More than 13 million Aussies to get $250 tax bonus

Working Australians will be $250 better off at tax time under one of the headline policies unveiled tonight in the Albanese government's 2026-27 federal budget.

To help pay for it, and its other tax cuts, the government will target discretionary trusts in an effort to squeeze more revenue from - among others - Australia's wealthiest people.

The government says 13.3 million working taxpayers will benefit from a new $250 Working Australians Tax Offset (WATO).

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But it won't apply this year.

In an effort to limit government spending in economy where inflation is already running hot, the offset will be available from July 1, 2027, and will be paid automatically in tax returns at the end of the year.

"This offset is targeted to workers and represents the most meaningful, permanent increase to the effective tax-free threshold since Labor last increased it more than a decade ago," Treasurer Jim Chalmers said.

The budget's figures showed that the threshold would increase to $19,985, or $24,985 for workers eligible for the Low Income Tax offset.

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Chalmers said the new offset would build on a raft of previously announced cost-of-living relief measures, including two yet-to-come tax cuts and a $1000 instant tax deduction that would leave the "average worker" better off by $2816 in 2028.

Chalmers said that was the equivalent of $54 in the pocket every week.

The offset will cost the government an estimated $6.4 billion across its first two years.

Tax on trusts

Discretionary trusts are the subject of an entirely different taxation approach.

The Albanese government will slap a 30 percent minimum tax rate on these trusts from July 1, 2028, to "improve the fairness of the tax system and help fund new tax cuts for workers".

Discretionary trusts allow people - most often people and families with great wealth - to minimise their tax expenses by distributing income among their trustees.

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The government's figures showed that in 2022-23, families with discretionary trusts faced an average tax rate about 4 per cent lower compared to families on similar income, but who were without trusts.

"This is about better aligning the taxes paid on these types of income with the taxes paid on wages," Chalmers said.

"And they will fund our new round of tax relief for more than 13 million Australian workers."

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The government claimed more than 90 per cent of private trust wealth belonged to the wealthiest 10 per cent of Australian households.

The minimum tax won't apply to other types of trusts that don't offer the same flexibility, like fixed and widely held trusts, charitable and special disability trusts, or complying superannuation funds.

It also won't apply to deceased estates, primary production income, certain income relating to vulnerable minors, and income from assets of discretionary testamentary trusts existing at the time of the announcement.

The government will also expand rollover relief for three years from July 1, 2027, in order to help businesses and individuals restructure their financial affairs.

Nonetheless, the government is predicting the minimum tax will bring in $4.5 billion in its first year, 2029-30.

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