What is the proposed standard deduction?
During the 2026-27 Budget, the Australian Government introduced a proposal to allow individual taxpayers a standard deduction of up to $1,000 for work-related expenses without needing to provide detailed receipts or calculate an ‘actual cost’ amount. This proposal is designed to simplify deductions for many taxpayers – particularly those whose expenses are modest and hard to document. (community.ato.gov.au)
Where does this sit legally – and when might it apply?
- The standard deduction is proposed, not yet law. It was announced as part of budget measures, but legislation to enact it is still pending. (community.ato.gov.au)
- Even if passed, the change will not apply to the 2025-26 tax return. It’s expected to begin from the 2026-27 income year. (community.ato.gov.au)
What the current rules require (2025-26 and earlier)
For claimable work-related deductions under current legislation, you need to satisfy three golden rules:
- Pay for it yourself – the expense must be out of pocket, not reimbursed. (community.ato.gov.au)
- Directly relate to earning your income – there must be a clear work nexus. For example, use of specialised equipment for your job. (community.ato.gov.au)
- Keep records – receipts, invoices, timesheets, logbooks, etc., to substantiate every claim. (community.ato.gov.au)
For working-from-home expenses, you generally can choose between the fixed rate method (currently 70 cents per hour for 2025-26) or the actual cost method, based on actual running expenses. (community.ato.gov.au)
How to prepare if the standard deduction becomes law
Even though it isn’t law yet, you can prepare:
- Track all work-related expenses as normal for 2025-26, including receipts and methods you’d use under actual cost methods. That way you’ll have proof ready if needed.
- Estimate whether the $1,000 cap is enough for your expenses. If your eligible costs—like tools, uniforms, travel, phone, home office—add to more than $1,000, you may still prefer to use the detailed claim method once new rules allow.
- Take care with mixed-use expenses—expenses used for both personal and work purposes must be apportioned. The standard deduction would simplify this, but it’s still crucial to maintain accuracy.
Practical examples
| Situation | What you’d do under current rules (2025-26) | What you might do under the standard deduction (2026-27 or later) |
|---|---|---|
| Retail assistant with $800 work-related expenses | Keep receipts, apportion any mixed-use (e.g. phone, clothing), declare actual amount | Claim full $800 (if under cap), no invoices needed |
| Freelancer with $2,500 of expenses | Use actual costs, keep valid records, perhaps fixed rate for home office | Choose actual cost if > $1,000, or cap deduction at $1,000 under standard deduction |
| Office employee with minimal expenses | Might use fixed method for home office, small receipts | Likely claim standard deduction up to $1,000 |
Key takeaways
- The standard deduction is not yet law. Be ready to follow current rules for 2025-26.
- Keep thorough records in 2025-26—receipts, usage logs, invoices—as proof in case you need them.
- Once law is passed, simple claims may become easier—but detailed method could still be worth it when expenses exceed $1,000.
- Consider speaking to a tax professional to decide which method will work best for your circumstances once changes are in effect.
By being informed early, you can maximize your deductions, avoid surprises, and stay compliant.