TITLE: Australia Tax Update: OSfA Review, Standard Deduction, Tax Cuts and 2026–27 Rates
Australian businesses have several important tax and compliance developments to review today.
The Tax Ombudsman has criticised weaknesses in the Australian Taxation Office’s Online Services for Agents portal. The ATO has clarified when the new $1,000 standard deduction begins. Personal income tax cuts are now law. New 2026–27 rates also affect Division 7A and capital gains tax administration.
This update is relevant to ecommerce brands, digital businesses, fast-growing SMEs and international companies trading into Australia from the UK, USA, Canada, Europe and elsewhere.
Australia tax update at a glance
- OSfA agent satisfaction fell from 76% in 2022 to 63% in 2026.
- Almost 100 OSfA improvements remain in the ATO’s backlog.
- The $1,000 standard deduction does not apply to 2025–26 tax returns.
- The deduction applies from 1 July 2026, subject to eligibility and the applicable rules.
- The resident tax rate on taxable income between $18,201 and $45,000 falls to 15% from 1 July 2026.
- The same rate is legislated to fall to 14% from 1 July 2027.
- The 2026–27 Division 7A benchmark interest rate is 8.77% per annum.
- The 2026–27 CGT improvement threshold is $194,165.
Tax Ombudsman identifies serious OSfA service gaps
The Inspector-General of Taxation and Taxation Ombudsman has published a critical review of the ATO’s Online Services for Agents, known as OSfA.
OSfA is intended to give registered tax agents and their authorised staff a secure digital way to manage client tax affairs. However, the review found that the portal does not consistently provide the functionality agents need.
According to reporting by SmartCompany, the proportion of agents saying OSfA meets all or most of their needs fell from 76% in 2022 to 63% in 2026.
The review also identified several operational problems:
- Agents must call the ATO to complete transactions that should be available online.
- Almost 100 requested OSfA improvements remain in the ATO backlog.
- Some backlog items have been waiting since before 2022.
- Certain lodgements still depend on paper, PDF or manual processes.
- Franking credit refunds for some non-profit organisations remain difficult to complete digitally.
- Agents may need to request information manually even when the ATO already holds the relevant data.
These problems increase processing time. They can also increase compliance costs for Australian businesses in Sydney, Melbourne, Brisbane, Perth, NSW, Victoria and Queensland.
The Tax Ombudsman’s OSfA review is critical but also constructive. The ATO has accepted the review’s recommendations and committed to improving self-service, transparency and digital engagement with agents.
Prepare for portal delays
Do not rely on OSfA being available for every urgent transaction.
Build additional time into your compliance calendar. Keep copies of:
- Lodgement confirmations.
- ATO correspondence.
- Supporting schedules.
- Payment records.
- Requests submitted through OSfA.
- Notes of calls with the ATO.
- Reference numbers and promised follow-up dates.
This creates an audit trail if a digital transaction fails or a response is delayed.
Ecommerce and digital businesses should also avoid leaving GST, PAYG or income tax work until the final day. A portal delay can affect cash flow, reporting accuracy and filing deadlines.
The $1,000 standard deduction starts from 2026–27
The ATO updated its work-related expense guidance on 12 August 2026.
The key point is simple: the $1,000 standard deduction does not apply to your 2025–26 tax return.
For the 2025–26 income year, you must continue to claim actual deductible work-related expenses under the existing rules. The expense must relate directly to earning your income, and you generally need records to support the claim.
The new standard deduction applies from the 2026–27 income year, beginning on 1 July 2026. Review the ATO’s standard deduction guidance before preparing records or payroll information.
Keep records from 1 July 2026
Although the standard deduction may reduce the need to substantiate the standard amount itself, you should still keep records for actual deductible expenses from 1 July 2026.
Maintain:
- Receipts and invoices.
- Work-related travel records.
- Equipment and software invoices.
- Professional subscription records.
- Work-use calculations.
- Home-office running expense records.
- Evidence showing the connection between the expense and your income.
The standard deduction is not a tax rebate. It is a deduction that reduces taxable income. It also does not necessarily provide an additional $1,000 on top of other work-related deductions.
Do not treat rent or mortgage interest as automatically deductible
The new measure does not make private occupancy costs deductible.
Rent, mortgage interest, council rates, land tax and home insurance are generally private occupancy expenses. They are not automatically deductible merely because you work from home or operate an online business.
Limited exceptions may apply where part of a home has the character of a place of business. Apply the existing rules carefully. Keep evidence for any claim.
For Australian ecommerce operators and digital businesses, separate genuine business costs from private household expenses. This will reduce the risk of incorrect deductions and ATO review activity.
Personal income tax cuts are now law
The ATO confirms that personal income tax cuts have been legislated.
From 1 July 2026, the tax rate applying to taxable income between $18,201 and $45,000 falls from 16% to 15%.
From 1 July 2027, that rate falls again to 14%.
The tax-free threshold remains $18,200. The change affects individual resident income tax. It does not change the GST rate, the company tax rate or the tax treatment of business sales.
Review the ATO’s personal income tax cut guidance and update your internal calculations.
Update payroll and owner remuneration records
If your business employs staff or pays working directors, check that your payroll software reflects the relevant 2026–27 tax tables.
You should:
- Confirm the correct income year for each calculation.
- Review PAYG withholding settings.
- Check employee tax declarations.
- Update salary and bonus modelling.
- Reconcile payroll reports to the general ledger.
