From 1 July 2026, millions of Australian workers get a $1,000 tax deduction they do not have to earn, document or even claim. The ATO applies it automatically in your 2026–27 tax return. No receipts, no diary, no itemised list of work expenses.
That sounds like free money. It is not quite that simple. The $1,000 is a deduction from your taxable income, not a $1,000 refund. It replaces your itemised work-related expense claims up to $1,000 rather than adding to them. And if your real work expenses are higher — as they are for most people — taking the easy $1,000 can cost you money. This guide works through who gets it, what sits on top of it, exactly how much tax it saves at each marginal rate, and the worked examples that decide whether you should take it or itemise.
The short answer
- From the 2026–27 income year (the return you lodge from July 2027), eligible individual taxpayers get a standard deduction of up to $1,000 for work-related expenses.
- You do not need to claim it. The ATO applies it automatically if you are eligible. You also do not need to have spent the money or kept records for it.
- It is not a $1,000 refund. It reduces your taxable income by $1,000, which saves between $150 and $450 in income tax depending on your marginal rate, plus up to $20 in Medicare levy.
- It does not stack with your other work expenses. Every dollar of covered work-related expenses you claim reduces the $1,000 dollar for dollar. Claim $400 of work expenses and your standard deduction becomes $600 — your total for covered expenses is still $1,000.
- Some deductions sit on top. Union fees, professional association memberships, charitable donations, tax agent fees, income protection premiums and investment expenses are claimable in addition to the $1,000.
- If your actual work expenses pass $1,000, itemise instead. You claim the higher real amount with records, and the standard deduction drops away entirely.
- It does not apply to the return you are lodging right now. The 2025–26 return (due 31 October 2026 for self-lodgers) still works the old way.
How the $1,000 standard deduction works
The measure was announced in the March 2025 Federal Budget and is now in ATO guidance, with the detail in Draft Law Companion Ruling LCR 2026/D5. It is deliberately boring by design: a default work-related expense claim that the ATO puts in your return for you.
The mechanics are four short rules:
1. It is automatic. If you are eligible, the standard deduction appears in your 2026–27 return without you doing anything. You do not tick a box and you do not need to lodge anything extra. MyTax and tax agents will both show it applied.
2. It is a deduction, not a refund or an offset. A $1,000 deduction cuts your taxable income by $1,000. Your tax saving is $1,000 multiplied by your marginal rate — not $1,000. At the 15% rate that is $150 of income tax saved; at 45% it is $450. The Medicare levy adds up to another $20 where it applies. Nobody gets $1,000 back from this.
3. It is reduced by the work expenses you claim. This is the rule most explainers skip, and it is the one that matters. The standard deduction covers the same ground as your ordinary work-related expense claims — home office costs, work clothing, tools and equipment, car expenses for work travel, stationery and work supplies, self-education for your current job. If you claim any of those, each dollar claimed shrinks the standard deduction by a dollar. Claim $450 and the standard deduction falls to $550. Claim $1,000 or more and it falls to zero — you are simply itemising instead.
4. It is capped at your labour income. The maximum is $1,000 where your assessable labour income is at least $1,000. If your total labour income for the year is less than $1,000 — a short stint of casual work, for example — the deduction is capped at that smaller amount.
Who is eligible — and who gets nothing
You are eligible if you are an individual, an Australian resident for tax purposes at any time during the income year, and you earn assessable labour income. Labour income includes salary and wages, director fees and office-holder payments, payments to religious practitioners, return-to-work payments, termination and retirement payments, and parental leave pay.
Just as important is who is not eligible:
- Sole traders with business income only. If your only income is business income, the standard deduction does not apply. Your business expenses are claimed under the business rules instead. A sole trader who also earns a salary can get the standard deduction against the salary income.
- Investors with dividend or rental income only. A retiree living on dividends and rent, with no salary or wages, gets nothing from this measure. The deduction is tied to labour income, not to lodging a return.
- Non-residents for tax purposes. The standard deduction is for Australian residents. Foreign residents are taxed on Australian-sourced income under different rules and do not get it.
- Companies and trusts. It is an individual-only measure. A company cannot claim it, and it does not flow through a trust distribution.
- Part-year workers are capped, not excluded. If you worked for part of the year and earned, say, $600 of labour income, your standard deduction is $600, not $1,000.
One common worry can be put to rest: having a second job does not give you a second $1,000. The deduction applies once per person, per year, against your total labour income.
What the $1,000 covers — and what sits on top
The distinction is the whole game. Covered expenses shrink the $1,000; uncovered expenses are claimed in addition to it.
| Covered by the standard deduction (reduces it $1-for-$1) | Claimable ON TOP of the $1,000 |
|---|---|
| Working from home (70c fixed rate) | Union fees |
| Work-related car expenses | Professional association memberships |
| Tools, equipment and work clothing | Charitable donations (DGR) |
| Self-education for your current job | Tax agent fees |
| Home office running costs, phone and internet | Income protection insurance premiums |
| Stationery, journals and work supplies | Investment-related expenses |
| Work-related travel between workplaces | ATO interest charges |
Treasury’s own example makes the split concrete. Nicky claims $200 of working-from-home expenses, $50 of stationery, $50 for a work-related subscription and $150 travelling between workplaces. Those four are covered expenses totalling $450, so Nicky’s standard deduction is reduced to $550 — the total for covered expenses is still $1,000. But Nicky’s $50 charitable donation and $150 tax agent fee are not work-related expenses at all, so they are claimed on top. Nicky’s total deductions are $1,000 + $50 + $150 = $1,200. And if Nicky had not bothered claiming the $450 at all, Treasury says the full $1,000 would still be applied automatically.
How much tax does it actually save?
Your saving depends on your marginal rate. The table uses the 2026–27 resident rates, and includes the 2% Medicare levy where it applies:
| Your marginal rate (2026–27) | Income tax saved on $1,000 | Medicare levy saved | Total saving |
|---|---|---|---|
| 15% ($18,201 – $45,000) | $150 | $20 | $170 |
| 30% ($45,001 – $135,000) | $300 | $20 | $320 |
| 37% ($135,001 – $190,000) | $370 | $20 | $390 |
| 45% (over $190,000) | $450 | $20 | $470 |
Two things are worth noting. First, the saving is worth the least to the people most likely to use it: a worker on $35,000 saves $170, while a worker on $200,000 saves $470. Treasury and the Parliamentary Budget Office put the average saving at roughly $200–$205, and about 1.7 million taxpayers under 30 are expected to benefit. Second, there are small second-order effects. A $1,000 lower taxable income can lift your low income tax offset by up to $50 if you sit in its phase-out range, and it can trim a HECS-HELP repayment by $10 to $100 depending on your repayment rate. None of these change the decision, but they are real money.
The 2026–27 rates themselves changed on 1 July 2026: the first bracket dropped from 16% to 15%, worth up to $268 a year. That cut is separate from the standard deduction, but the two land together in the same return — a worker on $45,000 gets up to $268 from the rate cut plus up to $170 from the standard deduction.
Worked example 1: Grace the public servant — take the $1,000
Grace works two days a week from home, keeps an hours log, and pays a professional association membership. In 2026–27 her numbers look like this:
- Working from home: 650 hours × 70c = $455
- Monitor, 90% work use: $252
- Work-related journals: $120
- Professional association membership: $460
Her covered expenses total $827. If she itemises, she claims $827 plus the $460 membership, for $1,287 in total deductions. If she takes the standard deduction, she claims the automatic $1,000 plus the $460 membership on top, for $1,460. The standard deduction wins by $173 — and she does not have to keep a single receipt for the $1,000. This is exactly the taxpayer the measure was designed for: modest, straightforward work expenses, and one or two claimable items that sit outside it.
Worked example 2: the electrician — itemise, every time
An electrician running a van for work will typically spend $12,000 to $22,000 a year on legitimate work expenses: vehicle costs, tools, licences, insurance, PPE and phone. Take the middle case of $22,000 in actual expenses.
Itemising gives $22,000 of deductions. Taking the standard deduction gives $1,000. The difference is $21,000 of lost deductions. At a 30% marginal rate plus the 2% Medicare levy, that is $6,825 of extra tax — for the convenience of not keeping receipts. A plumber on $18,000 of expenses loses $5,525 the same way; a painter on $12,000 loses $3,575. The only tradie who benefits from the standard deduction is one whose total work expenses are under $1,000 — a brand-new apprentice in their first weeks, or someone returning to work after a long break. For everyone else in a trade, the $1,000 is a trap, not a gift.
Worked example 3: the work-from-home crossover — 1,429 hours
The fixed-rate working-from-home method pays 70c per hour. Divide $1,000 by 70c and you get 1,429 hours — about 3.7 days a week across a 48-week working year. That single number is the decision rule for most office workers:
- Under 1,429 hours at home: your WFH claim alone is under $1,000. Unless your other covered expenses push you over the line, take the standard deduction and stop tracking hours.
- Over 1,429 hours at home: your WFH claim alone beats the standard deduction. Keep the diary, keep the receipts, and itemise.
- Near the line: add your other covered expenses. A worker doing 1,000 hours at home ($700) plus a $280 monitor and a $400 certification exam is at $1,380 — itemising wins by $380, worth about $122 in tax at 32%.
Remember the 70c rate already covers your energy, phone and internet for those hours. Do not claim them again on top of either method.
The trap: the return you are lodging right now does not include it
This is the confusion that will cost people money in the next few weeks. The standard deduction first applies in the 2026–27 income year — the return you lodge from July 2027. The return being lodged right now, for 2025–26, works entirely the old way: claim your actual work-related expenses with records, and the $300 no-receipt threshold still applies to that return.
If you are lodging your 2025–26 return yourself, the deadline is 31 October 2026. Do not add $1,000 to it. Do not assume your agent will either. And if a headline or a social media post tells you the $1,000 is available “now”, check which tax year it means — the measure is law for 2026–27, but your current return is 2025–26.
Two old shortcuts are dead from 1 July 2026
The standard deduction replaces two rules that workers have relied on for years. Both are gone from the 2026–27 year, and quoting them in a 2026–27 return will be wrong.
The $300 no-receipt rule is gone. Until 2025–26, you could claim up to $300 of work-related expenses without written evidence. From 2026–27 that rule no longer applies. In its place you get the $1,000 standard deduction without receipts. But the trade-off is real: if you itemise above $1,000, you need evidence for your actual expenses. There is no $300 free pass sitting underneath an itemised claim any more.
The $50 phone and internet shortcut is gone. The ATO’s $50 shortcut for incidental phone and internet use ended on 1 July 2026. If you want to claim phone or internet outside the standard deduction, you need to meet the ordinary substantiation rules — invoices, a four-week usage diary where appropriate, and an apportionment between work and private use.
There is one more quiet change. From 2026–27 you can no longer add new work equipment costing between $300 and $1,000 to a low-value pool for depreciation. Items in that price range are either claimed through the standard deduction or depreciated individually under the normal rules, which can slow down the deduction for computers and tools.
Should you still keep receipts in 2026–27?
Yes — at least until you know which side of $1,000 you land on. The honest answer for most workers is to keep tracking everything through the year and decide at lodgement time in July 2027. The decision is simple once the numbers are in:
- Add up your covered work-related expenses for the year. If the total is under $1,000, take the standard deduction and claim your union fees, donations and tax agent fees on top.
- If the total is over $1,000, itemise the real amount with your records. The standard deduction disappears, but you keep more.
- If you are close to the line, the WFH hours test above is usually the deciding factor. One extra day a week at home is worth $268.80 a year at the fixed rate — enough to tip most borderline cases.
The statistics explain why the choice matters. Around 6 million Australians claim under $1,000 in work expenses, and they are the clear winners. But the median claim across all taxpayers is $1,338 and the average is $2,739 — most workers already claim more than the standard deduction, and about 8.5 million of Australia’s 14.7 million workers are not expected to be affected by the change at all. The $1,000 is a floor for people with small claims, not a ceiling for everyone.
Common mistakes
- Treating it as a $1,000 refund. It is a $1,000 reduction in taxable income. At the 15% rate it is worth $170 including Medicare levy.
- Claiming $1,000 plus your full work expenses. Covered expenses reduce the standard deduction dollar for dollar. You never get $1,000 on top of $1,000 of work expenses.
- Claiming it on the 2025–26 return. It starts in 2026–27. The return due 31 October 2026 does not include it.
- Assuming it covers everything. Union fees, donations, tax agent fees, income protection and investment expenses are separate — claim them on top, or lose money.
- Stopping all record-keeping. If your expenses pass $1,000 by year’s end, you need the records to claim them. By the time you find out, the receipts are gone.
- Thinking sole traders get it. Business income does not count as labour income for this measure. A sole trader’s deductions stay in the business return.
- Quoting the $300 rule or the $50 phone shortcut for 2026–27. Both ended on 1 July 2026.
Frequently asked questions
Do I need to do anything to get the $1,000 standard deduction?
No. If you are an eligible individual — Australian resident with assessable labour income — the ATO applies it automatically in your 2026–27 return. You do not tick a box or make a separate claim. If you itemise higher actual expenses, the automatic amount is replaced by your itemised claim.
Can I claim the $1,000 and my work expenses as well?
Not for the same expenses. Every dollar of covered work-related expenses you claim reduces the standard deduction by a dollar, so your total for covered expenses is capped at $1,000 unless your actual expenses exceed it — in which case you claim the actual amount instead. Expenses that are not covered, like union fees and donations, are claimed on top.
Does the standard deduction apply to the tax return I am lodging now?
No. It first applies to the 2026–27 income year, for returns lodged from July 2027. The 2025–26 return being lodged now uses the old rules: itemise your actual expenses with records.
I am a sole trader. Do I get the $1,000?
Not for your business income. The measure only applies to individuals earning assessable labour income such as salary and wages. Your business expenses are claimed in your business return under the business deduction rules. If you also earn a salary, the standard deduction can apply against that salary income.
I work from home three days a week. Should I take it?
Probably not. Three days a week is roughly 1,152 hours a year, worth about $806 at the 70c fixed rate — and that is before any other covered expenses like equipment or self-education. Most three-day-a-week home workers pass $1,000 once everything is added up, so itemising usually wins. Run the numbers at year’s end before deciding.
Do union fees reduce the $1,000?
No. Union fees and professional association memberships are claimable on top of the standard deduction. The same applies to charitable donations, tax agent fees, income protection premiums and investment expenses.
What if I only worked for part of the year?
The deduction is capped at your total assessable labour income for the year. If you earned $600 of labour income, your standard deduction is $600. If you earned $1,000 or more, you get the full $1,000.
The bottom line
The $1,000 standard deduction is the biggest simplification to individual tax returns in years, and for the roughly 6 million workers whose work expenses are small it is genuinely good news: no receipts, no diary, no itemised list, and about $170 to $470 back depending on your tax rate. For everyone else it is a floor to compare against, not a payment to collect. Add up your covered expenses for 2026–27, keep the receipts while you do, and take whichever number is bigger when you lodge in July 2027. The one mistake that costs real money is assuming the easy $1,000 is also the best $1,000 — for most Australian workers, it is not.
Want your own number? Try the income tax calculator with and without the $1,000 deduction to see the difference at your salary. For the full 2026–27 rates behind the examples, see our income tax rates guide, the tax deductions checklist, and the work from home deduction guide for the 70c fixed rate. The tax offsets guide explains the LITO interaction, and the HECS-HELP guide covers how a lower taxable income trims your repayment. The ATO’s own page is the authoritative source: Standard deduction for work-related expenses.
