The Federal Budget has released several changes affecting individual taxpayers, with specific focus on those who pay tax on their work-related income. These changes have been made to reduce the amount of individual tax paid by working Australians to provide additional cost-of-living relief.
Medicare Levy Low-income Threshold
From 1 July 2025, The Government is increasing the Medicare levy low-income threshold by 2.9 per cent for singles, families and seniors and pensioners.
The new Medicare Levy rates are:
Singles | Families | Single Seniors & Pensioners | Seniors & Pensioners in a Family | |
Old Lower threshold | $27,222 | $45,907 | $43,020 | $59,886 |
New threshold as of 1/7/2025 | $28,011 | $47,238 | $44,268 | $61,623 |
Please note that the family income thresholds will increase by $4,338 for each dependent child or student, up from $4,216.
What this means for you
Depending on your assessable income for the financial year beginning 1 July 2025, you may be exempt from the Medicare levy, or you will pay a lower rate than in prior years.
Working Australians Tax Offset
The government is introducing additional tax cuts through a $250 Working Australians Tax Offset (WATO). From 1 July 2027, all workers will receive a $250 non-refundable tax offset on their work-related income tax.
What this means for you
From 1 July 2027, if you earn a wage from working in Australia, you will pay up to $250 less tax each year. The WATO will increase the effective tax-free threshold by $1,785, from $18,200 to $19,985 for workers.
For an Australian worker earning $80,000, in the 2025/26 income year, their tax payable (excluding the Medicare levy) would be $14,788. From 1 July 2027, if that same worker earned $80,000, they would only pay $14,002.
Instant Tax Deduction for Work-related expenses
The Government is introducing a $1,000 instant tax deduction for work-related expenses. From the 2026–27 income year, Australian tax residents who earn employment income will be able to claim an automatic $1,000 deduction for work-related expenses, without needing to itemise those expenses, provided the total claim is $1,000 or less.
What this means for you
If your actual work-related expenses exceed $1,000, you can still claim the higher amount with evidence and receipts as per prior periods. Deductions such as donations to a deductible gift recipient, non-work-related deductions and professional membership fees can be claimed in addition to this.
Speak with BlueRock's Tax Consultants and Financial Planners
If the changes in the 2026-2027 Federal Budget impact your business or personal situation, submit the form below and we'll connect you with the right expert to help you optimise your position.
