A one‑off Cost of Living Tax Offset will apply to 2025–26 tax returns, reducing tax payable or increasing refunds for eligible taxpayers without changing tax brackets or wages . The offset is processed automatically at tax time by the ATO for those who qualify, so no separate application is needed .
How much you could get
The maximum benefit is up to $1,200 for taxable incomes between $48,001 and $104,000 in 2025–26, with smaller amounts outside that band based on a sliding scale . Incomes up to $37,000 can receive up to $265, while the offset tapers from $104,001 and cuts out at $144,000 .
Who qualifies
Australian taxpayers with taxable income up to $144,000 in 2025–26 may be eligible, with the largest relief focused on low and middle earners in the $48,001 to $104,000 range . Roughly 10 million taxpayers are expected to benefit based on the policy guidance for the measure .
How it works at tax time
When lodging the 2025–26 return, the offset is applied against assessed tax, lowering the amount owed or boosting the refund, similar to prior offsets used in recent years . Because it is temporary and non‑refundable beyond assessed tax, those with little or no tax liability may see limited benefit compared with direct cash payments .
Sliding scale explained
- Up to $37,000 taxable income → Up to $265 offset .
- $37,001 to $48,000 → $265 plus 8.5 cents per dollar over $37,000, capped by the maximum .
- $48,001 to $104,000 → Maximum $1,200 offset .
- $104,001 to $144,000 → Phases out at 3 cents per dollar over $104,000 until it reaches zero .
Quick examples
A childcare worker on $52,000 would receive the full $1,200, cutting their tax bill directly at assessment . A tradie on $110,000 would receive a reduced amount of roughly $1,020 as the offset tapers above $104,000 .
Why it matters in 2025
With elevated living costs, the offset provides targeted relief without permanently changing the tax system, aiming to ease pressure on household budgets during a high‑inflation period . The trade‑off is timing, since the benefit appears at tax time rather than as an in‑year payment .
How to maximise your benefit
- Manage taxable income: Consider concessional super contributions or salary packaging to remain within the $48,001 to $104,000 band if already near thresholds, noting personal circumstances and caps .
- Keep deductions tidy: Claim eligible work‑related expenses, home office, mileage, tools, and uniforms accurately to reduce taxable income and increase the net benefit of the offset .
- Lodge on time: Filing by the due date or using a registered tax agent helps access the offset sooner if a refund is due .
Smart uses for the refund
Direct the savings towards high‑interest debt first to reduce ongoing costs, then top up an emergency fund to buffer future bills . For medium‑term gain, consider education or skills that lift earning potential, or cover unavoidable annual costs like rego or insurance to smooth cash flow .
Who benefits most
Middle‑income households often see the largest dollar benefit, especially single earners or dual earners each under $104,000 who both qualify for the max . Lower‑income earners still receive a smaller offset, though non‑taxpaying households may see less impact than from direct transfers .
Policy context and debate
Australia has used offsets before, such as the Low and Middle Income Tax Offset and the Low Income Tax Offset, to deliver targeted relief at assessment time . Supporters view this as efficient and temporary, while critics argue one‑off offsets miss the most vulnerable and risk modest inflationary effects if aggregate demand stays firm .
What to watch next
Final legislation and ATO guidance will confirm precise income tests, phase‑out formulas, and administrative details before 2025–26 lodgments open . Keeping pay summaries, deduction records, and super contribution confirmations organised will make claiming the offset straightforward when filing .