The $1,000 standard deduction has been described as a way to skip the receipts shoebox, but it does not replace every claim on your return. The ATO's draft ruling on the deduction lists several costs that sit outside it, including income protection premiums, union fees and the cost of a tax agent. For many workers that distinction could add hundreds of dollars to their deductions in the 2026–27 year, which began on 1 July.

The $1,000 standard deduction itself is law. The ATO's "latest news on tax law and policy" page lists the $1,000 Instant Tax deduction as starting from 1 July 2026, with Royal Assent on 26 June 2026.

The detail on how it works comes from Law Companion Ruling LCR 2026/D5, "The standard deduction for work-related expenses". This is draft guidance. It was issued on 26 August 2026 and comments closed on 9 October. According to its own footnote, it takes no effect until it is finalised.

So the treatment described below reflects the ATO's proposed view, which could still change.

What sits outside the $1,000

Paragraphs 22 and 24 of the draft set out the claims that do not eat into the standard deduction.

  • Income protection, sickness and accident insurance premiums can be claimed separately.
  • Association and union membership fees can also be claimed separately.
  • Deductions not related to labour income, such as Investment costs and tax agent costs, do not reduce the standard deduction either.

The logic of the last group is that these costs are not about earning a wage. The cost of managing your tax affairs, including fees paid to a registered tax agent, has long been deductible under its own provision. Investment costs relate to income such as dividends, interest or rent, rather than to labour income.

The catch is that these separate claims still need substantiation, so the usual record-keeping rules apply to them.

On income protection, a long-standing point is that premiums for cover held inside a super fund are generally not something you claim on your own return. The separate claim concerns premiums you pay personally.

What does reduce it

The draft is just as clear about the other side. Under paragraphs 18 and 19, ordinary work-related deductions reduce the $1,000 standard deduction dollar for dollar.

The examples given include self-education, work-related travel, uniforms, home office costs, car expenses and certain depreciating Assets used to earn labour income.

In practice, these are the expenses the $1,000 is designed to replace. Claiming them separately only makes sense if their total is above $1,000 and you have the records to support them.

Paragraphs 16 and 17 add another limit: the standard deduction is the lesser of $1,000 and your total assessable labour income.

Hypothetical example: stacking the claims

Hypothetical example: Jordan is an Australian-resident employee with a salary well over $1,000 in 2026–27. Jordan's work-related spending on items such as a uniform and some travel is modest and below $1,000, so Jordan takes the $1,000 standard deduction.

Jordan also personally pays $850 a year for an income protection policy held outside super, $600 in union fees and $250 to a registered tax agent to prepare the return.

On the draft's approach, none of those three amounts reduces the standard deduction. Jordan's total deductions would be $1,000 plus $850 plus $600 plus $250, or $2,700.

Now compare Sam, who has the same three separate costs but also has $1,300 of fully substantiated work expenses. On the draft's mechanics, the $1,300 claim reduces the standard deduction to zero, so Sam claims the $1,300 itself. Adding the $1,700 of separate claims, Sam's total would be $3,000.

If Jordan had wrongly assumed the $1,000 covered everything, the claim would have been $1,700 lower. Each of the three separate claims would still need records.

These figures are illustrative only. Actual entitlements depend on individual circumstances and on the final ruling.

Who is eligible, and what if a claim is knocked back

Paragraph 13 of the draft says the standard deduction is available to an individual who was an Australian resident at some time in the income year and who derived assessable labour income.

The draft also addresses a question tax professionals have raised: what happens if the ATO rejects a work-expense claim?

Paragraphs 32 and 33 say that if claimed work expenses are later disallowed, the ATO may increase the standard deduction when it makes or amends the assessment, up to the amount the taxpayer would otherwise have been entitled to.

That provides some comfort for people who claim actual expenses and later find part of the claim disallowed. It is draft guidance, though, and the wording in the final version could be different.

Practical points on the draft

Some general points follow from the draft.

Separate claims need separate records. Insurance renewal notices, union fee statements and your tax agent's invoice usually cover the records needed.

Second, check where an expense actually belongs. A union fee goes on top of the $1,000. A professional course you pay for yourself is likely to count as self-education and would reduce it.

Third, remember the timing. The ATO's Tax Time 2026 guidance makes clear the standard deduction applies from 2026–27, not to 2025–26 returns.

Fourth, watch the timing of agent fees. A fee is generally claimed in the year you pay it, so a fee paid in 2026–27 to prepare your 2025–26 return would usually be claimed in your 2026–27 return. Because tax agent costs sit outside the $1,000 under the draft, that claim would not cut into the standard deduction.

What to watch

  • The final LCR: watch for whether paragraphs 22 and 24 keep income protection, union fees and tax agent costs outside the $1,000.
  • Treatment of disallowed claims: whether the final ruling keeps the approach in paragraphs 32 and 33.
  • 30 June 2027: the end of the first income year under the new deduction.
  • Lodgment of 2026–27 returns from 1 July 2027: the first time the standard deduction appears in a return.

The main point from the draft is that taking the $1,000 does not mean giving up every other deduction.