The 2026-27 Budget announced a permanent $250 Working Australians Tax Offset (WATO) from the 2027-28 income year. Treasury estimates 13 million Australians qualify and 97% receive the full $250. Below the headline there's structural detail worth knowing — how WATO interacts with LITO, how it lifts the effective tax-free threshold, and whether it actually changes anything for you in cash terms.
How the WATO works
The WATO is a non-refundable offset — it reduces tax payable but doesn't generate a refund beyond your assessed tax. If you owe $1,500 in tax, the WATO knocks it to $1,250. If you owe $0 because your income was under the tax-free threshold, the WATO doesn't do anything (because there's no tax to offset).
The maximum amount is $250 per individual per year, applied automatically when you lodge your return. Treasury's 97% figure reflects that most workers earn enough to use the full offset against tax payable. The 3% who don't are very-low-income earners whose tax bill was already $0 or close.
What it does to your effective tax-free threshold
The current tax-free threshold is $18,200 (s 4-15 ITAA 1997 + the tax tables). Adding the WATO at the bottom of the marginal-rate scale means a worker can earn another $1,800 or so before they actually pay net tax — pushing the effective threshold up to around $19,985 for someone with only WATO. Stack the existing Low Income Tax Offset on top, and the effective threshold reaches around $24,985 for someone earning under the LITO phase-out band.
For most clients earning above $30,000 the WATO just lops $250 off the final assessment. For lower earners it materially extends the no-tax band.
Who qualifies
- Individuals earning employment income — PAYG employees of any role, casual / part-time / full-time, public or private sector.
- Sole traders — anyone running a business with personal services or sole-trader income (rideshare drivers, tradies on ABN, freelancers).
- People on JobSeeker, Age Pension, or other social security payments — if they ALSO earn employment income above a threshold. Pure social-security recipients with no work income don't qualify (the offset is for "working Australians" by name).
The detailed income thresholds for partial-WATO recipients (the 3% who don't get the full $250) haven't been published yet. We update this post when the legislation drops.
How it interacts with other offsets
- Low Income Tax Offset (LITO) — stacks. WATO + LITO together can deliver up to ~$700 of offset for low-income workers.
- Low and Middle Income Tax Offset (LMITO) — already abolished after FY22; not relevant.
- Senior Australians and Pensioners Tax Offset (SAPTO) — separate offset, separate test. WATO is on top.
- The new $1,000 instant work-related deduction — different mechanism. WATO is an offset (reduces tax payable); the $1,000 instant deduction is a deduction (reduces taxable income). They stack: take both.
What to do
Nothing — the WATO applies from FY28 (1 July 2027 to 30 June 2028) and is auto-applied when the ATO assesses your return. You don't opt in, claim a code, or lodge a separate form. The first time you see it on a notice of assessment is when you lodge your 2028 return.
For agents and clients planning cash flow for FY28: build a $250 buffer into any forward modelling for personal-tax outcomes. Stack with the $1,000 instant deduction which begins the same year — combined effect for a worker on the 30% marginal rate is roughly $550 less tax ($300 from the deduction + $250 from the offset).
Sources
- Budget 2026-27 cost-of-living page (budget.gov.au/content/02-cost-of-living.htm)
- Budget 2026-27 tax reform page (budget.gov.au/content/04-tax-reform.htm)
- SmartCompany — New $250 tax offset for working Australians
- Pitcher Partners technical note — Federal Budget 2026-27: Personal tax measures
