The Federal Government has released draft legislation for a new “instant” standard tax deduction that would allow eligible taxpayers to claim work-related expenses at tax time without receipts. This would replace the current $300 no-receipt immediate deduction limit.
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. This means it won’t help with your 2025–2026 return, but could be available next year.
It’s important to understand that a tax deduction doesn’t simply put a cash amount back in your pocket. Instead, deducting it offsets the tax you pay, so the actual benefit depends on your tax rate. For someone on the 32.5% tax rate, a $1,000 deduction would reduce their tax by about $325. Higher income earners could save up to $450 (or $470 including Medicare levy).
The government estimates about 6.2 million taxpayers could benefit, with average savings of around $205.
Here’s a key point, though: if you already claim more than $1,000 in work-related expenses, you may be better off sticking with keeping receipts and claiming your actual expenses. The ATO says the average Australian claims $2,739 in work-related expenses, and the median claim is $1,338. This means many taxpayers already claim more than the proposed $1,000 and wouldn’t financially benefit from the change.
However, people whose claims are usually close to $1,000 or who like the idea of a predictable deduction may find it saves some record-keeping effort.
The standard deduction would cover typical work expenses like:
- home office costs;
- work clothing and uniforms;
- 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.
From 2026–2027, you also wouldn’t be able to add new work equipment costing between $300 and $1,000 to a “low-value pool” for depreciation purposes. This could slow down tax deductions for items like computers or tools, reducing the benefit you receive in earlier years.
What should you do?
First, remember this is still just a proposed change to the law. Second, consider whether you typically claim more or less than $1,000 in work-related expenses. If you claim more, the change likely won’t help you.
However, changes like this can have unexpected consequences, so third, consider seeking professional advice at tax time. If you want to optimise your deduction strategy, contact our office to discuss your circumstances and ensure you’re maximising your legitimate tax benefits.
