A proposed new “instant” tax deduction could make tax time easier for many Australians.
However, experts say some workers may end up worse off.
The Federal Government is proposing to introduce a standard tax deduction of up to $1000 from July 1, 2026, which would first apply to 2026-27 income and be claimed in 2027 tax returns.
The reform would allow eligible Australian tax residents earning labour income to claim the deduction for work-related expenses without having to spend any money or keep records for common claims.
But Curtin University tax expert Dr Lizzie Morton said the headline figure could be misleading.
“Taxpayers won’t get $1000 cash back here,” Dr Morton said.
“This deduction reduces a taxpayer’s taxable income and therefore reduces their tax bill.”
She said the actual savings would depend on a person’s income.
Those earning up to $45,000 could save about $160, while people earning up to $135,000 may save about $300.
The maximum benefit is expected to be about $470 for the highest income earners.
Australians earning less than about $18,000 would not benefit.
Dr Morton said the proposal would mostly help employees who usually do not claim many work-related expenses.
“The higher the income the better,” she said.
“They need to have at least $1000 in labour income to benefit at all.”
Those with genuine work-related expenses over $1000 may face more paperwork if they choose not to take the standard deduction.
“Those individuals that have genuine expenses or no labour income will be worse off,” Dr Morton said.
The proposed deduction would replace common work-related expense claims, meaning taxpayers who take it could not also claim those same expenses separately.
Some expenses could still be claimed on top, including donations, the cost of using a registered tax agent, income protection and memberships of trade or professional associations.
Dr Morton said the changes would also remove some existing concessions. An example is laundry claims.
At the moment, taxpayers can claim up to $150 for washing protective clothing or uniforms without written records.
Under the proposed changes, that concession would be removed.
“Without such, taxpayers will find it quite complex to be able to work out their claim and perhaps many taxpayers will simply not bother,” she said.
Dr Morton said the reform could be a step towards ending traditional tax returns for people with simple tax affairs.
“Eventually, we are likely to see the tax returns for individuals with simple tax affairs become a thing of the past,” she said.
She said the new system could create “two lanes” at tax time.
One would be a simpler, lower-risk option for people claiming the standard deduction.
The other would be more complex for taxpayers claiming more than $1000 in genuine expenses and could attract greater scrutiny from the Australian Taxation Office.
“This reform will make tax administration easier for the ATO,” Dr Morton said.
Taxpayers lodging their 2025-26 tax returns next year would not be able to claim the deduction.
