Source: https://budget.gov.au/content/02-cost-of-living.htm
Cost of living
Taking pressure off Australians
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New tax cuts to help with the cost of living
A new tax cut for every Australian worker
The Working Australians Tax Offset (WATO) provides an additional tax cut of up to $250 for working Australians on top of the tax cuts in the 2024-25 Budget and the two upcoming rounds announced in the 2025-26 Budget. This will benefit over 13 million Australian workers.
The WATO is a permanent, annual tax offset of up to $250 from the 2027-28 income year for all Australian workers. This increases the effective tax‑free threshold for Australian workers by nearly $1,800 to $19,985 (or up to $24,985 for workers eligible for the Low Income Tax Offset). Of the 13 million Australian workers who receive the WATO, 97 per cent are expected to receive the full $250 offset.
Tax cuts for every taxpayer starting 1 July 2026
The Government is rolling out two more tax cuts for every Australian taxpayer.
- From 1 July 2026, the 16 per cent tax rate on taxable income between $18,201 and $45,000 will drop to 15 per cent.
- From 1 July 2027, the tax rate will drop to 14 per cent.
Every Australian taxpayer will receive a tax cut of up to $268 from 1 July 2026, then up to $536 every year from 1 July 2027, compared to the 2024-25 tax settings.
Lower, simpler taxes with a $1,000 instant tax deduction
The Government is also introducing a $1,000 instant tax deduction to deliver lower and simpler taxes for workers from 2026-27. 6.2 million workers, or 42 per cent of taxpayers, will benefit from an average tax saving of $205 for 2026-27.
The instant tax deduction allows workers to lower their taxable income from work by $1,000 without keeping receipts when they lodge their tax return. It will make tax time simpler and deliver more cost‑of‑living relief for workers from 2026-27.
Case study: Instant tax deduction
Kerry and Matt both work and share looking after their young daughter. Kerry is a cyber security engineer earning $140,000 a year. She incurs $800 in self‑education costs to keep her skills current. Matt is a pharmacy nurse earning $90,000. He sometimes drives his car to home visits and incurs $450 in work‑related car expenses.
Thanks to the instant tax deduction, from 2026-27 onwards they both receive a $1,000 deduction without needing to keep records of their work‑related expenses. Their combined tax bill for 2026-27 falls by $254.
Combined benefits of five tax cuts
The Government is cutting taxes five times to help workers keep more of what they earn. Combined with the first round of tax cuts from 1 July 2024 and the additional tax cuts from 1 July 2026 and 1 July 2027, the WATO will mean an Australian worker on average earnings ($81,245) will receive a tax cut of $1,978 in 2026-27 and $2,496 from 2027-28, compared to 2023-24 tax settings.
Combined with the $1,000 instant tax deduction, an Australian worker on average earnings who receives the average benefit from the instant tax deduction would be $2,701 better off in 2027-28. If this worker received the maximum benefit from the instant tax deduction, they would be $2,816 better off after the five rounds of tax cuts.
An Australian worker on average earnings is expected to pay up to $38,977 less tax from 2024-25 to 2036-37, relative to 2023-24 tax settings.
Case study: Combined benefits of five tax cuts
Dean is a mechanic and has taxable income of $70,000 per year, after claiming $300 in work‑related expenses. He received a tax cut of $1,429 in both 2024-25 and 2025-26 from the first round of tax cuts, compared with the 2023-24 tax settings. When combined with the new $250 WATO and the two upcoming rounds of tax cuts, his saving will grow to $2,215 per year from 2027-28. Dean will further reduce his tax by $224 per year by using the $1,000 instant tax deduction.
Helping with the cost of fuel
Taking the sting out of fuel prices
The Government has delivered a $2.9 billion package to more than halve the fuel excise and reduce the heavy vehicle road user charge to zero for three months from 1 April 2026. Excise on petrol and diesel has fallen from 52.6 to 20.6 cents per litre. The states and territories will provide the Commonwealth up to $400 million to support the fuel excise reduction.
A fair go for consumers and small businesses
The Government has directed the ACCC to undertake weekly reporting on retail fuel prices. We have also doubled the maximum penalties for major breaches of competition and consumer laws to $100 million and are providing more resourcing for enforcement.
The Government is also introducing penalties for breaches of the Oil Code of Conduct.
Support for businesses
The ATO is streamlining access to temporary relief from tax obligations for eligible businesses until 30 June 2026. This includes more generous payment plans, remission of interest and penalties, support in varying pay as you go (PAYG) instalments where there has been a reduction in taxable income, and a new dedicated channel for businesses to access relief.
Some compliance actions will also be limited across the worst affected industries, and debt collection actions may be paused where appropriate.
Case study: Helping with the cost of fuel
Anjali is a teacher and drives to work in her small petrol hatchback. On average, she needs to fill her 40‑litre tank once a week. Under the changes, Anjali saves around $14 in excise and GST per tank and around $170 over the three‑month period.
More homes and a fair go for first home buyers
Helping more Australians own their own home
In this Budget the Government is reforming negative gearing and capital gains tax concessions. These tax changes are estimated to support an additional 75,000 homeowners over the decade.
Building more homes
The Government is establishing a new $2 billion Local Infrastructure Fund to help local governments and state utilities build essential infrastructure to support new housing - including by connecting essential services such as water, power, sewerage and roads. This funding will support up to 65,000 homes over the decade and brings the Government’s total investment in housing‑enabling infrastructure to $6.3 billion.
Banning foreign investors from buying existing homes
The Government is extending the ban on foreign buyers purchasing established homes until mid‑2029.
Making renting fairer and more affordable
The Government is continuing to work with states and territories to harmonise and strengthen renters’ rights across Australia through A Better Deal for Renters.
The Government has also delivered the first back‑to‑back increases in Commonwealth Rent Assistance (CRA) in more than 30 years and continues to support over 1.4 million renters through CRA.
Securing more housing for Australians doing it tough
The Government is investing $59.4 million to help Community Housing Providers provide social housing for over 4,000 young people aged 16-24 who are at risk of or experiencing homelessness.
This Budget also releases a further $100 million from the Housing Australia Future Fund to improve the quality of housing for First Nations Australians in remote communities.
More affordable and accessible healthcare
Cheaper medicines
The Government is investing $5.9 billion in this Budget to list new medicines on the PBS, including treatments for cystic fibrosis, chronic kidney disease, various cancers and more. This includes permanently cutting the cost of COVID‑19 oral antiviral medicines. Since 1 July 2022, the Government has funded 437 new or amended PBS medicines.
The Government is also providing $449.3 million to list the respiratory syncytial virus (RSV) vaccine Arexvy® for eligible older Australians on the National Immunisation Program to protect against respiratory infection caused by RSV.
Record funding for public hospitals
The Government is delivering a landmark $25 billion in additional funding for state and territory hospitals to reach a record $220.3 billion over five years.
Investing in Medicare Urgent Care Clinics
The Government is investing $1.8 billion and $580.2 million each year ongoing to secure the future of Australia’s 137 Medicare Urgent Care Clinics - making them a permanent feature of Australia’s health system.
Case study: Cheaper medicines
Ken has severe asthma. Now that the vaccine for RSV is available to eligible older Australians through the National Immunisation Program, he can receive this important vaccination for free when he goes to the GP, an immunisation clinic or a participating pharmacy. This will help protect him, his family and his community from severe disease caused by this common illness.
Growing wages
Increases to minimum and award wages
For the current 2026 Annual Wage Review, the Government has recommended the Fair Work Commission award an economically sustainable real wage increase to Australia’s award workers.
Addressing the gender pay gap
The Government is supporting a historic review to address gender pay gaps. The Fair Work Commission has found historical gender undervaluation occurred in five priority modern awards across female‑dominated sectors such as child care, health (including First Nations workers) and social services.
Adult age, adult wage
The Fair Work Commission’s decision to phase out junior pay rates will help ensure young workers get fair and decent wages. Junior award rates of pay will be phased out for retail, fast food and pharmacy workers aged 18 to 20.
Responding to changing fuel costs
The Government has amended the Fair Work Act 2009 to allow the Fair Work Commission to make orders to deal with rising fuel prices. On 21 April 2026, an order came into effect to help road transport businesses and workers, by regularly adjusting the rates they are paid. This will help the many owner‑drivers and small transport operators recover costs from higher fuel prices.
Budget themes
Fuel supply and security Cost of living Productivity Tax reform Care and opportunity Security and investment
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