The 2026–27 Federal Budget, delivered by Treasurer Jim Chalmers on the evening of 12 May 2026, is one of the most significant overhauls of the Australian tax system in nearly three decades.
In a single Budget, the Government has made changes to capital gains tax, negative gearing, trust distributions, superannuation, electric vehicles, research and development, and a range of cost-of-living measures.
Almost every one of our clients will be affected in some way.
Individual Taxpayers
The $1,000 Instant Tax Deduction
From 1 July 2026, eligible Australian taxpayers who earn income from work will be able to claim a flat $1,000 deduction for work-related expenses — without needing to keep receipts or itemise individual costs.
This is a choice, not an automatic change, and you will still need to decide whether the flat deduction or your actual expenses gives you the better result.
Who Is Eligible?
Australian tax residents who earn income from work, including wages, salaries, and sole trader business income.
If your income comes only from investments or rental properties, this deduction does not apply.
Will It Save You Money?
The saving depends on your tax rate. At 32% (30% plus the Medicare Levy), the saving is $320. At 47% (45% plus the Medicare Levy), the saving is $470. If you currently claim more than $1,000 in legitimate work-related expenses, your actual expenses remain the better option.
A Few Important Points
Charitable donations, union and professional association membership fees, and other non-work deductions can still be claimed on top of the $1,000 flat deduction.
$250 Working Australians Tax Offset
The Budget introduces a permanent Working Australians Tax Offset of up to $250 for Australians who earn income from work — including wages, salaries, and the business income of sole traders.
This offset does not take effect until the 2027–28 financial year, meaning most clients will first see the benefit when their 2027–28 tax return is lodged and processed.
Key Points
The offset reduces tax owed, rather than providing a direct cash payment. If you pay little or no tax, the benefit will be reduced or nil.
It applies to individuals with income from work — not investment or rental income only.
It increases the effective tax-free threshold for work income by nearly $1,800 to approximately $19,985 — or up to $24,985 for those also eligible for the Low-Income Income Tax Offset.
This is a permanent measure, unlike previous one-off cost-of-living offsets.
A Few Important Points
If you have an outstanding tax debt or other liabilities, the offset may be applied against what you owe rather than appearing as a refund.
Changes to Income Tax Rates
I heard income tax rates are changing — how does that affect me?
I heard Income Tax Rates are Changing?
Yes they are, however these changes were confirmed before this Budget and have not been altered.
Personal income tax cuts take effect on 1 July 2026 and again on 1 July 2027.
Medicare Levy Thresholds for Low Income Earners
The Medicare levy low-income thresholds have been increased by 2.9% from 1 July 2025.
If your income is below these thresholds, you are exempt from the Medicare levy:
- Singles: threshold increases to $28,011
- Families: threshold increases to $47,238
- Single seniors and pensioners: threshold increases to $44,268
- Family threshold for seniors and pensioners: increases to $61,623
The family threshold increases by $4,338 for each dependent child or student.
Other Federal Budget 2026/27 Blogs
Click here to view our Blog on The Budget's Changes to Capital Gains Tax
Click here to view our Blog on The Budget's Changes to Property Investors and Negative Gearing
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