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.
