Major Tax Changes Set to Impact Workers, Property Investors and Families
The 2026–27 Federal Budget introduces significant personal tax reforms aimed at easing cost-of-living pressures for Australians while reshaping the property investment landscape.
Key measures include:
- a new Working Australians Tax Offset
- a $1,000 standard deduction for work expenses
- lower income tax rates
- Medicare levy threshold increases
- major changes to capital gains tax and negative gearing rules
Here’s what Australian taxpayers need to know.
New Working Australians Tax Offset (WATO)
From 1 July 2027, eligible Australian workers will receive a permanent $250 Working Australians Tax Offset (WATO) on income earned through employment, wages, salaries, and sole trader business activities.
The new offset will:
- Increase the effective tax-free threshold by almost $1,800
- Raise the threshold to $19,985
- Increase it further to $24,985 for workers eligible for the Low Income Tax Offset (LITO)
According to the Treasurer, this is the largest permanent increase to the effective tax-free threshold since 2012–13.
Combined with previously announced tax measures, Australians on average earnings could receive up to $2,816 in annual tax relief from 2027–28.
$1,000 Standard Deduction Confirmed
The Federal Budget also confirmed the introduction of the long awaited $1,000 standard deduction for work-related expenses from the 2026–27 income year.
This optional deduction allows eligible taxpayers to:
- Claim up to $1,000 without receipts or substantiation
- Simplify annual tax return preparation
- Reduce compliance and record-keeping requirements
However:
- The deduction is reduced dollar-for-dollar by actual work-related deductions claimed
- Double-dipping is not allowed
Certain expenses remain claimable separately, including:
- Union fees
- Income protection insurance
- Tax agent fees and tax affairs management costs
Why This Matters
The standard deduction is expected to benefit millions of employees who typically claim modest work-related expenses.
Income Tax Cuts Remain in Place
Previously legislated personal income tax cuts will proceed as planned.
Upcoming Tax Rate Changes
Financial Year | Tax Rate | Income Bracket |
Current | 16% | $18,201 – $45,000 |
From 1 July 2026 | 15% | $18,201 – $45,000 |
From 1 July 2027 | 14% | $18,201 – $45,000 |
These changes will provide:
- Up to $268 in annual tax savings from 2026–27
- Up to $536 annually from 2027–28
Medicare Levy Thresholds Increase
To further support low-income Australians, Medicare levy thresholds will increase for the 2025–26 financial year.
Updated Medicare Levy Thresholds
Singles
- Increased to $28,011
Families
- Increased to $47,238
Seniors and Pensioners Eligible for SAPTO
- Single threshold: $44,268
- Family threshold: $61,623
These increases aim to protect lower-income earners from additional tax burdens amid rising living costs.
Private Health Insurance Rebate Changes
From 1 April 2027, higher age-based private health insurance rebate tiers for Australians aged 65 and over will be removed.
All Australians will instead receive the same base-tier rebate regardless of age.
The government estimates this measure will save approximately $3 billion over four years.
Major Property Tax Changes from 2027
The Budget introduces substantial reforms affecting Australian property investors.
Capital Gains Tax (CGT) Reforms
From 1 July 2027:
- The current 50% CGT discount will be replaced with inflation-adjusted indexation
- A minimum 30% tax rate will apply to realised capital gains
Exception for New Residential Properties
Investors purchasing newly built residential properties may choose between:
- The current 50% CGT discount system, or
- The new indexation method
Impact on Investors
These changes could significantly alter:
- Long-term investment returns
- Property investment strategies
- Tax planning opportunities
Negative Gearing Changes
Negative gearing will be restricted to newly constructed properties from 2027.
Existing Property Owners Protected
Properties owned at Budget time will remain grandfathered until sold.
New Rules for Established Properties
Losses from established residential properties will only be deductible against:
- Rental income, or
- Capital gains from residential property investments
This reform is designed to improve housing affordability and encourage new housing construction.
New Minimum Tax on Trust Distributions
From 1 July 2028, discretionary trusts will face a minimum 30% tax rate on taxable income distributions.
What Changes?
- Trustees will pay a minimum 30% tax
- Beneficiaries receive non-refundable tax credits
- Lower-income beneficiaries may face higher effective tax rates than under current rules
Transitional Relief Available
To support restructuring, the government will introduce expanded rollover relief for three years from 1 July 2027.
This may help discretionary trusts transition into:
- Companies
- Fixed trusts
What These Budget Changes Mean for Australians
The 2026–27 Federal Budget represents one of the most significant overhauls of Australia’s personal tax system in decades.
Whether you are:
- An employee claiming work expenses
- A sole trader
- A property investor
- A trustee or beneficiary of a family trust
- A retiree or pensioner
these reforms could substantially impact your tax position and financial planning strategies.
Need Advice on How the Budget Affects You?
Understanding how these tax changes apply to your individual circumstances is essential for effective tax planning.
Contact our office today to discuss:
- Tax minimisation strategies
- Property investment implications
- Trust restructuring options
- Work-related deductions
- Personal tax planning for 2026–27 and beyond
We can help you prepare for the upcoming changes and maximise available opportunities.