TL;DR
- •WATO is a new non-refundable offset, up to $250 per year
- •Applies from the 2026-27 income year (income from 1 July 2026)
- •Applied automatically at tax time — no separate claim needed
- •Stacks with the new 15% tax bracket for total benefit up to ~$518
- •13+ million working Australians eligible (Treasury estimate)
What WATO actually is
The Working Australians Tax Offset is a non-refundable tax offset. That means:
- • It reduces the tax you owe, dollar-for-dollar, up to a maximum of $250
- • It cannot make your tax bill go negative (you can't receive WATO as a cash refund if your tax is already $0)
- • It's separate from — and stacks on top of — the 1 July 2026 bracket change from 16% to 15%
Combined with the bracket change, a typical middle-income earner sees their annual tax bill fall by up to $518.
How WATO compares to other offsets
| Offset | Maximum | Who Gets It | Status |
|---|---|---|---|
| WATO | $250 | Working Australians | New 2026-27 |
| LITO | $700 | Low income (under $66,667) | Existing |
| SAPTO | Varies | Seniors, pensioners | Existing |
Offsets generally stack but each has its own taper. The total offset you receive depends on the specific eligibility tests.
Frequently Asked Questions
What is the Working Australians Tax Offset?
A new non-refundable tax offset worth up to $250 per year, announced in the 2026-27 Federal Budget. It applies to over 13 million working Australians from the 2026-27 financial year (income earned from 1 July 2026 onward).
How is it different from a tax cut?
A tax cut reduces the rate at which your income is taxed. An offset directly reduces the tax payable, dollar-for-dollar. WATO reduces your tax bill by up to $250 — but because it's non-refundable, you can only use it to bring your tax to zero, not below.
When do I get the WATO benefit?
At tax time, when you lodge your 2026-27 tax return (from July 2027). The ATO applies it automatically based on your assessable income — you don't need to claim anything specifically.
Do I get the full $250 regardless of income?
No. The maximum $250 is for workers in a middle income band. The offset phases in for lower earners and phases out for higher earners. Exact taper formula will be confirmed in the legislation.
Does WATO stack with the new 15% tax bracket?
Yes. The 15% bracket change saves up to $268 from tax payable, and WATO further reduces tax by up to $250. Together, a worker earning $45,000–$135,000 could see a combined benefit of up to ~$518.
Can I claim WATO if I'm not currently working?
WATO is targeted at working Australians, so it generally requires labour-force participation in the income year. The definition will be confirmed in legislation, but it broadly tracks the labour income tests used in other offsets like LITO.
Get Tax Bracket Updates
Be the first to know when tax brackets change. We'll email you about updates like the Stage 3 tax cuts and new HECS thresholds.
No spam, just tax updates. Unsubscribe anytime.
Related Resources
General information only. Final WATO eligibility and taper rules subject to legislation.
Last updated: 25 May 2026