The rumours were true. The Federal Government has drafted legislation to allow employees a standard $1,000 deduction to cover work-related expenses, potentially commencing for the 2027 tax year.
On 20 April 2026, Treasurer Jim Chalmers announced the policy has been opened for public consultation as part of a broader tax reform agenda ahead of May’s Federal Budget.
Chalmers has flagged that Labor’s budget will include broader reform beyond this measure, stating “there’ll be tax reform, there’ll be a productivity push, and there will be savings”, with the $1,000 deduction designed to “cut back on paperwork” and “save time and money” for taxpayers.
How is the standard deduction proposed to work?
All individuals across Australia will be offered a standard deduction of $1,000 at tax time, proposed to cover their work-related expenses without the need of substantiation. This could include mobile phone use, work-related travel, or work-from-home expenses to name a few.
Every taxpayer will receive a standard $1,000 deduction which is then reduced for every itemised deduction they take.
For example, if you claimed $400 in work-from-home expenses, your standard deduction would be reduced to $600. Your total deduction would still be $1,000.
As another example, if you claim $2,500 of itemised deductions, your standard deduction is reduced to nil but you still get $2,500 in tax deductions.
In addition, Chalmers confirmed that non-work-related deductions such as charitable donations or professional association memberships and union fees could still be claimed on top of the $1,000 deduction.
Do you have to use it?
No, the standard deduction is not mandatoryfor all employees.
You can opt-in, or if you wish to claim more than $1,000, use the current substantiation methods to capture every deduction you are entitled to.
Subject to its passing, around 6.2 million workers in Australia are tipped to benefit from this legislation.
The consultation period for this draft legislation, which opened on Monday, is set to close on 1 May 2026.
