Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (49 of 2026)

Schedule 3   Working Australians tax offset

Part 1   Amendments

Division 1   Main amendments

Income Tax Assessment Act 1997

1   After Subdivision 61-D

Insert:

Subdivision 61-E - Working Australians tax offset

Guide to Subdivision 61-E

61-150 What this Subdivision is about

You may be entitled to a tax offset if you earn certain labour income.

Table of sections

Operative provisions

61-155 Entitlement to the working Australians tax offset

61-160 Amount of the working Australians tax offset

Operative provisions

61-155 Entitlement to the working Australians tax offset

(1) You are entitled to a *tax offset for an income year if:

(a) you are an individual who is an Australian resident at any time during the income year; and

(b) in the income year, the amount worked out for you under subsection (2) (about your net labour income) exceeds the tax-free threshold (within the meaning of the Income Tax Rates Act 1986).

Net labour income

(2) Work out the amount for an income year using the formula:

where:

labour amounts means the sum of the following amounts included in your assessable income for the income year:

(a) an amount of *assessable labour income;

(b) an amount you *derive from carrying on a *business as an individual (not including assessable income you derive from a business carried on by a partnership or trust);

(c) an amount of *personal services income;

(d) an amount included in your assessable income under section 83A-25 (about discounts given in relation to an *ESS interest included in assessable income);

(e) an amount that is a payment from which an amount must be withheld (even if the amount is not withheld) under section 12-60 in Schedule 1 to the Taxation Administration Act 1953 (about payments under labour hire and certain other arrangements).

labour deductions means the sum of the following amounts you can deduct in relation to the income year:

(a) an amount of a loss or outgoing that you incurred in gaining or producing an amount mentioned in paragraph (a) or (c) of the definition of labour amounts ;

(b) an amount of a loss or outgoing that you necessarily incurred in carrying on a *business as an individual (not including a loss or outgoing necessarily incurred by a business carried on by a partnership or trust);

(c) an amount you can deduct under section 25-130;

(d) an amount you can deduct under section 40-25 (other than an amount equal to the decline in value of a *depreciating asset that you allocate to a low-value pool under section 40-425), to the extent that the deduction arises for a depreciating asset that you use to:

(i) derive an amount mentioned in paragraph (b) of the definition of labour amounts ; or

(ii) gain or produce an amount mentioned in paragraph (c) of the definition of labour amounts ;

(e) an amount of a deduction mentioned in paragraphs 25-130(2)(d) to (g) (standard deduction for work-related expenses);

(f) an amount you can deduct under Subdivision 328-D, to the extent that the deduction arises for a depreciating asset that you use to derive an amount mentioned in paragraph (b) of the definition of labour amounts .

(3) If more than one paragraph in the definition of labour amounts or labour deductions covers an amount, include the amount only once.

61-160 Amount of the working Australians tax offset

The amount of your *tax offset for an income year is the lesser of:

(a) $250; and

(b) the amount that would be the amount of your basic income tax liability for the income year if your taxable income was comprised only of your net labour income worked out under subsection 61-155(2) for the income year.