The standard deduction for work expenses from 2026-27: a floor, not a bonus

From the 2026-27 income year, new section 25-130 of the Income Tax Assessment Act 1997 gives eligible individuals a standard deduction for work-related expenses: start with the lesser of $1,000 and your total assessable labour income, then reduce that amount — but not below zero — dollar for dollar by the work-related deductions you claim under the provisions the section lists. It is a floor beneath that class of deductions, not an addition to them: if your listed work-related claims already reach $1,000, the standard deduction is nil. It is a deduction from assessable income, so its cash value is the deduction multiplied by your marginal tax rate, not $1,000.

Key points:
- This is the **only measure in the [Treasury Laws Amendment (Tax Reform No. 1) Act 2026](https://www.legislation.gov.au/C2026A00049/asmade) that applies to income tax assessments for the income year now under way** — the SMSF borrowing restriction in Schedule 5 commences separately on 10 August 2026 for new borrowing arrangements. Item 17(1) of Schedule 4 applies the income tax amendments to assessments for the **2026-27 income year** and later — the first return in which the standard deduction can be claimed is the 2026-27 return, generally lodged from July 2027.
- The amount is worked out by **cap and reduce**, not by a flat grant: the lesser of $1,000 and your total assessable labour income, reduced (but not below zero) dollar for dollar by your deductions under the provisions listed in s 25-130(2)(c)–(g).
- It therefore operates as a **floor** on that class of deductions. Claim $700 of listed work deductions and the standard deduction is $300; claim $1,200 and it is nil.
- Eligibility is narrow: you must be an **individual**, an **Australian resident at some time** during the income year, and you must **derive assessable labour income** — an exhaustive list of PAYG-withholding payment types in s 25-130(4). Sole traders and self-employed people cannot claim it unless they also derive labour income of a listed kind.
- Four categories are **disregarded** when working out the reduction (s 25-130(3)): income protection, personal sickness and accident insurance premiums, and membership of a trade, business or professional association. Claiming them does not erode the standard deduction.
- From 2026-27, item 11 **repeals s 900-35 (the $300 total work-expenses substantiation exception) and s 900-40 (the $150 laundry exception)**, along with s 900-45. Any advice that you can claim up to $300 of work expenses without written evidence is wrong for 2026-27 onwards.
- The **fringe benefits tax amendments in Part 2 apply separately** — to FBT years starting on or after **1 April 2027** — so the old FBT rules continue through to 31 March 2027 while the income tax measure is already running.