Working Australians Tax Offset (WATO)

Starting in the 2027–28 income year, there will be a non-refundable annual tax offset of up to $250 for income earned from work, such as wages, salaries, and sole trader business income.

It is not applicable to income earned from assets.

Similar to the new $1,000 instant deduction, the WATO will be paid automatically through a worker’s annual tax return.

This increases the effective tax-free threshold for workers by nearly $1,800 to $19,985 (before other offsets). For workers who are also eligible for the Low Income Tax Offset, the threshold increases to $24,985.

Primary producers operating as sole traders will be eligible for the tax offset.

The Bill in its current form confirms that the offset cannot be refunded, transferred or carried forward to a later income year.

The measure was announced with the 2026 Federal Budget.

Sources:

• Budget papers 2026
• Treasury Laws Amendment (Tax Reform No.1) Bill 2026 [and related Bill] [Preliminary Digest] – Parliament of Australia
• Progress of Bill through parliament
• Explanatory memorandum

This page was last modified 2026-06-06