each $1 over $18,200 |
| $45,001 to $135,000 | $4,020 plus 30c for each $1 over $45,000 | $3,752 plus 30c for each $1 over $45,000 |
| $135,001 to $190,000 | $31,020 plus 37c for each $1 over $135,000 | $30,752 plus 37c for each $1 over $135,000 |
| $190,001 and over | $51,370 plus 45c for each $1 over $190,000 | $51,102 plus 45c for each $1 over $190,000 |
Resident rates, not including the 2% Medicare levy. 2026-27 is the ATO’s published scale; 2027-28 applies the ATO’s 14% rate to the same band. See tax brackets and tax bracket history.
Take-Home Pay in 2027-28 vs 2026-27
The table holds your salary the same in both years, so the difference is purely the law. It includes income tax, the low income tax offset and the Medicare levy at current settings. Pay rises would add to it.
| Salary | Take-home 2026-27 | Take-home 2027-28 | Better off a year | Per fortnight |
|---|---|---|---|---|
| $25,000 | $24,680 | $24,998 | $318 | $12.23 |
| $30,000 | $28,731 | $29,099 | $368 | $14.15 |
| $45,000 | $40,405 | $40,923 | $518 | $19.92 |
| $60,000 | $50,380 | $50,898 | $518 | $19.92 |
| $80,000 | $63,880 | $64,398 | $518 | $19.92 |
| $100,000 | $77,480 | $77,998 | $518 | $19.92 |
| $150,000 | $110,430 | $110,948 | $518 | $19.92 |
| $200,000 | $140,130 | $140,648 | $518 | $19.92 |
Resident, all labour income, no deductions, HECS or private health adjustments. LITO and Medicare levy held at 2026-27 settings.
Worked example, $60,000 salary. In 2026-27 the income tax is $8,520 ($4,020 plus 30c on the $15,000 above $45,000), the Medicare levy is $1,200, and take-home is $50,380. In 2027-28 the tax before offsets is $8,252, because the first $26,800 of the taxable band now costs 14c rather than 15c. The WATO takes off a further $250, leaving income tax of $7,902 and take-home of $50,898. That is $518 a year, or $19.92 a fortnight, more.
Who Gets Less Than the Maximum?
- Earners below $45,000. The rate cut is worth 1 cent per dollar of income above $18,200, so it grows from nil to $268.
- Low earners with little tax payable. The offset cannot reduce your tax below nil. The low income tax offset already wipes out the tax for people earning up to about $22,867 in 2026-27 and $23,200 in 2027-28 (see the LITO guide), so they have nothing left for the WATO to reduce.
- Anyone not earning labour income. Investment income alone does not count as net labour income.
- Non-residents for tax purposes. The offset needs Australian residency during the income year. See non-resident tax rates.
What We Have Not Confirmed Yet
Three things are not settled in the official material we read. First, how the offset will be delivered: whether your employer’s PAYG withholding will include it from 1 July 2027 or whether you receive it when your 2027-28 return is assessed. Second, the exact definition of labour income for people with business income. Third, 2027-28 settings for the Medicare levy and the low income tax offset, which this calculator holds at their current values. We will update this page when the ATO publishes more. In the meantime the annual figures above are the effect on your tax for the year.
Related Calculators and Guides
- Tax Changes 2026-27: what changed on 1 July 2026
- Income Tax Calculator: your tax this year
- Take-Home Pay Calculator: net pay with super and HECS
- Pay Rise Calculator: what a raise adds after tax
- Stage 3 Tax Cuts: the 2024 cuts, for context
Frequently Asked Questions
Working Australians Tax Offset questions and answers
What is the Working Australians Tax Offset?
It is a new non-refundable tax offset of up to $250 a year for Australian residents who earn labour income, available from the 2027-28 income year (1 July 2027 to 30 June 2028). The ATO says the measure is now law, following Royal Assent on 26 June 2026.
Who gets the $250 offset?
Individuals who are Australian residents for tax purposes during the 2027-28 income year and whose net labour income (labour amounts less labour deductions) is above the tax-free threshold of $18,200. The maximum $250 applies if the income tax payable on your net labour income is above $250.
Is the Working Australians Tax Offset refundable?
No. It can only reduce your tax payable to nil. Any unused amount is not refunded, and it cannot be transferred or carried forward to another year.
When does the tax rate fall from 15% to 14%?
On 1 July 2027. The 16% rate fell to 15% on 1 July 2026, and the ATO says the 15% rate will be reduced further to 14% from 1 July 2027. It applies to taxable income between $18,201 and $45,000, and the measure is now law.
How much better off will I be in 2027-28?
On the same salary, up to $518 a year: $268 from the lower rate (for anyone earning $45,000 or more) plus $250 from the offset. Someone earning $30,000 gets less from the rate cut, 1 cent for each dollar above $18,200, and may get less than $250 from the offset if their tax is low.
Is the offset the same for everyone?
The maximum is the same, $250, for every eligible worker whether they earn $50,000 or $250,000. Because it is a flat dollar amount, it is worth a bigger share of a lower salary. Workers whose tax payable is below $250 get less because the offset cannot go below nil.
Does the Working Australians Tax Offset apply to the 2026-27 tax year?
No. It starts in the 2027-28 income year. The 1 July 2026 change for 2026-27 is the cut in the second tax rate from 16% to 15%, plus the $1,000 instant tax deduction, which you claim on the 2026-27 return.
Will my employer pay it in my pay or will I get it at tax time?
We have not seen the ATO say how it will be delivered, whether through PAYG withholding or when your 2027-28 return is assessed. The calculator shows the annual effect on your tax. Check the ATO's Working Australians tax offset page for updates.
Does self-employed income count as labour income?
The ATO describes the offset as being for residents who earn labour income, measured as labour amounts less labour deductions. The legal definition of labour amounts sits in the legislation, and we have not confirmed how it treats sole trader business income, so check the ATO page if most of your income is not salary or wages.
How we worked this out▼
For each year, tax is worked out on the resident scale (2026-27: 15% second rate; 2027-28: 14%, same thresholds), less the low income tax offset (limited to the tax), less in 2027-28 the WATO of the lesser of $250 and the tax left after LITO, then the 2% Medicare levy with its low-income phase-in is added. Take-home = salary minus income tax minus Medicare. The WATO is zero at or below $18,200. The offset is capped at tax after LITO, the cautious reading of “can only reduce tax payable to nil”.
Assumes all income is salary, residency for the full year, and no deductions, HECS, private health or other adjustments. General information, not tax advice.
Sources & References
- 1Working Australians tax offset— Australian Taxation Office
- 2Personal income tax - new tax cuts for every Australian taxpayer— Australian Taxation Office
- 3Latest news on tax law and policy (Royal Assent dates)— Australian Taxation Office
- 4Budget 2026-27 tax system changes— Treasury
- 5Tax reform, Budget 2026-27— Australian Government
Last verified: 5 October 2026. Our content is based on the latest information from official Australian government sources.
Anita Bell
AuthorFounder & Senior Bookkeeper
Accountancy degree (2015); certified in Xero, QuickBooks Online, MYOB, Saasu, Zoho and Reckon One
Anita Bell earned her accountancy degree in 2015 and has worked as a senior bookkeeper with Prime Bookkeeping for over 5 years. This built her skills in Australian and New Zealand tax legislation and industry regulations. She is certified in Xero, QuickBooks Online, MYOB, Saasu, Zoho and Reckon One, and works with payroll and rostering software including Gusto, Deputy, Tsheets and KeyPay. She has strong experience in hospitality, building and construction, financial services, real estate, ecommerce, and medical and health services.
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