Budget Measures for Australian Workers Not Yet Law, Affecting Tax Returns

The federal government made a point of talking up new measures aimed at benefiting the average Australian worker in the budget last month.

They included the $250 Working Australians Tax Offset (WATO) and a new instant tax deduction of up to $1,000.

But that doesn't mean you'll see an extra $1,250 in your tax return this year.

Changes not legislated yet

Those two measures haven't been written into Australian law yet.

They're on the same bill as the proposed changes to negative gearing rules and the capital gains tax, two major changes that have been creating a lot of debate in and out of Parliament.

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The bill has been introduced to the House of Representatives but it hasn't been voted into law yet.

It has been referred to the Senate Economics Legislation Committee, with a report on it due on Friday.

But even if the bill does pass before the end of the financial year, it won't affect your tax return for 2025-26.

Instant deduction rule due next year

The instant tax deduction of up to $1,000 isn't slated to take effect until the 2026-27 financial year.

So you won't be able to utilise it until tax time next year.

And it doesn't work out to be a $1,000 bonus payment, it's about cutting down on the paperwork for individuals who are claiming $1,000 or less in work-related deductions.

Those kinds of deductions are not dollar-for-dollar refunds on work-related expenses you get back in your tax return.

You only get a percentage of the work-related expense back in your tax return, and that percentage is based on what rate you're taxed at.

The federal government said this measure would work out to be an average tax saving of just $205 for eligible taxpayers.

In fact, the maximum benefit of this change is expected to be just $470, tax experts Elizabeth Morton and Lisa Greig pointed out in a post for the Australian National University's Tax and Transfer Policy Institute.

But you would have to be earning $190,001 or more (and being taxed at the highest rate of 45 per cent along with the 2 per cent Medicare levy) to get that much back.

Individuals won't be able to use the instant tax deduction if they have genuine expenses of more than $1,000.

"They're introducing the standard deduction to make life simpler, but it's really for those that have got minimal expenses," Dr Morton said.

And this new rule could actually make things harder for people claiming more than $1,000 in deductions.

"They're actually removing some of the substantiation concessions," Dr Morton said.

"For those with genuine expenses of more than $1000, they're going to have a higher compliance burden."

Keep records of your expenses

With the instant deduction still a year away, you'll need to keep up with documenting your claims.

"It's important to keep good records, including receipts, for the work-related expenses included in your tax return," Australian Taxation Office assistant commissioner Anita Challen said.

"We encourage taxpayers to continue to keep these records in future years, in case their eligible deductions claim exceeds $1,000."

The $250 offset is two years away

The WATO benefit of $250 won't come into effect until the 2027-28 financial year.

So that's another two years away.

It's only for taxpayers who earn from labour income, or sole traders running their own business.

Keep in mind that it's not a bonus payment, it's a tax offset.

That means it only reduces the amount of tax you pay.

So if you're earning the tax-free threshold of $18,200 or less, you won't pay tax and therefore won't see the benefit of the WATO.

When does the financial year end?

The last day of the financial year is June 30.

This current financial year is 2025-26.

July 1 will mark the start of the 2026-27 financial year.

When can I do my tax return?

Technically, you'll be able to file your tax return from July 1 onwards.

But Australian Taxation Office assistant commissioner Anita Challen said to wait until late July to file your return.

"If you lodge too early, you run the risk of missing information and the need to make an amendment later down the track," Ms Challen said.

"We encourage taxpayers to hold off lodging until pre-fill is available.

"By late July, most pre-fill information is available, including wages, bank interest, government payments and private health insurance details.

"Once pre-fill is ready, taxpayers simply need to check the information, add in any missing information, including cash income, and eligible deductions."

Disclaimer: This is not tax advice; this is for educational purposes only. Taxpayers should seek advice from a registered tax agent or suitably qualified professional.