As part of its election promises Labor flagged that Australian workers would be able to claim a standard deduction of up to $1,000 for work-related expenses without having to keep receipts.  This differs from the existing rules where receipts are required, and taxpayers must itemise the deductions claimed.

The draft legislation has just been released, however, its not all lattes and sunshine.  The draft legislation proposes a tax deduction (not a tax refund) and therefore any saving of tax that will arise will be a function of the individual’s marginal rate of tax.  For the highest rate taxpayers, a $1,000 deduction will generate a tax refund of $470 (less than 2 coffees a week).  Positioning around the changes is that it provides cost of living pressure relief and reduces red tape, however, this may not be the case when looked at practically.

Treasury indicates are that about 40% of people will benefit under the proposed changes with the average saving being $205 per year (less than a coffee a week).

When will the proposed changes apply from?

The proposed changes if enacted in their current form will apply for the 2026-27 income years (ie from 1 July 2026).

How the proposed changes work?

• The changes only apply if you are in paid employment (“assessable labour income”). As such, self-employed individuals or individuals who solely derive passive income (trust distributions, dividends etc) do not benefit from this law change.
• The costs must relate to doing an individual’s job – tax agent fees or donations are not covered.
• Deductible costs outside of the $1,000 can still be claimed separately (eg income protection, donations etc).
• Where assessable labour income is less than $1,000, the standard deduction will be capped at the employment income amount.

What costs are designed to be covered?

Costs anticipated to be covered include:

• General deductions for costs incurred in gaining or producing assessable income
• Car expenses
• Transport costs
• Depreciating assets (eg phones, desks etc)

More than $1,000?

Where costs of more than $1,000 are claimed, the existing rules will still apply meaning that taxpayers will need to be able to provide records to support the claims made.

Less than $1,000?

Where costs of less than $1,000 have been incurred, taxpayers will still be able to claim $1,000.

Should you have any questions about these proposed changes please reach out to your ESV Engagement Partner.