Important proposed tax changes for the 2026/27 financial year

The proposed $1,000 instant tax deduction — what you need to know

The Federal Government has released exposure draft legislation for its proposed $1,000 instant tax deduction, delivering on a 2025 election commitment.

What is being proposed?

A standard deduction of up to $1,000 would become available for work-related expenses, without any requirement to incur or substantiate the expense. Key features of the draft include:

• Eligibility – available to Australian tax residents who derive assessable labour income. This is broader than just wages and salaries, it includes payments to employees, company directors, office holders, religious practitioners, return-to-work payments, employment termination payments and parental leave pay. The deduction is not available to taxpayers whose income is solely derived from business or investment sources.
• Automatic top-up mechanism – the standard deduction is reduced dollar-for-dollar by any work-related expenses the taxpayer claims. In practice this means:
  • If you have under $1,000 of genuine work-related expenses, you will adopt the standard deduction of $1,000.
  • If you have more than $1,000 of genuine work-related expenses, the standard deduction is reduced to zero and you will continue to itemise and substantiate your claims as you do today.
• Deductions claimable in addition to the standard deduction – the following are not covered by the $1,000 standard deduction and remain separately claimable:
  • Charitable donations and other gifts/contributions;
  • Costs of managing tax affairs (tax agent fees);
  • Union, trade, business or professional association membership fees;
  • Income protection, personal sickness and accident insurance premiums; and
  • Investment expenses and other deductions not connected with labour income.
• Fringe Benefits Tax (FBT) – These rules may affect the tax effectiveness of salary packaging of certain items. We suggest you speak with your advisor beforehand to ensure it is tax effective.
• Repeal of existing substantiation concessions – the current $300 receipt-free threshold for work-related expenses and the $150 laundry concession will be repealed, as the new standard deduction is intended to take their place.

When would it apply?

Assuming the exposure draft becomes law, the income tax amendments are proposed to apply from the 2026-27 income year (i.e. expenses incurred from 1 July 2026 onwards). The FBT amendments apply for FBT years starting on or after 1 April 2027.

In practical terms, eligible taxpayers would first be able to access the standard deduction when lodging their 2026-27 returns. There is no impact on 2025-26 returns. The existing rules (including the $300 receipt-free threshold) continue to apply for this year.

What’s next and how we can help

We will continue to monitor the exposure draft and will provide updates when they become available. In the meantime, please keep your receipts and records as usual for the 2025-26 year. Substantiation remains essential if you are claiming above the existing $300 concession for 2025-26.

If you would like to discuss how the proposed changes may affect your personal circumstances, please contact your Exant adviser or alternatively our Tax Partner, Jamie Towers, by completing the form below:

Sources

Treasury Consultation Hub: consult.treasury.gov.au/c2026-757530.  Exposure Draft Explanatory Memorandum, Treasury Laws Amendment Bill 2026.  Treasurer’s media release (20 April 2026).

Disclaimer: This article contains general information only and does not constitute tax, financial or legal advice. The legislation discussed is in exposure draft form and subject to change. Clients should obtain personalised advice before acting on the contents.