The law gives a top-up, not a choice between two boxes
If Priya earns $85,000 of salary in 2026–27 and has $600 of specified work deductions, the new Australian rule can give her $400 of standard deduction as well. Her work-related deduction total would be $1,000, assuming those $600 claims are valid and no other offsetting work deductions apply. The old version of this page described an “either $1,000 or actual expenses” election. That is not what the enacted formula says.
Schedule 4 of the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 inserted section 25-130 into the Income Tax Assessment Act 1997. It received assent on 26 June 2026 and applies to 2026–27 assessments and later years. It does not change the work-expense return for 2025–26 that people lodge during 2026. The Federal Register’s current Act entry shows the law is in force. Older ATO pages about the 2024–25 or 2025–26 return may still call the $1,000 measure a proposal; they describe an earlier tax year and should not override the enacted 2026 law.
How section 25-130 actually calculates the amount
For an eligible individual who was an Australian tax resident at some point in the year and had assessable labour income, start with the smaller of $1,000 or that labour income. Then subtract the specified actual work deductions claimed for the year. The statutory amount cannot fall below zero. The specified deductions include relevant general employment expenses, car expenses, travel between workplaces, eligible depreciating-asset deductions and listed COVID-19 test deductions when connected with that labour income.
| Priya’s specified actual work deductions | Section 25-130 standard amount | Combined work deduction before separately excluded items |
|---|---|---|
| $0 | $1,000 | $1,000 |
| $600 | $400 | $1,000 |
| $1,400 | $0 | $1,400 |
How actual claims reduce the standard top-up
These examples assume Priya has at least $1,000 of assessable labour income. If someone has only $500 of that income and no offsetting work deduction, the statutory starting amount is $500, not $1,000. The definition includes wages and certain other labour payments listed in section 25-130(4); it is not a universal deduction for someone with only investment income. Sole-trader business profit by itself does not meet that specified labour-income definition.
The rule does not require an employee to spend $1,000 first. That is why Priya can have a $1,000 standard amount when her specified actual expenses are zero. But if she claims $600 or $1,400 of actual expenses, she must be able to support those claims under the applicable record rules. Do not throw away receipts for amounts you actually claim.
Why the old $300 comparison led readers astray
The earlier $300 work-expense substantiation threshold was not a flat $300 deduction available without spending anything. Under the pre-2026 rules, a person still needed to have incurred a deductible work expense; the threshold affected whether written evidence such as a receipt was required for many claims. The ATO’s older-year deduction guidance explains that distinction for the 2024–25 return. It is not a statement that section 25-130 was absent after June 2026.
So it is wrong to call the new provision “$700 more cash” because $1,000 − $300 = $700. The old $300 was a record-keeping threshold, not a benefit paid to everyone. The new $1,000 is a tax deduction, not a refund. Tax saved depends on the part of the deduction that actually reduces taxable income, the marginal tax rate and any other tax interactions.
Which claims can sit beside the standard amount?
Section 25-130(3) explicitly tells taxpayers not to subtract certain otherwise deductible section 8-1 claims when calculating the standard amount: income-protection, personal-sickness and accident insurance premiums, plus membership of a trade, business or professional association. Suppose Priya pays $150 of deductible professional-association dues and has $600 of other specified work expenses. Her section 25-130 amount remains $400; with her $600 actual work claims and $150 dues, the deduction total in this example is $1,150. The dues still need to meet ordinary deductibility and record conditions.
The statute also lists other deductions, such as eligible car expenses, that do reduce the standard amount. The previous article told readers that choosing the standard $1,000 meant no other work expenses could be claimed, and that association fees were simply on top in every situation. The first part was false; the second needed the precise statutory exception. Tax-agent fees, gifts and investment expenses have their own rules and should not be casually classified as work expenses or counted in the top-up formula without checking the relevant section.
What a $1,000 deduction might save in tax
For 2026–27 resident income tax, the rate on taxable income between $18,201 and $45,000 is 15%; between $45,001 and $135,000 it is 30%; between $135,001 and $190,000 it is 37%. These rates come from the enacted Australian resident rate schedule and the Treasury’s 2026–27 rate explanation. If an entire $1,000 deduction falls within just one of those bands, the income-tax-only reduction is $150, $300 or $370 respectively.
Income-tax-only effect of a full $1,000 deduction
This chart excludes the Medicare levy, low-income tax offset, HELP repayments, Medicare levy surcharge and any band crossing. Those can change the outcome. The old page stated every taxpayer’s deduction saved a marginal rate plus a fixed 2% Medicare levy and even suggested the Medicare levy surcharge necessarily increases the benefit. Those are not sound universal shortcuts. Compare total tax before and after the deduction for the actual return; the $1,000 is never itself deposited as a cash payment.
A filing check for 2027
For the return covering 1 July 2026 to 30 June 2027, identify assessable labour income and keep separate totals for specified actual work claims and the excluded association or insurance categories. Run the section 25-130 top-up formula after checking actual work claims and their records. Review how your return software or tax agent applies it; do not add a second $1,000 on top of work expenses that have already filled the cap.
The practical advantage is that a worker with low actual claims can receive the balance of a $1,000 deduction without inventing spending or assembling receipts for that standard portion. A worker with documented actual work expenses over $1,000 can still claim those actual amounts under ordinary rules. Keep the enacted section 25-130 text beside the return when a marketing graphic treats the two paths as mutually exclusive.
