The new $1,000 standard deduction, explained
From the 2026-27 income year, Australian residents with labour income such as wages get a standard deduction of up to $1,000 for work-related expenses, applied automatically. It reduces your taxable income, so what it's worth depends on your tax rate. If you claim work expenses yourself, they reduce it dollar for dollar, so you get whichever is bigger. It doesn't apply to business income, so a sole trader with no wages misses out.
The short version
- Ella can skip her $450 of receipts and still get $1,000, while Marco does better claiming his own $3,500, as long as he has the records.
- Mia gets $1,000 for her job plus her $3,000 of business expenses, while Raj gets no standard deduction at all.
- In the 30% band, plus the 2% Medicare levy, a $1,000 deduction is worth about $320. In the 15% band it's worth $150, plus any Medicare levy saved.
You've probably heard about the $1,000 tax deduction. Some headlines made it sound like $1,000 in your pocket. Others made it sound like you can throw your receipts away. Neither is quite right.
Here's how it actually works, who gets it, and what it means if you have an ABN.
What it is, and when it starts
- It starts with the 2026-27 income year, so the first return it applies to is the one for 1 July 2026 to 30 June 2027. It isn't available for 2025-26.
- The maximum is $1,000, or your total labour income if that's less.
- The ATO applies it automatically. You don't need to claim it or report it.
- It lowers your taxable income. The tax you save depends on your tax rate.
The ATO's detailed guidance is still in a draft ruling, Draft Law Companion Ruling LCR 2026/D5. Some finer points may be refined when it's finalised, so check the ATO page before tax time in July 2027.
Who gets it
You need to be an individual, an Australian resident for tax purposes, and earn assessable labour income. The ATO lists:
- 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 ATO says the standard deduction will not apply if you only earn other types of income, such as dividend income or business income.
How it works with claims you make yourself
Work-related expenses you claim reduce your standard deduction dollar for dollar, down to nil. These include:
- stationery, tolls, uniforms and laundry
- travel allowance expenses
- working from home costs
- car expenses for your job
- transport between separate workplaces
- balancing adjustment deductions on work assets
So for work expenses you end up with whichever is bigger, $1,000 or your own total. Claiming $450 of expenses doesn't get you $1,450. It gets you $450 plus a standard deduction of $550, still $1,000 in total, and now you need records for the $450.
These don't reduce it and are claimed as usual on top:
- union fees
- trade, business or professional association memberships
- gifts and donations
- tax agent costs
- investment and rental property deductions
- personal super contributions
- income protection or sickness and accident insurance
- expenses you incur in earning other types of income
Worked example
Ella and Marco, two employees
Example only. Ella and Marco are example people, both Australian residents on wages in the 30% band. Ella has $450 of work expenses, mostly laundry and a uniform. Marco has $3,500 of work expenses with receipts. Both also pay $600 in union fees.
| Step | Sum | Result |
|---|---|---|
| Ella's work deductions | Bigger of $1,000 or $450 | $1,000 |
| Ella's total with union fees | $1,000 + $600 | $1,600 |
| Marco's work deductions | Bigger of $1,000 or $3,500, standard deduction nil | $3,500 |
| Marco's total with union fees | $3,500 + $600 | $4,100 |
| Ella's tax saved at 32% | $1,600 x 32% | $512 |
| Marco's tax saved at 32% | $4,100 x 32% | $1,312 |
Ella can skip her $450 of receipts and still get $1,000, while Marco does better claiming his own $3,500, as long as he has the records.
32% is the 30% tax rate plus the 2% Medicare levy. Example only.
Do I still need receipts?
If your work expenses are under $1,000, you can just take the standard deduction and you don't need records for them, though the ATO recommends keeping them. If your expenses are over $1,000 and you want to claim them, you need records.
Some old shortcuts also ended on 1 July 2026. The $300 work expense limit without receipts, the $150 laundry limit and the award transport exemption no longer apply. For laundry the ATO accepts $1 a load if it's only work clothes, or 50c if mixed.
You still need records for things that sit outside the standard deduction, like union fees, income protection and tax agent fees.
When claiming your own expenses is worth it
Only when your work expenses add up to more than $1,000. Even then, the gain is the amount over $1,000, not the whole claim.
Say your work expenses come to $1,300. Claiming them gives you $300 more deduction than the standard $1,000. In the 30% band plus Medicare levy that's worth about $96 ($300 x 32%). Whether that's worth the receipts and records is your call. If you work from home a lot or drive for your job, your total can pass $1,000 quickly, so it's worth adding it up before you decide.
If you're a sole trader
This is where a lot of ABN holders will get caught out.
- Business income only, no wages: no standard deduction. You claim your business expenses as usual.
- A job plus an ABN: you get the standard deduction against your wages and you claim your business expenses separately. Business expenses are expenses of earning another type of income, so they don't reduce it.
- Very small wages: the cap is your labour income. In the ATO's example, Simon earns $400 in wages and $40,000 in investment income, so his standard deduction is limited to $400.
Worked example
Mia and Raj, ABN holders
Example only. Mia is an example person in Wollongong who earns $70,000 in wages and runs a side business with $3,000 of business expenses. She claims $300 of work tolls for her job. Raj is a full-time sole trader with no wages and $8,000 of business expenses.
| Step | Sum | Result |
|---|---|---|
| Mia's standard deduction | $1,000 - $300 tolls | $700 |
| Mia's work-related total | $300 + $700 | $1,000 |
| Mia's business expenses | Claimed separately, don't reduce it | $3,000 |
| Raj's standard deduction | No labour income | $0 |
| Raj's business expenses | Claimed as usual | $8,000 |
Mia gets $1,000 for her job plus her $3,000 of business expenses, while Raj gets no standard deduction at all.
General information only. Check with the ATO or a registered tax agent if your income mix is unusual.
Key numbers
| What | Figure and source |
|---|---|
| 2026-27 resident tax rate, $45,001 to $135,000 | $4,020 plus 30c for each $1 over $45,000 ATO |
| Medicare levy | 2% ATO |
| Start | 2026-27 income year ATO |
| Maximum | Lower of $1,000 or labour income ATO |
| Business income | Not eligible on its own ATO |
| Reduction | Dollar for dollar ATO |
Free official help
- ATO: Standard deduction for work-related expenses
The official rules and the Simon, Yui and Marco examples. - ATO: Tax rates for Australian residents
2026-27 rates, to see what a deduction is worth to you. - Moneysmart: Income tax calculator
Find your marginal rate for 2026-2027. - ATO: Are you in business?
Check whether your side income is business income.
Questions people ask
Do I have to do anything to get it?
No. The ATO says it will apply it to your tax return automatically from the 2026-27 income year.
Can I claim it on my 2025-26 tax return?
No. It starts with the 2026-27 income year.
Does it apply to my ABN income?
No. It's only for labour income such as wages. Your business expenses are claimed separately and don't reduce it.
Should I still keep receipts?
Yes, if there's any chance your work expenses will top $1,000, and always for items outside it like union fees and tax agent fees.
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Sources
- Standard deduction for work-related expenses. https://www.ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/deductions-you-can-claim/work-related-deductions/standard-deduction-for-work-related-expenses, accessed 2026-10-16.
- Tax rates: Australian residents. https://www.ato.gov.au/tax-rates-and-codes/tax-rates-australian-residents, accessed 2026-10-16.
- Income tax calculator. https://moneysmart.gov.au/work-and-tax/income-tax-calculator, accessed 2026-10-16.