Treasury has released exposure draft legislation for a new standard $1,000 work-related deduction – and for millions of Australians, it’s the most meaningful simplification of tax time in years.
Effective from 1 July 2026, the proposed measure allows eligible taxpayers to claim up to $1,000 without receipts, with no change to their ability to claim higher actual expenses if they have them.
Here’s what the draft legislation says, who it affects, and what you should be thinking about now.
Why a $1,000 Tax Deduction?
As part of its election promise, the government’s cost-of-living relief agenda includes a new standard or instant tax deduction for resident taxpayers aimed at reducing paperwork and making tax time easier for millions of Australians.
The draft legislation is now open for public consultation, reflecting the government’s commitment to a simpler, fairer tax system.
Key Features of the Exposure Draft
- Eligibility: Applies to Australian tax residents earning income from work.
- Start Date: Applies from 1 July 2026 (2026–27 income year). No impact for 2025-26 returns to be lodged in the coming months after financial year end.
- Deduction Amount: Standard deduction of up to $1,000 without receipts for the 2026–27 income year.
- Flexibility: Taxpayers with more than $1,000 in work-related deductions can still claim the higher amount under existing rules – itemised work related deductions.
- Additional Deductions: Charitable donations, union/professional fees, and investment expenses can be claimed on top of the standard / instant deduction.
- Anti-Avoidance: Provisions within the legislation deal with the FBT overlay and prevent double-dipping via salary packaging for expenses covered by the instant deduction.
- Supporting Changes: Updates to substantiation and capital allowance rules are included in the legislation to support the new deduction.
Size of the Tax Benefit (Illustrative)
Treasury has been explicit that the average tax saving is about $205.
| Marginal Rate | Benefit |
|---|---|
| 19% marginal rate. | $190 benefit. |
| 30% marginal rate. | $300 benefit. |
| 45% marginal rate. | $450 benefit. |
Who Benefits?
Per the Treasury release, around 6.2 million workers (42% of taxpayers) are expected to benefit, with an average tax saving of $205.
Based on Treasury modelling:
- 54% of beneficiaries are women.
- 75% of beneficiaries have taxable income under $100,000; and
- Taxpayers under 30 make up 28% of those benefitting.
Note: The standard deduction is not available to those earning only business or investment income.
How to Claim the Instant Deduction
- Claimable when lodging your 2026–27 tax return (from the second half of 2027).
- No receipts required for the standard $1,000 deduction to be applied.
- Taxpayers can still claim higher actual expenses if substantiated.
- Other allowable deductions (such as donations or investment deductions) remain claimable as usual.
Note: It is important to note that this $1,000 standard deduction is not a tax offset or rebate, or a cash payment, or an automatic entitlement. It simply reduces taxable income reported by the taxpayer by up to $1,000, meaning the actual tax saving depends on the individual taxpayer’s marginal tax rate.
What This Means for You
- For some, it will mean a simpler tax return process. For millions of Australians with relatively simple tax affairs and minimal work related deductions, this could mean an ability to claim a $1,000 deduction without keeping any records throughout the year.
- For those who do choose to take up the $1,000 work related deduction, this means a significantly reduced record-keeping burden. For some taxpayers, this will mean a welcome change allowing them to stop keeping their spreadsheet of work related purchases or no longer using the ATO app for deduction tracking.
- On the other side of the coin, there is a risk of a potential sub‑optimal ability to claim all applicable deductions where actual expenses exceed $1,000 and reduced record‑keeping has occurred, which could lead to poorer client outcomes when deduction detail isn’t available.
- This proposed change will be a focus area for the 2026-27 tax year, with Tax Agents needing to work with the clients to assess and plan whether this standard deduction works for them or not.
Next Steps / Andersen Perspective
- The draft legislation is open for public consultation until 01 May 2026.
- Andersen recommends reviewing the exposure draft and considering a submission via the Treasury Consultation Hub.
- For tailored advice, contact your Andersen advisor.
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