The new Working Australians Tax Offset is law, but anyone expecting a $250 deposit from the government will be disappointed. The offset is non-refundable. It can only reduce the income tax a worker owes, and it does not begin until the 2027–28 income year.

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.

What the law actually provides

The offset, known as WATO, was enacted in Schedule 3 of the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Act No. 49 of 2026. The legislation passed Parliament on 25 June 2026 and received Royal Assent the following day. It sits in the same Act as the changes to capital gains tax, negative gearing and the $1,000 standard deduction for work-related expenses.

WATO was announced in the Budget on 12 May 2026. The bills were introduced on 28 May and passed with amendments, with the support of the Greens and independent Senator David Pocock.

According to the ATO's summary page, updated 23 July 2026, the offset is "available from the 2027–28 income year". It is worth up to $250 a year.

To be eligible, a person must be an Australian resident for tax purposes during the income year. Their net labour income must also exceed the tax-free threshold. The ATO defines net labour income as labour amounts minus labour deductions. It says the full $250 is available where income tax payable on net labour income exceeds $250.

Non-refundable: why it can't turn into a cash payment

The ATO's wording is blunt. WATO "can only reduce an individual's tax payable to nil. Any unused amount will not be refunded and it cannot be transferred or carried forward."

That places it in the category of non-refundable offsets. These differ from refundable ones, such as franking credits for individuals, where any excess can be paid out. With WATO, a worker who owes no tax gets nothing, and any unused part of the $250 simply disappears.

There is a nuance that may cause confusion. For employees who have tax withheld from each pay, a lower final tax bill can mean a larger refund at tax time. In that sense, WATO may show up inside a refund. But the money is tax the worker has already paid being returned, not a separate payment. Someone who has paid no tax cannot receive it.

Because the ATO says the offset cannot be transferred, it also cannot be passed to a spouse or partner. In a couple where one person earns little or nothing from work, that person's unused offset cannot top up the other's.

The ATO's summary page does not say whether the offset will be built into pay-as-you-go withholding during 2027–28. It describes WATO as an offset against tax payable, which is worked out on assessment.

Three hypothetical cases

The following hypothetical examples are illustrative only. They ignore the Medicare levy and assume current thresholds carry into 2027–28 for the purposes of the arithmetic.

Case one: Mia earns $60,000 in wages. Under the legislated 14% rate for 2027–28 on income between $18,201 and $45,000, her income tax before offsets would be $3,752 plus 30% of $15,000, or $8,252. Her tax on labour income comfortably exceeds $250, so WATO would reduce her bill to $8,002. If her employer had withheld tax based on the higher figure, her refund would be $250 larger.

Case two: suppose a part-time worker's tax payable, after other offsets, comes to $180. WATO could reduce that to nil, but no further. The remaining $70 would be lost, because it cannot be refunded or carried forward to the following year.

Case three: a self-funded retiree living on dividends and interest has no labour income. Because eligibility depends on net labour income exceeding the tax-free threshold, this person would not qualify, regardless of how much tax they pay on investment income.

How WATO interacts with other offsets, such as the low income tax offset, is not set out on the ATO's summary page. Lower-income earners may find the real benefit is smaller than $250, depending on individual circumstances.

Why 'from 2028' is only half right

Some reports have described WATO as starting in 2028. Legally, the offset applies to the 2027–28 income year, which runs from 1 July 2027 to 30 June 2028. The benefit is realised when that year's tax return is assessed, which for most people will be from July 2028 onwards.

Nothing about WATO applies to the 2025–26 returns being lodged now, or to 2026–27 returns lodged from July 2027. Anyone who sees an offer, message or social media post promising an immediate $250 payment should treat it with caution.

How it fits the bigger package

Treasury says WATO will reach "more than 13 million workers". Its Budget material also describes a combined benefit of up to $2,816 a year for an average earner, compared with 2023–24 settings.

That larger number bundles five measures. Three are earlier tax cuts, and the other two are the $1,000 standard deduction and WATO. It is not a new payment, and not everyone will receive it.

Treasurer Jim Chalmers described WATO as a "new feature of the system" in his 21 September 2026 lecture at the ANU. He said the reforms were about "better aligning the tax treatment of income from work and income from assets". The offset is limited to labour income, so investors whose income comes only from assets miss out by design.

Key dates to watch

The 2027–28 income year begins on 1 July 2027. The same date brings the second step of the legislated rate cut, from 15% to 14% on income between $18,201 and $45,000.

Closer to then, watch for ATO guidance on how WATO will appear in myTax, how it interacts with other offsets and whether withholding schedules reflect it. The first returns that can include WATO can be lodged from July 2028.

Because the offset only reduces tax payable, its value will depend on each person's income and other offsets. A registered tax agent may help clarify how it applies in individual circumstances.