Tax cuts to ease cost pressures

There are two stages to the tax cuts:

From July 1, 2026, the 16 per cent rate will be reduced to 15 per cent.

From July 1, 2027, the 15 per cent rate will be reduced further to 14 per cent.

This means every Australian taxpayer will receive a tax cut of up to $268 from this year, then up to $536 every year from July 1, 2027 compared to the 2024-25 tax settings.

Senior and pensioner tax offset (SAPTO) thresholds will change from 2026-27 as a result of the tax cuts (see table). There will be no changes to the maximum tax offset amounts.

To be eligible for SAPTO you must:

• be eligible for a Federal Government pension or allowance

• meet income limits for you and your spouse.

The offset can reduce the amount of income tax you pay.

The Australian Tax Office will apply the non-refundable offset when your tax return is assessed.

You may be able to transfer an unused amount to your spouse if you're both eligible for SAPTO.

If you're entitled to SAPTO, you are also eligible for an increased Medicare levy low income threshold.

You must be entitled to at least $1 of SAPTO in order to use the threshold.

Another tax measure announced in the 2026-2027 Federal Budget is the Working Australians Tax Offset (WATO).

This provides an additional tax cut of up to $250 for working Australians, on top of the tax cuts in the 2024-25 Budget, and the two upcoming rounds announced in the 2025–26 Budget.

The WATO is a permanent, annual tax offset of up to $250 from the 2027-28 income year for all Australian workers.

This increases the effective tax‑free threshold for Australian workers by nearly $1,800 to $19,985 (or up to $24,985 for workers eligible for the Low Income Tax Offset).

Of the 13 million Australian workers who receive the WATO, 97 per cent are expected to receive the full $250 offset.