The proposed $1,000 instant deduction for work-related expenses has attracted plenty of attention, and fair enough. On the surface, it sounds simple.

But before anyone starts planning their 2026 tax return around it, there is one important point to understand:

This measure is not yet law.

Draft legislation has been released proposing a new standard $1,000 immediate deduction for work-related expenses. If passed, it is proposed to apply from 1 July 2026, meaning it would first be relevant to the 2026–27 financial year and tax returns lodged in 2027.

It does not apply to the 2025–26 financial year that is about to end.

With the Federal Budget due next week, this is one to watch – but for Tax Time 2026, the current rules still apply.

What is being proposed?

Under the draft proposal, eligible individual taxpayers would be able to claim a flat $1,000 deduction for work-related expenses without needing to substantiate each individual expense with receipts.

The proposed deduction would be optional.

Taxpayers could choose between:

  • Claiming the standard $1,000 deduction, or
  • Claiming their actual work-related expenses under the existing substantiation rules

If actual work-related expenses exceed $1,000, the current deduction rules would continue to apply.

In other words, the proposal is designed to simplify tax reporting for employees with relatively modest work-related expenses, while preserving the ability to claim higher deductions where properly supported.

Simple idea. Important timing.

Timing matters

Because the proposed start date is 1 July 2026, the measure would form part of the 2027 tax return cycle, not the upcoming 2026 tax return cycle.

For clarity:

  • 2025–26 tax returns lodged in 2026 are not affected
  • Existing deduction rules continue to apply in full for the upcoming tax refund period
  • Taxpayers should continue to keep records and maximise deductions under current law
  • Any change will only occur if the legislation is passed, either in its current or an amended form

So while the headline may sound like something taxpayers can use this year, the practical answer is: not yet.

What this means for your upcoming tax return

For the tax return period about to commence, nothing changes.

The proposed deduction does not alter how work-related expenses are claimed for the 2025–26 income year.

There may still be opportunities to legitimately maximise your after-tax position by:

  • Reviewing work-related expenses under current ATO rules
  • Ensuring substantiation is complete and compliant
  • Assessing whether deductions have been overlooked or incorrectly claimed in prior years
  • Checking that claims are reasonable, work-related and properly supported

A proposed shortcut in the future does not remove the need to get this year’s return right.

What employers should keep in mind

For employers, this proposal may also prompt questions from staff about deductions, allowances, reimbursements and record-keeping.

But it does not change payroll obligations, fringe benefits tax considerations, or the need for appropriate documentation where employers reimburse or provide work-related items.

Businesses should be careful not to treat the proposed deduction as a replacement for proper payroll, reimbursement or substantiation processes.

As always, the details matter – and the timing matters even more.

The bottom line

The proposed $1,000 work-related deduction may simplify things for some taxpayers in the future.

But for now:

It is draft legislation. It is not yet law. And it does not apply to Tax Time 2026.

With the Federal Budget just around the corner, this is a measure worth watching. But if you are thinking ahead to your 2025–26 tax return, work with the rules in force now – not the headlines doing the rounds.

Unsure what applies this tax time? Get advice based on your actual circumstances, the records you have, and the law as it currently stands – Get in touch.

Author: Kylie McEwan – Director | Partner

Disclaimer: The information that is provided in this article is factual in nature and objectively ascertainable and, therefore, does not constitute financial product advice. Importantly, the factual information that has been supplied does not take into account your personal circumstances, objectives or goals. Davidsons is not licensed to provide any financial product advice nor make any recommendations in respect of any financial product. If you require such advice, you will need to consult a financial adviser who is licensed to provide financial product advice before you make a decision on a financial product.