From the 2026-27 income year, most Australian employees get a $1,000 standard deduction for work-related expenses, and they don't have to spend a cent or keep a single receipt to get it. The ATO applies it when you lodge your return, and it comes straight off the income you are taxed on. It sounds simple, and the basics are. The part nobody seems to explain is what that $1,000 slice of income is actually worth, because the answer isn't $1,000, and it isn't the same for everyone.
The deduction is law, not a proposal waiting on parliament. It sits in section 25-130 of the Income Tax Assessment Act 1997, put there by the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, and it applies to the 2026-27 income year and later years. It does not apply to the 2025-26 return most people are lodging right now. The first returns that include it get lodged from July 2027.
How the $1,000 standard deduction works
You qualify if you are an Australian resident for tax purposes and you earn assessable labour income, which for most people means salary and wages. Company directors and office holders count too. If your only income is rent, dividends or a business you run as a sole trader, there is no labour income and no deduction.
The amount is the lower of $1,000 and your labour income for the year. Earn $600 in wages and your standard deduction is $600. Earn $60,000 and it is the full $1,000. Salary sacrifice into super doesn't shrink it, because the deduction is worked out on your labour income before the sacrifice comes off.
One catch catches people out. Work-related expenses you claim in the return reduce the standard deduction dollar for dollar, so if you claim $1,000 of covered expenses, the standard deduction falls to zero. If your real expenses run higher than $1,000 and you have the records, claim the real amount instead and skip the standard deduction. Just know the substantiation rules then apply to your whole claim, not only the part above $1,000.
Some costs sit outside the standard deduction and stay claimable on top of it. Union fees, professional association memberships and income protection insurance premiums are the common ones. Claiming those does not eat into your $1,000.
The deduction lands at assessment time, not in your pay packet. Your employer keeps withholding the usual way all year, and the benefit shows up as a bigger refund or a smaller bill when the 2026-27 return is assessed.
What the $1,000 standard deduction Australia is worth at your salary
A deduction takes money off the income you are taxed on, not off the tax itself. So the saving is roughly your marginal tax rate multiplied by $1,000, plus $20 of Medicare levy, because the levy is worked out on the same reduced taxable income. Sit in the 30% bracket and the whole thing is worth $320 a year. Anyone telling you it puts $1,000 in your pocket is selling something.
| Salary | Income tax saved | Medicare levy saved | Total saved per year |
|---|---|---|---|
| $40,000 | $200 | $20 | $220 |
| $50,000 | $315 | $20 | $335 |
| $60,000 | $315 | $20 | $335 |
| $80,000 | $300 | $20 | $320 |
| $100,000 | $300 | $20 | $320 |
| $120,000 | $300 | $20 | $320 |
| $150,000 | $370 | $20 | $390 |
Two salaries in that table save a little more than the pattern suggests. At $50,000 and $60,000, the lower taxable income also lifts the low income tax offset, because the offset phases out as income rises. That adds $15 to the tax saving. Most write-ups of this deduction never mention the offset at all.
There is a bigger point hiding in the table. Most online calculators still show 2026-27 figures without the standard deduction built in, so on a $100,000 salary they quote tax of $20,520 and take-home pay of $77,480. Run the same salary with the deduction included and you get tax of $20,220 and take-home pay of $77,800. Our Australia income tax calculator includes the deduction in every 2026-27 result, with the Medicare levy and any HELP repayment worked out on the reduced income too.
The side effect most guides miss: it also cuts a HELP repayment
HELP repayments are not worked out on your salary. They are worked out on repayment income, and under the Higher Education Support Act that figure starts with your taxable income, then adds back items such as reportable super contributions. The standard deduction reduces taxable income, and nothing in the law adds it back. So your repayment income falls by the same amount, up to $1,000.
Salary sacrifice cannot do this, by the way. Sacrificed super is a reportable super contribution, so it goes straight back into repayment income. The standard deduction is one of the few deductions that genuinely lowers both numbers at once.
Here is what that means in dollars. On a $70,000 salary with a HELP debt, repayment income drops from $70,000 to $69,000, which is under the 2026-27 threshold of $69,528, so a compulsory repayment of $70.80 becomes $0. On $80,000 the repayment falls from $1,570.80 to $1,420.80. On $100,000 it falls from $4,570.80 to $4,420.80. The higher two save $150 each. The $70,000 case saves less money but wipes the repayment out completely, which matters if you are hovering near the threshold after a pay rise.
At low incomes it can switch off the Medicare levy
The Medicare levy has a low income phase-in. There is no levy at all on taxable income of $28,011 or less, then the levy phases in at 10 cents per extra dollar until the full 2% takes over at $35,013. That phase-in is where the standard deduction does its quietest work.
Take a salary of $29,000. Without the deduction, taxable income is $29,000 and the levy comes to $98.90. With the deduction, taxable income falls to $28,000, under the line, and the levy is $0. Add the $150 of income tax saved and that salary gains $248.90 from the deduction, which is more, dollar for dollar, than a $100,000 salary gains. The benefit is biggest exactly where money is tightest.
What the standard deduction does not do
- It is not in the 2025-26 return. That return still runs on the old rules, receipts and all.
- No labour income, no deduction. Business and investment income on their own do not count.
- It does not beat claiming real expenses above $1,000 when you have kept the records.
- It does not change your pay during the year. The money arrives when the return is assessed.
- It does not touch the Medicare levy surcharge, HELP indexation, or your super guarantee.
Keep your receipts anyway if your genuine work expenses could pass $1,000. Working from home costs alone can get there faster than people expect, and you can't reconstruct a year of records in July 2027.
Run your own salary through it
On an $80,000 salary, the deduction pulls taxable income down to $79,000. Income tax comes to $14,220, the Medicare levy to $1,580, and take-home pay to $64,200 a year, or $2,469.23 a fortnight. The same salary without the deduction takes home $63,880, so the $320 difference from the table above is the whole story at that income.
If you are paid by the hour, turn your wage into a yearly figure first with our salary calculator. Then put the yearly number into the income tax calculator for Australia, set the year to 2026-27, and switch HELP on if you carry a study debt. You'll see the standard deduction as its own line in the breakdown.
Common questions
Do I need receipts for the $1,000 standard deduction?
No. That is the point of it. You don't need receipts, and you don't need to have spent the money. Records only matter if you claim actual work expenses instead, or for the extra costs you claim on top of the deduction.
When do I first get the standard deduction?
In your 2026-27 tax return, which you lodge from July 2027. The deduction applies to income earned from 1 July 2026, but you feel it at assessment time, not during the year.
Is the standard deduction worth $1,000?
No. It takes $1,000 off the income you are taxed on, not $1,000 off your tax bill. For a worker in the 30% bracket it is worth $320 a year once the Medicare levy saving is counted, and less at lower incomes where rates are lower.
What if my work expenses are more than $1,000?
Claim the real amount, with records for the whole claim. Claiming covered work expenses reduces the standard deduction dollar for dollar, so there is no way to stack the two. Pick whichever leaves you better off, which is usually the higher, documented claim.
Does the standard deduction reduce my HELP repayment?
Yes. Repayment income is built on taxable income, and the standard deduction is not added back, so your repayment income drops by up to $1,000. Near the $69,528 threshold that can switch a small compulsory repayment off altogether.
Figures in this article were calculated with the 2026-27 resident tax rates, Medicare levy settings and HELP repayment thresholds. The law is section 25-130 of the Income Tax Assessment Act 1997, and the ATO explains the rules on its standard deduction for work-related expenses page. General information only, not tax advice.