You may have heard about the Federal Government’s proposed $1,000 “instant” tax deduction for work-related expenses. Before you get excited about potential savings, it’s worth understanding who may benefit, when it could apply, and whether it would be better than claiming your actual expenses.
What’s being proposed?
The Government has released draft legislation for a new standard deduction of up to $1,000 for eligible taxpayers. The aim is to simplify tax returns by allowing people with smaller work-related expenses to claim a set amount without the need to substantiate actual expenses. If introduced, this would replace the current $300 no-receipt deduction threshold for work-related expenses and the separate $150 laundry concession. However, this is still just a proposal. The draft legislation’s been released for comment, so isn’t before Parliament yet. If passed in its current form, the changes would apply from the 2026–2027 financial year, meaning it won’t help with 2025–2026 returns. The deduction would be available to Australian tax residents who earn “assessable labour income”, including salary and wages and certain other PAYG-withheld payments such as director fees, office-holder payments, termination payments and parental leave pay. The deduction will be capped at the lesser of $1,000 or your total assessable labour income for the year.
How much could you actually save?
A deduction doesn’t simply put a cash amount back in your pocket. It reduces your taxable income, so the actual saving depends on your tax rate. For example, someone on the 30% tax rate could save up to $300 from a $1,000 deduction. Higher income earners could save up to $450 (or $470 including the Medicare levy). The Government estimates about 6.2 million taxpayers could benefit, with average savings of around $205. However, if you already claim more than $1,000 in work-related expenses, you may be better off keeping receipts and claiming your actual expenses. The ATO says the average Australian claimed $2,739 in work-related expenses, and the median claim was $1,338 (for 2022–2023). This suggests many taxpayers already claim more than the proposed $1,000 and may not financially benefit. That said, people whose claims are usually close to $1,000 may appreciate the reduced record-keeping.
What expenses would count?
The proposed standard deduction would cover typical work-related expenses like: home office costs; deductible work clothing, uniforms and protective clothing; tools and equipment; car expenses for work travel; and stationery and work supplies. Certain deductions would be claimable on top of the $1,000, including charitable donations, union fees, income protection insurance, and investment-related expenses. Low-value pool changes The proposal includes a less publicised change. From 2026–2027, you would no longer be able to allocate a depreciating asset to a “low-value pool” where it’s mainly used to produce assessable labour income. This would only apply to new allocations from 2026–2027, and wouldn’t affect assets already allocated to a low-value pool for 2025–2026 or earlier income years. However, it could slow down future deductions for items like computers or tools.
What should you do?
First, remember this is still just a proposed change. Second, consider whether you typically claim more or less than $1,000 in work-related expenses. If you claim more, the standard deduction may not help you. Tax changes can have unexpected consequences. If you want to optimise your deduction strategy, contact our office to discuss your circumstances and ensure you’re maximising your legitimate tax benefits.
Our business and tax compliance services include personal tax return preparation and deduction strategy reviews, so you can make an informed decision between the standard deduction and claiming your actual expenses.
Frequently asked questions
Has the $1,000 standard deduction been legislated yet?
No. As of the time of writing, the Government has released draft legislation for public comment but it has not yet been introduced to Parliament. If passed in its current form, the measure would apply from the 2026-2027 financial year, meaning it will not affect 2025-2026 tax returns.
Who would be eligible for the $1,000 standard deduction?
The deduction would be available to Australian tax residents who earn assessable labour income. This includes salary and wages, as well as certain other PAYG-withheld payments such as director fees, office-holder payments, termination payments and parental leave pay. The deduction is capped at the lesser of $1,000 or your total assessable labour income for the year.
Does the $1,000 deduction mean $1,000 back in my pocket?
No. A deduction reduces your taxable income rather than directly reducing your tax bill by that amount. The actual saving depends on your marginal tax rate. Someone on the 30% tax rate would save up to $300 from a $1,000 deduction, while higher income earners could save up to $450, or $470 when the Medicare levy is included.
If I already claim more than $1,000 in work-related expenses, should I still use the standard deduction?
Almost certainly not. If your actual work-related expenses exceed $1,000 and you have the receipts to support them, you will generally be better off claiming your actual expenses. The ATO reports the average Australian claimed $2,739 in work-related expenses for 2022-2023, with a median claim of $1,338, suggesting many taxpayers already exceed the proposed threshold.
What types of expenses would be covered by the standard deduction?
The proposed deduction is intended to cover typical work-related expenses including home office costs, deductible work clothing and uniforms, tools and equipment, car expenses for work travel, and stationery and work supplies. Some deductions can still be claimed on top of the $1,000, including charitable donations, union fees, income protection insurance and investment-related expenses.
What is the proposed change to low-value pools and how does it affect me?
From 2026-2027, the proposal would prevent taxpayers from allocating depreciating assets to a low-value pool where those assets are mainly used to produce assessable labour income. This only applies to new allocations from that year onwards and would not affect assets already in a low-value pool. However, it could slow down future deductions for items like computers or tools that are used primarily for work.
Should I stop keeping receipts for work expenses?
Not yet, and possibly not at all. The legislation has not passed, and even if it does, keeping receipts remains worthwhile for anyone whose actual expenses are likely to exceed $1,000. If you are unsure how this change might affect your situation, contact our office to talk through your specific circumstances before lodging your next return.
