Your FY27 tax return will look different. Here’s what changed and how to prepare

The tax return you lodge for the next financial year will look different to every return you have filed before it.

Three meaningful changes took effect on 1 July 2026 and will appear in your FY27 return.

Understanding each of them before you lodge will help you maximise your refund and avoid common mistakes.

Change one: the 15% tax rate

The most important change is the reduction in the marginal tax rate on income between $18,201 and $45,000.

That rate dropped from 16% to 15% from 1 July 2026, delivering a tax cut worth up to $268 per year to every Australian taxpayer.

For most salary and wage earners, this adjustment was already applied to your take-home pay from 1 July through your employer’s PAYG withholding calculations.

When you lodge your FY27 return, the ATO will calculate your tax at the new 15% rate automatically.

You do not need to do anything specific to claim this benefit.

However, if you changed jobs during the year, started freelancing, or had irregular income, your employer may not have withheld at exactly the right rate.

Change two: the $1,000 instant work-related expense deduction

From FY27, every Australian who earns salary or wage income can claim up to $1,000 in work-related expenses without keeping a single receipt.

Previously, the receipt-free limit was $300.

The new $1,000 deduction applies automatically when you lodge your return.

For a worker on a 32.5% marginal tax rate, claiming the full $1,000 deduction is worth approximately $325 in tax savings.

The deduction cannot be combined with specific expense claims above $1,000. If your actual work-related expenses exceed $1,000 and you have receipts to prove it, you should claim the actual amount rather than the instant deduction.

Work-related expenses include items like home office costs, professional development, tools, uniforms, and technology used for work.

Change three: higher Medicare levy thresholds

Medicare levy low-income thresholds increased from 1 July 2025 and apply to the FY27 return.

The threshold for singles rose to $28,011, up from $27,222, meaning more low-income Australians will pay no Medicare levy on their FY27 return.

The family threshold rose to $47,238 and increases by $4,338 for each dependent child or student.

For single seniors and pensioners, the threshold rose to $44,268.

If you earn below these thresholds, you may be entitled to a Medicare levy reduction or exemption when you lodge.

What to do with any tax refund

A tax refund is not a windfall. Instead, it is the return of money you overpaid during the year.

However, how you deploy a refund still matters.

Spending it immediately on discretionary items means the tax cut effectively disappears into everyday consumption.

Investing it, even a modest amount, is the start of a compounding habit.

Commonwealth Bank of Australia (ASX: CBA) is the most widely held ASX share among Australian retail investors. The company offers a fully franked dividend yield and long-term earnings track record that suits a regular, small-investment approach.

Alternatively, for investors who want instant diversification rather than individual stock selection, the Betashares Australia 200 ETF (ASX: A200) charges just 0.04% per annum and tracks the performance of 200 of Australia’s largest companies in a single trade.

For global technology and AI exposure, the Betashares Nasdaq 100 ETF (ASX: NDQ) gives investors access to the world’s largest non-financial technology companies. This will includes SpaceX following its Nasdaq-100 inclusion this week.

Foolish takeaway

Your FY27 tax return will be simpler in some ways and more lucrative in others.

The 15% rate and the $1,000 instant deduction both reduce your tax liability automatically.

The Medicare levy changes may eliminate the levy entirely for lower-income earners.

Understanding the changes before you lodge means you claim what you are entitled to, rather than leaving money on the table.

The post Your FY27 tax return will look different. Here’s what changed and how to prepare appeared first on The Motley Fool Australia.

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Motley Fool contributor Mark Verhoeven has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool Australia has positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.