The up to $1,000 deduction changes the question

The ATO has confirmed that a standard deduction of up to $1,000 for work-related expenses is now law. The measure commenced on 1 July 2026 and applies to the 2026-27 individual tax return.

For planners, the important part is what sits around the headline amount. The measure affects how some employed clients may approach their deductions, but it does not turn tax discussions into a single question about whether a client wants to claim $1,000.

The allowance is narrower than the headline

A client hearing “standard deduction” could reasonably conclude that the measure is a universal $1,000 deduction, available without regard to their circumstances. That is not what the ATO describes.

The measure applies to eligible individual taxpayers who are Australian tax residents and earn income from work. It also preserves current arrangements for people who have more than $1,000 in work-related expenses, or who earn only business or investment income.

That distinction matters in the advice process. The first question is not simply whether a client incurred work-related costs. It is whether the client sits within the group covered by the new standard deduction and whether the existing arrangements remain relevant to them.

A client discussion now needs to distinguish between the tax year already completed and the tax year to which the new rules apply.

The number does not settle the file

The next likely assumption is that choosing the standard deduction means every other deduction disappears. The ATO's description points in the other direction. Some deductions may still be claimed in addition to the standard deduction, including investment expenses, charitable donations, union and professional association membership fees, and income protection insurance premiums.

The word “additional” is the practical hinge. The standard deduction concerns eligible work-related expenses. It does not remove the need to identify other types of deductible expenditure that the ATO says may remain available separately.

That gives planners a useful way to frame the conversation with tax advisers and clients. Rather than treating the measure as a replacement for the entire deductions review, separate the work-related expense question from the other expense categories. The client may need to understand both the standard deduction and which costs sit outside it.

For a practice, this is less about adding a new tax calculation to every file than about avoiding an overly compressed fact find. A workflow that asks only, “Are you claiming the standard deduction?” may fail to surface expenses the ATO identifies as separately claimable.

Salary packaging creates a second check

Salary packaging adds another point where a simple assumption can produce the wrong result. A client may think that an expense can be treated as deductible in the tax return simply because it is connected with work. But the ATO says the changes prevent people from receiving a double benefit by salary packaging expenses covered by the standard deduction.

The practical response is to consider the interaction between the expense and the way it has already been treated through remuneration arrangements. That means the advice conversation should not examine the tax return in isolation. It should also ask whether relevant expenses have been salary packaged.

A prudent practice response is to consider the client's employment arrangements alongside the deductions discussion. The question is not only what the client paid, but whether the expense has already been dealt with through salary packaging and is covered by the standard deduction.

Recordkeeping questions remain relevant

The ATO also says the measure updates substantiation and capital allowance rules to support the new standard deduction. That should discourage the assumption that the new amount makes all recordkeeping questions irrelevant.

The exact documentation and treatment will depend on the client's circumstances, but the practice implication is clear enough: do not remove expense and salary packaging questions from the annual review simply because a standard amount is available. Update the client questionnaire, tax assumptions and hand-off points with the tax adviser instead.

This is particularly important where a practice has standardised annual review prompts. Existing templates may distinguish clients by employment status or broad income source, but they may not capture whether work-related expenses exceed $1,000, whether the client earns only business or investment income, or whether relevant expenses have been salary packaged.

A practical update for advice teams

For advice teams, implementation points to a small but consequential change in client file preparation.

• First, identify clients who are Australian tax residents earning income from work and flag the 2026-27 return as the relevant period.
• Second, establish whether work-related expenses are more than $1,000, because the ATO says current arrangements continue for those clients.
• Third, keep separate prompts for investment expenses, charitable donations, union and professional association membership fees, and income protection insurance premiums.
• Finally, ask about salary packaging before treating the standard deduction as an additional benefit.