What This Guide Covers
The 2026 Federal Budget introduced a new tax-offset measure — the Working Australians Tax Offset (WATO). This permanent annual tax offset of up to $250 will benefit over 13 million Australian workers from the 2027–28 income year. Here's everything you need to know.
"The WATO is a permanent, annual tax offset of up to $250 from the 2027–28 income year for all Australian workers." — Budget 2026–27, Cost of Living
What Is the Working Australians Tax Offset?
The WATO is a non-refundable tax offset — it reduces the tax you would otherwise pay, dollar for dollar, down to zero. Unlike a deduction (which only reduces your taxable income), an offset comes off your tax bill directly. Refundability has not been officially confirmed; treat it as a standard non-refundable offset until legislation clarifies.
| Feature | Detail |
|---|---|
| Name | Working Australians Tax Offset (WATO) |
| Amount | Up to $250 per year |
| Type | Non-refundable tax offset |
| Who qualifies | All Australian workers (13+ million) |
| Take-up rate | 97% expected to receive full $250 |
| Starting | 2027–28 income year |
| Duration | Permanent (annual) |
Impact on Tax-Free Threshold
- Standard tax-free threshold: $18,200
- Effective threshold for workers with WATO: $19,985
- For workers also eligible for LITO (Low Income Tax Offset): up to $24,985
How WATO Fits Into the Budget 2026 Picture
WATO is one of the NEW Budget 2026–27 measures, announced on 12 May 2026. It is NOT one of the Stage 4 rate cuts (those were legislated separately, before Budget night). Here's how the pieces sit together:
| Type | Measure | Effective | Annual benefit (avg earner above $45k) |
|---|---|---|---|
| Already legislated (Stage 4 Phase 1) | 16% → 15% on $18,201–$45,000 | 1 July 2026 | ~$268 |
| Budget 2026 NEW | $1,000 instant tax deduction | FY2026–27 | ~$205 avg |
| Already legislated (Stage 4 Phase 2) | 15% → 14% on $18,201–$45,000 | 1 July 2027 | additional ~$268 |
| Budget 2026 NEW | WATO ($250) | FY2027–28 | +$250 |
| Budget 2026 NEW | CGT / Negative gearing reform | 1 July 2027 | varies |
| Budget 2026 NEW | Discretionary trust 30% min tax | 1 July 2028 | varies |
For the full picture, see our Budget 2026 personal tax changes overview.
Who Gets the Full $250?
According to Treasury, 97% of workers will receive the full $250 offset. The offset starts phasing out only above approximately $34,919 taxable income for the full amount, with the upper phase-out tapering at higher incomes. Above $45,000, most workers still receive close to the full amount — the offset is designed to be near-universal.
Examples
Dean — Mechanic, $70,000/year
- Stage 4 Phase 1 (FY2026–27): ~$268/year from the rate cut
- Stage 4 Phase 2 (FY2027–28): cumulative ~$536/year (vs FY2025–26 baseline)
- WATO: +$250 from FY2027–28
- Plus the choice of $1,000 instant deduction or itemised receipts each year
Kerry — Cyber security engineer, $140,000/year
- Receives the full $250 WATO from FY2027–28
- Combined with Stage 4 rate cuts and the $1,000 instant deduction option
"Of the 13 million Australian workers who receive the WATO, 97 per cent are expected to receive the full $250 offset." — Budget 2026–27
WATO vs LITO: What's the Difference?
| Feature | WATO | LITO |
|---|---|---|
| Full amount | $250 | $700 |
| Who qualifies | Workers | Low to middle income earners |
| Phase-out | Begins above ~$34,919 (still near-universal) | Tapers from $37,500; gone by $66,667 |
| Type | Non-refundable tax offset | Non-refundable tax offset |
| Start | 2027–28 | Existing |
Both offsets can be claimed together — they're separate and complementary. Note that both are non-refundable, meaning they can reduce your tax bill to zero but won't generate a cash refund beyond the tax you actually owe.
Common Questions
Is WATO permanent?
Yes — it's a permanent annual tax offset, not a one-off payment.
Do I need to apply?
No — it's applied automatically when you lodge your tax return, just like LITO.
Can I get WATO if I'm a part-time worker?
Yes — all workers with employment income qualify, including part-time and casual.
Does WATO affect my other benefits?
As a tax offset, it shouldn't affect Centrelink payments or other means-tested benefits, but check with Services Australia for your specific situation.
Is WATO refundable?
The Budget papers describe WATO as a tax offset but do not explicitly confirm refundability. Treat it as a standard non-refundable offset — it reduces tax owed but doesn't produce a cash payment beyond your actual tax liability — unless legislation says otherwise.
What about the Low Income Tax Offset (LITO)?
LITO remains unchanged. You can receive both WATO and LITO if you qualify for both.
Quick Checklist
- Understand that WATO provides up to $250/year from 2027–28
- 97% of workers receive the full amount — you likely qualify
- No application needed — automatic at tax time
- WATO is on top of the Stage 4 rate cuts (legislated separately) and the $1,000 instant deduction option
- The $1,000 instant tax deduction starts earlier (2026–27) and works alongside WATO from 2027–28 onwards
Need Help With Your Tax Return?
Complex situation? a registered tax agent (see the directory) Our partner agents review every detail for accuracy and compliance.
*Disclaimer: This is general information only and does not constitute personal tax advice. Consult a registered tax agent for advice tailored to your specific situation. Always verify against the latest ATO guidelines at ato.gov.au.*
*Disclaimer: This information is general in nature and does not constitute financial or tax advice. Budget measures are subject to the passage of legislation. Always consult a registered tax agent for advice specific to your situation.*