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Proposed new instant tax deduction for work-expenses
From 1 July 2026, eligible individuals may be able to claim a flat $1,000 instant deduction for work-related expenses without substantiation, following the release of exposure draft legislation by Treasury.
Under the draft Bill, the income tax law will be amended to:
- introduce a standard deduction of up to $1,000 for Australian tax residents who derive income from employment from 1 July 2026;
- retain the existing work-expenses deduction rules for taxpayers who:
- incur more than $1,000 in work related expenses; or
- earn only business or investment income
- allow certain deductions to be claimed in addition to the standard deduction, including investment expenses, charitable donations, and union and professional association membership fees;
- prevent taxpayers from obtaining a double benefit, including by salary packaging expenses covered by the standard deduction; and
- update substantiation requirements and capital allowance rules to support the new regime.
Where a taxpayer chooses to claim and substantiate actual work related expenses exceeding $1,000, the instant deduction is reduced to nil.
Consultation on the draft legislation recently closed on 1 May 2026. If enacted, the instant tax deduction will apply from the 2026-27 income year.
