From 1 July 2026 there is a new way to claim work-related expenses: a standard deduction of up to $1,000, with no receipts and no substantiation.
It sounds like free money. It isn't, and the people most likely to lose out are the ones who hear about it and stop keeping records.
How it actually works
The standard deduction is in section 25-130 of the tax law, and it applies from 1 July 2026 — the financial year you are in right now. It will first show up in the returns we lodge for you from July 2027.
Three things determine what you get:
- The cap is $1,000. You can claim up to that amount for work-related expenses without producing a single receipt.
- It is limited by your labour income. The deduction is the lesser of $1,000 or your total assessable labour income. If you earned $600 in wages this year, the standard deduction is $600.
- It is not additional. This is the part that gets missed. If you claim actual work-related expenses, the standard deduction reduces dollar-for-dollar by what you claim. You are not getting $1,000 plus your real expenses. You are getting whichever of the two is bigger.
Deductions that are not work-related — rental property costs, donations, the fee you pay us — are claimed the way they always have been.
Who is better off
If your genuine work expenses are small, this is a real gain. An office worker with a phone bill and not much else, someone who has never kept a receipt in their life, a part-time employee with no uniform and no tools — all of these people have been claiming a few hundred dollars or nothing at all. Now they can claim up to $1,000.
Who should ignore it
If you work in a trade, a salon, a kitchen, a hospital or on a building site, your real claim is very likely above $1,000 already. Tools, protective gear, compulsory uniforms and their laundry, equipment over $300 being depreciated, car travel between jobs — these add up past the cap quickly.
For you, nothing has changed. You claim actual expenses, and every substantiation rule applies exactly as it did before.
The trap
Here is the problem. You cannot know which side of the line you are on until the year is over.
If you decide in October that you will just take the standard $1,000 and throw your receipts away, and it turns out in July that your real claim was $1,800, you have given up $800 of deductions — and you have no way to prove the $1,800 even if you change your mind.
The cost of keeping records is a shoebox or a photo on your phone. The cost of not keeping them is capped at $1,000 of deductions, permanently, every year.
So our advice this year is the same as it was last year: keep everything. We will work out at return time which method leaves you better off, and we will use that one.
One caveat on the detail
The $1,000 threshold is law. How the ATO interprets the finer points — the interaction with depreciating assets and with salary-packaged benefits in particular — is still in draft. The Commissioner's draft ruling LCR 2026/D5 closed for comment on 9 October 2026, and the final version may move some of the detail.
Nothing in that changes the practical advice above.
If you are a USQ client, you don't need to do anything differently. Send us what you always send us, and we will model both methods before your return is lodged.
This is general information, not personal tax advice. Your circumstances change the answer — please talk to us before acting on it.