A new $1000 Instant Tax Deduction is coming next year.
Here’s the short version:
- Nobody will receive $1000
- Does not affect your tax return until 2026
- It may lead to a smaller tax refund – always save your receipts
In the lead-up to the April 2025 federal election, the Government announced a “$1000 instant tax deduction”.
They label this as “Tax reform for easier, faster, better tax returns”. They claim it will provide cost-of-living relief and make it easier and cheaper to do your tax return.
That sounds like an amazing handout, and it seems simple, right?
Unfortunately, tax is never simple in Australia, and this new change could see you get a smaller tax refund.
Let’s have a closer look and see if the $1000 instant tax deduction passes the pub test.
Will I Get an Extra $1000 Tax Refund?
No.
This is not a $1000 handout. Nobody receives an extra $1000 in their tax refund under this new scheme.
What it really is, is a tax deduction you can claim instead of your actual expenses.
The $1000 deduction equates to less than $300 in tax refund dollars for an average Australian worker who clicks to claim this deduction.
However, for many people, claiming the $1000 instant deduction could mean a smaller tax refund. Why?
If you agree to the “easy” $1000 deduction, you cannot claim your actual work-related expenses. That means if you, like most people, pay more than $1000 for work-related expenses, across the whole year, then you cheat yourself out of a bigger tax refund by accepting this standard $1000 deduction on your tax return.
That means you won’t get the tax refund you deserve – and you will probably get much less than a $1000 tax refund.
Is It Really New?
Sort of, and sort of not. There is already a $300 standard deduction that you can claim if you paid for some work-related expenses, but you don’t have receipts. That will get bumped up to $1000 which is great for some people – but it could be a trap for the majority of taxpayers.
When Can I Claim the $1000 Instant Deduction?
This does not affect your 2025 tax return.
The $1000 instant deduction will begin on your 2026 tax return. (Note: This legislation still needs to pass through Parliament).
How Do I Claim the $1000 Standard Deduction?
This new rule means that if you work to earn an income, you can claim a $1000 standard tax deduction when you do your tax return. Remember, that’s a $1000 tax deduction – not a $1000 tax refund.
You’ll likely be offered a “one click” option to accept this deduction, and if you do it, your actual work-related expense claims will be ignored.
If your total work-related expenses are under $1000, this new deduction might boost your tax refund by just one or two hundred dollars, on average. In that case, your tax return might be a bit easier, because you don’t need to find receipts. However, if you count on that and stop saving your receipts, you risk losing money by not claiming everything you can.
What Can I Claim with the Instant Tax Deduction?
This “instant” deduction replaces your normal deductions. That is risky, because it might be much less valuable than your actual work-related expenses – if you keep track of them.
Your tax deductions can include items like car and travel expenses, work-from-home office expenses, work-related study, books or subscriptions, tools, equipment and supplies, union fees, professional memberships, mobile phone and internet expenses, supplies and furniture, and many others.
For most people, claiming those items individually will give you a better tax refund than claiming the $1000 instant tax deduction.
Why Are They Offering an Instant Tax Deduction?
The government says this will make doing taxes quicker and easier. Also, they suggest it could save Australians time and money – people won’t need to spend hours searching for old receipts.
There are some unspoken sides to this story.
We should recognise the ATO’s job is to collect money (taxes) that the Government can spend on public services and public-sector salaries. The ATO and the Government want to maximise taxes collected, and to reduce tax refunds, by reducing work-related expense claims. They never say it this plainly, but that’s how it is.
We should also remember that the average total deduction claimed by an Australian taxpayer is around $3000 – far greater than the new standard deduction.
Australia’s complex tax laws and rules allow workers to claim a wide range of expenses. If you paid for a work-related expense, it is your right to claim it back on your tax return.
To put it simply: the instant tax deduction aims for an overall reduction in the amount that taxpayers claim on their tax returns. Which means, of course, that people get smaller tax refunds.
What if my expenses were more than $1000?
The answer is simple. If you might spend more than $1000, in a whole year, on work-related expenses, you need to:
- Save your receipts (a photo on your phone is fine).
- Claim them on your tax return – your tax agent can help you get the claims lodged in the right way, so you’ll get everything you deserve.
If you skip those two steps, and choose the instant tax deduction, you could lose out on thousands of dollars over the coming years.
If you aren’t sure how much you spend in a year on work-related expenses, then keep your receipts! They really do add up, but if you lose receipts and forget about what you paid for, then you lose out on real money at tax time.
Let’s look at an example:
Sarah earns $123,000 working as a Project Manager. She has private health insurance. Sarah’s salary falls into the 30% tax bracket in the 2024-25 tax year. This means she pays a total of $27,688 tax during the year (not including the Medicare Levy).
$1000 Instant Tax Deduction
If Sarah claims the instant $1000 tax deduction, it boosts her tax refund by $300. Remember this $1000 deduction does not make a $1000 boost to her refund.
Claiming Actual Expenses
Instead of claiming the $1000 tax deduction, Sarah claims the following items:
- Work from home: $769
- Car Expenses: $849
- Professional memberships: $399
- Work related study: $499
- Uniforms: $199
Total deduction claim: $2715
If Sarah claims these items individually on her tax return, they’ll boost her tax refund by $814.50 ($514.50 more than claiming the instant tax deduction).
In just 3 years, claiming her deductions individually and not using the instant tax deduction, Sarah would have more than $1500 extra in her pocket.
Does it pass the pub test?
The $1000 instant tax deduction does not give anybody $1000. It will make tax returns easier for some people, but that simplicity might fool many Australians into not claiming what they’re truly entitled to – and that could cost people thousands in lost tax refund money as the years go by.
The Government has hinted this new deduction should swell the number of people who use myTax. Using myTax to claim your actual expenses is not straight-forward and it’s likely that, over time, many myTax users give up on claiming what they are entitled to.
Tax agents will continue to help people claim expenses the right way and get the refund they deserve.
CPA Australia said, “Clicking a few buttons to get a basic deduction may be easy, but it is unlikely to be in the best interests of taxpayers or the economy.”
