Working Australians Tax Offset (WATO): What the New $250 Offset Means
The 2026–27 Federal Budget introduced a new tax measure called the Working Australians Tax Offset, or WATO. It is designed to put money back in the pockets of working Australians.
It is not law yet, and it does not start for a while. Here is what it actually is, who it is for, and when you can expect to see it.
What WATO Actually Is
WATO is a permanent annual tax offset of up to $250 for people who earn income from work. This includes wages, salaries, and sole trader business income.
An offset is different from a deduction. A deduction reduces your taxable income. An offset reduces your tax bill directly, dollar for dollar. A $250 offset means $250 less tax owed, not $250 off your income.
It is also different from a cash payment. You will not receive WATO as a lump sum. It is applied automatically when you lodge your tax return.
When It Actually Starts
This is the detail most people get wrong. WATO does not begin in the current tax year, or even next year.
It applies from the 2027–28 income year, which starts on 1 July 2027. That means it will first show up when you lodge your tax return in 2028, not before.
It is also not law yet. The measure was announced in the May 2026 Budget but still needs to pass through Parliament before it takes effect.
Who Is Eligible
WATO is broad. Around 13.3 million Australian workers are expected to qualify, including approximately 1.5 million sole traders.
If you earn income from a job, or run a business as a sole trader, you are likely covered. It does not apply to income earned purely from investments or assets.
The government expects 97 percent of eligible workers to receive the full $250 offset.
What This Means for Sole Traders and Small Business
If you operate as a sole trader, WATO applies to your business income, just as it does to wages. This is worth knowing, since it is easy to assume offsets like this only apply to employees.
If you run your business through a company or trust, WATO does not apply to income retained in that structure. It does apply to any wage or salary you personally draw as an employee of your own company.
What to Do Right Now
Nothing urgent. WATO does not affect this year’s tax return, or even next year’s.
Keep an eye on its progress through Parliament. It is not guaranteed until it becomes law.
If you are a sole trader, note that you are eligible too. This detail is easy to overlook.
Talk to your accountant closer to 2027 to understand exactly how it stacks with other changes, like the $1,000 instant deduction.
Frequently Asked Questions
Will WATO show up on my next tax return? No. It applies from the 2027–28 income year, first appearing on returns lodged from 2028.
Is WATO guaranteed to happen? Not yet. It was announced in the Budget but still needs to pass through Parliament before becoming law.
Do sole traders get WATO? Yes. WATO applies to business income earned by sole traders, in addition to wages and salaries.
Get Reliable Tax and Payroll Advice Talk to Edulink
Keeping track of tax changes years in advance is hard when you are focused on running your business today. You do not have to do it alone.
Edulink Payroll Services charges $750 per employee, per year, covering payroll, compliance, and reporting, for small and medium businesses across greater Sydney and Campbelltown.
Have more employees? Call us for a discounted rate.
📞 Call us today: 04 044 71 816
Edulink Payroll Services | Campbelltown & Greater Sydney | Call 04 044 71 816
Leave a Reply