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 threshold and the separate $150 laundry concession. However, this is still just a proposal and is not yet before Parliament. If passed, it 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 earning assessable labour income, including salary and wages and certain PAYG-withheld payments such as director fees, termination payments, and parental leave pay. The deduction is capped at the lesser of $1,000 or total assessable labour income.
How much could you actually save?
A deduction reduces taxable income, not a direct cash refund, so the benefit depends on your tax rate. For example, someone on a 30% tax rate could save up to $300, while higher income earners could save up to $450 (or $470 including Medicare levy). The Government estimates 6.2 million taxpayers may benefit, with average savings of $205. However, if you already claim more than $1,000, you may be better off keeping receipts and claiming actual expenses. ATO data shows the average claim was $2,739 and the median $1,338, suggesting many taxpayers may not benefit financially, though those near $1,000 may value reduced record-keeping.
What expenses would count?
The deduction would cover home office costs, work clothing and uniforms, tools and equipment, work-related car expenses, and stationery and supplies. You could still claim certain items on top of the $1,000, including charitable donations, union fees, income protection insurance, and investment-related expenses.
Low-value pool changes:
From 2026–2027, you would no longer be able to allocate assets to a low-value pool where they are mainly used to produce assessable labour income. This applies only to new allocations and won’t affect existing assets, but it may slow down deductions for items like computers or tools.
What should you do?
Remember this is still a proposed change. Consider whether you typically claim more or less than $1,000—if more, the standard deduction may not benefit you. Tax changes can have unexpected consequences, so if you want to optimise your deduction strategy, contact our office to discuss your circumstances and ensure you’re maximising your legitimate tax benefits.