The $1,000 Standard Tax Deduction Explained (2026–27)

You may have heard about the "$1,000 instant tax deduction". It is now law. It starts in the 2026–27 income year, so it doesn't apply to your 2025–26 return. Here's how the $1,000 standard deduction works, who it helps and what has changed for record keeping.

To estimate your 2026–27 tax with the standard deduction, choose 2026–27 in our tax calculator and enter $1,000 as your deductions.

Key takeaways: the $1,000 standard deduction applies from 1 July 2026, first on 2026–27 returns (ATO). The ATO applies it automatically if you're eligible. Work-related expenses you claim reduce it dollar for dollar, while union fees, donations and tax agent fees are claimed on top. Around 6.2 million workers (42%) are expected to benefit, with an average saving of about $205.

What Is the $1,000 Standard Deduction?

The $1,000 standard deduction (also called the instant tax deduction) is a default deduction of up to $1,000 for work-related expenses. You don't need to have spent the money or kept records. It became law under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026. You're eligible if you're an individual, an Australian resident for tax purposes and you earn assessable labour income, such as salary and wages. If your labour income is under $1,000, the deduction is capped at that amount. The ATO applies it automatically in your return (ATO).

It isn't a simple either/or. Any covered work-related expenses you claim reduce the standard deduction dollar for dollar, and if your claims exceed $1,000, it drops to nil. So claiming expenses only increases your total deduction once they go above $1,000.

What reduces the standard deduction

• Expenses of earning labour income, such as stationery, tolls, uniforms, laundry and working from home
• Car expenses
• Travel between two or more separate workplaces
• Balancing adjustment deductions on work assets
• Decline in value of assets used to earn labour income

Example: Mia earns wages and has $400 of working from home expenses. If she claims nothing, she gets the full $1,000 with no records needed. If she claims the $400, she needs records for it, and her standard deduction falls to $600. Either way her work deductions total $1,000. Her $250 tax agent fee is claimed on top in both cases.

What you still claim on top

• Union fees and trade, business or professional association memberships
• Gifts and donations
• The cost of managing your tax affairs, such as tax agent fees
• Investment and rental property deductions
• Personal super contributions
• Income protection, sickness or accident insurance premiums
• Expenses of earning other income, such as business or digital platform income

When Does It Start, and Does It Affect My 2026 Return?

No. It doesn't apply to your 2025–26 return. It applies from 1 July 2026, so the first return it appears on is your 2026–27 return, lodged from July 2027 (ATO).

For your current return, the existing rules still apply: itemise your real deductions, keep your receipts, and use the 70c work-from-home method if it fits. See what you can claim this year and our 2026 work-from-home guide.

Who Benefits from the $1,000 Deduction?

Treasury estimates around 6.2 million workers, about 42% of taxpayers, will benefit in 2026–27, with an average tax saving of about $205 (Treasury). The people who gain most are those whose genuine work expenses are under $1,000.

If your work expenses are over $1,000, which is common for tradies, nurses and drivers, you can still claim them in full. You won't get the standard deduction as well, and you'll need written evidence, such as receipts, for all the work-related expenses you claim.

Other changes from 1 July 2026 (for everyone)

• Record-keeping exceptions removed: the $300 work-expense limit, the $150 laundry limit and the award transport exemption no longer apply.
• Laundry: the ATO accepts $1 per load of work clothes only, or 50c per load if mixed with other clothes.
• Low-value pool: an asset you expect to use mainly to earn labour income can't be added to a low-value pool. You can still claim its decline in value, but that claim reduces your standard deduction.

What Should You Do Now?

For 2025–26, claim your work expenses as usual. From 1 July 2026, keep receipts if your work expenses might go over $1,000. If they stay under, records aren't required, but they're still a good idea in case costs climb. See what you can claim without receipts.

• 2025–26 return: claim and substantiate as normal.
• 2026–27 onwards: the $1,000 is applied automatically. Only claim work expenses if they total more than $1,000.
• Over $1,000: keep written evidence for every work-related expense you claim.
• Union fees, donations, tax agent fees: claim these on top and keep records.

Not sure whether you're above or below the $1,000 line? That's exactly the kind of thing a quick review answers. See how to maximise your tax return.

Want to make sure you claim the most? Australia Wide Tax Solutions is a registered tax agent (TPB 78641007). Book an appointment or see our tax return service, and we'll check whether claiming your expenses beats the standard deduction.