Tax Insights

The cut is modest in dollar terms, but it reaches almost everyone who earns more than the tax-free threshold. With 2025–26 returns still being lodged at the old rate, it is worth understanding which year each rate applies to.

The ATO has warned people off claiming it early. With the 31 October deadline approaching, understanding the timing could prevent an incorrect claim and help with planning for next year.

For the millions of employees expected to use the deduction from the 2026–27 income year, the draft is the clearest guide yet to the choices they will face when lodging from July 2027.

That means the first benefit arrives when 2027–28 tax returns are lodged from July 2028, and only for people who pay enough tax on their work income to use it. As the government promotes the offset, the mechanics matter.

With millions of Australians still finalising 2025–26 returns ahead of the October deadline, messages about income statements and payments look routine, and that is exactly what makes them dangerous.

It matters now because the new settings apply to income earned this financial year, with the 2026–27 repayment worked out when returns are lodged from July 2027. For many early-career workers, it means a smaller repayment, or none at all.

For people without private hospital cover whose income sits just above last year's line, that could mean no surcharge at all for 2026–27. For those with cover, it may mean a larger rebate on premiums.