From the 2026-27 income year, eligible taxpayers get a standard deduction of up to $1,000 for work-related expenses. The ATO also calls it the instant tax deduction. You do not need to have spent that money, and you do not need records for the standard amount itself. If you are eligible, the ATO applies it automatically in your tax return.

It is a deduction, not a tax offset or a rebate. It reduces taxable income. It first applies in the 2026-27 return. It does not apply in the 2025-26 return.

You can still claim actual work-related expenses instead of, or as well as, a reduced standard amount, but the interaction is specific. Claiming expenses that are covered by the standard deduction reduces the standard amount, dollar for dollar. Once those claims reach $1,000, the standard deduction is nil, and you keep the itemised claims, with written evidence.

This explainer sets out who is eligible, how the amount is calculated, what still needs records, and the other record-keeping changes that start from 1 July 2026. It sits with the Never Lose Interest income tax and pay calculator guides, and with the working from home and car expenses explainer for those two claim methods after the standard deduction starts.

This is general information only. It is not personal advice or a tax assessment. Draft Law Companion Ruling LCR 2026/D5, which explains some of the detail, was still in draft as at November 2026.

Who gets the standard deduction?

You are eligible if you are an individual, you are an Australian resident for tax purposes, and you earn assessable labour income. The ATO lists assessable labour income as including:

  • salary and wages
  • director fees and office holder payments
  • payments to religious practitioners
  • return-to-work payments
  • termination and retirement payments
  • parental leave pay

The standard deduction will not apply if you only earn other types of income, such as dividends or business income.

The maximum standard deduction is the lower of $1,000 and your total assessable labour income. In the ATO's Simon example, he earns $400 of wages and $40,000 of investment income. His maximum standard deduction is $400, not $1,000, because only the $400 is assessable labour income.

If you are eligible, you do not need to do anything to receive the standard amount. The ATO applies it automatically from 2026-27, based on the information in your return.

How do itemised work claims change the $1,000?

Certain work-related expenses you claim in the return reduce the standard deduction, dollar for dollar. The ATO's list includes:

  • expenses related to earning assessable labour income, such as stationery, tolls, travel allowance expenses, uniform, laundry and working-from-home expenses
  • car expenses related to earning that income
  • transport expenses incurred between two or more separate workplaces, where neither workplace is your home and you earn assessable labour income at one of them
  • balancing adjustment deductions on assets used to earn assessable labour income
  • COVID-19 test expenses

If you claim none of those, you receive the full maximum, usually $1,000. If you claim some, the standard deduction shrinks by the same amount. If you claim $1,000 or more of those expenses, the standard deduction is reduced to nil and you keep the itemised deduction, provided you can support it.

The ATO's Yui example is the practical comparison. Yui earns $95,000 in wages and has $550 of work-related expenses: $200 working from home, $200 for a training course and $150 travelling from her workplace to visit clients. She also has a $50 deductible donation and $175 of tax agent fees.

  • If she does not claim the $550, she receives the full $1,000 standard deduction, and she does not need records for those $550 of expenses.
  • If she claims the $550, she must have records for that $550, and the standard deduction falls to $450. Her total work-related deduction is still $1,000 ($550 plus $450).

In those circumstances, the ATO notes it is easier for Yui not to claim the $550. Either way, she can still claim the $50 donation and the $175 tax agent fees, because those are not covered by the standard deduction, and she needs records for them.

Marco, in the ATO's third example, spends $3,500 on work-related expenses that reduce the standard deduction. He claims the $3,500, with written evidence, and receives no standard deduction, because it is reduced to nil. That is how he keeps the full $3,500.

The comparison is therefore simple, once you have a realistic total of the expenses that reduce the standard amount:

  • if those expenses would be less than your maximum standard deduction, you are usually better off not claiming them, and taking the automatic amount
  • if they would be more, claim them in full, with records, and the standard deduction drops away

You do not add $1,000 on top of $3,500 of the same kind of work expenses.

Which deductions do not reduce the standard deduction?

You should still claim, in the usual way and with the required records:

  • union fees
  • memberships of a trade, business or professional association

The ATO is explicit that those claims do not reduce the standard deduction.

Other deductions also sit outside the standard amount and should be claimed as usual, including:

  • gifts and donations
  • investment and rental property deductions
  • the cost of managing your tax affairs
  • personal super contributions
  • income protection, personal sickness or accident insurance premiums
  • expenses incurred in earning other types of income, such as a business or income from a digital platform

A rental loss, for example, is not swapped for the $1,000, and it does not shrink it. See how negative gearing works.

What else changes from 1 July 2026?

Because of the standard deduction, some older record-keeping exceptions cease from 1 July 2026. The ATO says the following will not apply, for 2026-27 and later years, and that this is the case for all taxpayers, whether or not they are eligible for the standard deduction:

  • the $300 deduction limit for work-related expenses that could be claimed without written evidence
  • the $150 laundry expense limit
  • the award transport expense exemption

If you choose to claim more than your maximum standard deduction, you must have written evidence, such as a receipt, for all work-related expenses you claim in the return.

The ATO also says that if you incur laundry expenses and claim a deduction for them, it will accept $1 per load if you only wash work clothes in that load, and 50 cents per load if you mix other clothes with your work clothes. That compliance approach is set out in Draft Law Companion Ruling LCR 2026/D5, which was still in draft as at November 2026. Check the final ruling before you rely on those per-load amounts.

There are two further changes, which also apply whether or not you are eligible for the standard deduction.

From 2026-27, you cannot add a depreciating asset to a low-value pool if, when you acquired it, you expected to mainly use it to earn assessable labour income. You can still claim the decline in value, but that claim reduces any standard deduction you are entitled to in that year. Existing assets already in a low-value pool, and assets not used to earn labour income, are not affected in the same way.

If you sell, dispose of or stop using a depreciating asset that was used at any time to earn assessable labour income, and you received a partial or full standard deduction in one or more years you held it, there is a simplified option for the balancing adjustment. You can use a fixed 50% rate to calculate the reduction of the amount included in your assessable income, or the amount you can deduct, because you stopped holding or using the asset. A balancing adjustment deduction related to an asset used to produce assessable labour income reduces the standard deduction in that year.

What are the usual rules if I itemise work expenses?

The longstanding tests still apply to any work expense you actually claim. The ATO's usual three conditions are that you spent the money yourself and were not reimbursed, the expense is directly related to earning your income, and you can show how you calculated the claim.

Private or mixed-use costs have to be apportioned. The cost of travelling between home and your regular workplace is generally not deductible. A reimbursement from your employer is not deductible. Those rules are not displaced by the standard deduction. The standard amount simply means many employees will not need to itemise small work costs at all.

For 2025-26, the older substantiation exceptions, including the $300 work-expense threshold, still applied. Do not mix the two years in the same calculation.

Frequently asked questions

Is the $1,000 a cash refund?

No. It reduces taxable income. The tax saving is your marginal rate, plus any Medicare levy that also falls, on up to $1,000. It is not a $1,000 refund.

Do I need receipts if I am just taking the standard deduction?

Not for the standard amount itself. You still need records for any other deductions you claim, including union fees, donations, tax agent fees and investment expenses. If you think your work expenses might exceed $1,000, keep the records anyway, so you can choose at year end.

Can I claim union fees as well as the $1,000?

Yes. Union fees and professional association memberships do not reduce the standard deduction, provided you have the records to support them.

I am a sole trader. Do I get the $1,000?

The standard deduction is for assessable labour income of an individual who is an Australian resident for tax purposes. It does not apply if you only earn business income. Expenses of a business are claimed under the business deduction rules, not as this standard amount.

Will a tax calculator include it automatically?

A 2026-27 income tax or pay calculator should reduce taxable labour income by up to $1,000 if you are eligible and you are not itemising more than that in covered work expenses. A 2025-26 calculation should not include it. See the income tax explainer.

General information warning

This article is general information only. It is not personal advice or a tax assessment, and it is not a recommendation to itemise or to rely on the standard deduction. It does not take into account your objectives, financial situation or needs. Draft Law Companion Ruling LCR 2026/D5 was still in draft as at November 2026, and some compliance details may change when it is finalised. Consider speaking with a registered tax agent if your work expenses are material, or if you use a home office or a car for work.

Sources

  • Australian Taxation Office, Standard deduction for work-related expenses, last updated 2 November 2026, including the official Simon, Yui and Marco examples and the record-keeping changes from 1 July 2026.
  • Australian Taxation Office, Draft Law Companion Ruling LCR 2026/D5, The standard deduction for work-related expenses, referred to on the standard deduction page above. This ruling was still in draft as at November 2026.
  • Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Schedule 4, for the legislated standard deduction from 2026-27.
  • Australian Taxation Office, myTax 2026 Claiming deductions, for the usual tests that apply to itemised work expenses, including in 2025-26.

Last reviewed: November 2026.