PERSONAL INCOME TAX CHANGES
Treasurer Jim Chalmers also announced the $250 Working Australians Tax Offset (WATO) which will be a permanent annual tax offset for income earned by Australian workers from 1 July 2027. The WATO will also be available to sole traders running their own business and is in addition to the $1,000 instant tax deduction for work-related expenses to offset employment income previously announced.
Additionally, as previously announced, personal income tax cuts for the $18,200 to $45,000 income bracket will commence from 1 July 2026. The measure will reduce the tax rate applying from 1 July 2026 with the first reduction from 16% to 15% and the second reduction from 1 July 2027 from 15% to 14%.
After three rounds of tax cuts, the WATO and the instant tax deduction, an Australian worker on average earnings could receive a combined benefit of up to $2,816 from the 2027– 28 income year relative to 2023–24 tax settings.
Increasing Medicare levy low-income thresholds
The Government will also increase the Medicare levy low-income thresholds by 2.9 % for singles, families, and seniors and pensioners from 1 July 2025. This increase is aimed at ensuring that individuals and families on lower incomes continue to be exempt from paying the Medicare levy or pay a reduced levy rate.
MKT Comment:
While positioned as support for cost-of-living pressures and workforce participation, the WATO does not commence until 1 July 2027, limiting its ability to provide timely relief and with no further changes to personal tax rate thresholds, the salaried worker is still penalised for earning more.
If you would like to discuss any of these proposed Budget Changes please contact our MKT Federal Budget team of Ross Prosper, Mimi Ngo, Chris Schoeman or Sean Pearce.