Standard deduction for work-related expenses

About the standard deduction

From the 2026–27 income year, eligible taxpayers are entitled to a standard deduction (also referred to as the 'instant tax deduction') of up to $1,000 for work-related expenses, without needing to have spent the money or kept records.

This deduction first applies in your 2026–27 tax return. It doesn't apply in the 2025–26 tax return.

How the standard deduction works

The standard deduction:

• is a default work-related expense claim that will be automatically applied in your tax return if you're eligible
• reduces your taxable income
• isn't a tax offset or rebate
• is reduced by any work-related expenses you claim in your tax return that are covered by the standard deduction.

For more information, see Draft Law Companion Ruling LCR 2026/D5 The standard deduction for work-related expenses.

Eligibility for the standard deduction

You're eligible for the standard deduction if you:

• are an individual
• are an Australian resident for tax purposes
• earn 'assessable labour income', which includes
  • salary and wages
  • director fees and office holder payments
  • payments to religious practitioners
  • return-to-work payments
  • termination and retirement payments
  • parental leave pay.

The standard deduction will not apply if you only earn other types of income such as dividend income or business income.

Receiving the standard deduction

If you're eligible for the standard deduction:

• you don't need to do anything to claim the deduction
• we'll automatically apply it to your tax return from the 2026–27 income year onwards based on the information in your return.

How your standard deduction is calculated

The maximum standard deduction you may be entitled to is the lower of $1,000 or the amount of your total assessable labour income.

If your total assessable labour income is:

• $1,000 or more, your maximum standard deduction is $1,000
• less than $1,000, your maximum standard deduction will be the total amount of assessable labour income you earned during the income year.

Your maximum standard deduction gets reduced by certain work-related expenses you claim in your tax return.

Work-related expenses that reduce the standard deduction

Certain work-related expenses you claim in your tax return reduce the amount of your standard deduction. These include:

• expenses related to earning assessable labour income, such as stationery, tolls, travel allowance expenses, uniform, laundry and working from home expenses
• car expenses related to earning assessable labour income
• transport expenses incurred between 2 or more separate workplaces (provided none of the workplaces is your home and you earn assessable labour income at one of them)
• balancing adjustment deductions on assets used to earn assessable labour income
• COVID-19 test expenses.

If you're eligible for the standard deduction and you:

• don't claim work-related expenses that reduce the standard deduction in your tax return, you automatically receive your maximum standard deduction – see example 2
• claim work-related expenses that reduce the standard deduction in your tax return, your standard deduction is reduced dollar for dollar – see example 2 and may be reduced to nil – see example 3.

 

Work-related expenses not affecting the standard deduction

There are work-related expenses that don't reduce the amount of your standard deduction. You should claim the following expenses in your tax return:

• union fees
• memberships of a trade, business or professional association.

You must have the required records to support your claims, such as statements of the fees or subscriptions you paid.

Other deductions not affecting the standard deduction

You need to claim all other tax deductions you're entitled to in your tax return as usual, such as:

• gifts and donations
• investment and rental property deductions
• the cost of managing your tax affairs
• personal super contributions
• income protection, personal sickness or accident insurance premiums
• expenses you incur in earning other types of income, such as business or from providing services through a digital platform.

Record keeping

If you expect your total work-related expenses that reduce your standard deduction to be:

• more than the maximum standard deduction you're entitled to – then if you want to claim the amounts as a deduction you need to keep the required records for all work-related expenses you're entitled to. However, you can choose not to claim these deductions and instead receive the standard deduction you're entitled to. Choosing to receive the standard deduction means you don’t need to keep records for those expenses.
• less than the maximum standard deduction you are entitled to, it’s not necessary but still a good idea to keep records. Unexpected costs can occur, which may increase your total work-related expenses.

You need to keep records for:

• work-related expenses you claim in your tax return
• union fees, subscriptions to trade, business or professional associations
• income protection, personal sickness or accident insurance premiums
• all other deductions you claim, such as investment expenses or donations.

There are other changes to record keeping from 1 July 2026, because of the standard deduction, see removal of record keeping exceptions.

Additional changes due to the standard deduction

Due to the standard deduction for work-related expenses, there are additional changes that apply from the 2026–27 income year.

Removal of record keeping exceptions

From 1 July 2026, the following record keeping exceptions won't apply:

• $300 deduction limit for work-related expenses
• $150 laundry expense limit
• award transport expense exemption

This applies to all taxpayers, regardless of eligibility for the standard deduction.

If you choose to claim more than your maximum standard deduction, you must have written evidence (such as a receipt) for all work-related expenses you claim in your tax return for the 2026–27 and later income years.

Laundry expenses

If you incur laundry expenses and claim a deduction for them in your return, we will accept the following amounts for working out your laundry expenses deduction:

• $1 per load if you only wash your work clothes in that load
• 50c per load if you mix other clothes with your work clothes.

For more information, see the compliance approach contained in Draft Law Companion Ruling LCR 2026/D5 The standard deduction for work-related expenses.

Low value pool

For the 2026–2027 and later income years, you can't add a depreciating asset to a low-value pool if, when you acquired it, you expected to mainly use it to earn assessable labour income. You can still claim the decline in value of the depreciating asset. However, the decline in value claim for depreciating assets used to earn assessable labour income in an income year will reduce any standard deduction you're entitled to.

This change applies regardless of eligibility for the standard deduction.

It doesn't affect:

• existing assets in a low-value pool
• other depreciating assets (such as business assets) not used to earn assessable labour income.

Balancing adjustments

From the 2026–27 income year, there is a simple way to work out your balancing adjustment amount if you:

• sell, dispose of or stop using a depreciating asset that's used at any time for the purpose of gaining or producing your assessable labour income
• received a partial or full standard deduction in one or more years in which you held the asset.

You have the option of using a fixed 50% rate to calculate the reduction of either of the following amounts that arose because you stopped holding or using the asset:

• the amount you include in your assessable income
• the amount you can deduct from your assessable income.

This simplifies calculations where detailed records of an asset's use were not kept. If you claim a balancing adjustment deduction related to an asset used to produce your assessable labour income, it reduces the amount of your standard deduction in that income year.

For more information on balancing adjustments, see What happens if you no longer hold or use a depreciating asset.