For years, workers could claim up to $300 of work expenses without keeping receipts. With the 2025–26 lodgment deadline now behind most self-preparers, attention turns to the 2026–27 year, which began on 1 July. According to the ATO's draft ruling on the new $1,000 standard deduction, the $300 exception no longer applies from this income year. Anyone planning to claim more than $1,000 will need full records, so the receipts you keep from now matter.

What has changed, and what is still draft

Two separate things are in play, and they have different status.

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

How the ATO intends to apply it is set out in a draft: Law Companion Ruling LCR 2026/D5, "The standard deduction for work-related expenses". It was issued on 26 August 2026, and public comments closed on 9 October.

The draft's own footnote says it has no effect until it is finalised. Paragraph 7 states: "It is proposed that this Ruling, when finalised, will be effective from 1 July 2026." The ATO's legal database shows whether a final version has been published.

Until now, the substantiation rules gave some relief to people with small claims. If your total work expenses came to $300 or less, you did not need written evidence such as receipts, although you still had to have spent the money and be able to show how you worked out the claim.

Paragraphs 41 to 44 of LCR 2026/D5 say several former substantiation exceptions, including the $300 work expenses exception, no longer apply from the 2026–27 income year.

The practical message in the draft is that if you claim more than $1,000 of covered work expenses, you need full substantiation.

How the $1,000 deduction works under the draft

Under paragraphs 16 and 17 of the draft, the standard deduction is the lesser of $1,000 and your total assessable labour income. Someone with only $700 of labour income would get a $700 deduction, not $1,000.

To be eligible, paragraph 13 says you must be an individual who was an Australian resident at some time in the year and who derived assessable labour income.

The draft also explains how it interacts with actual claims. Under paragraphs 18 and 19, ordinary work-related deductions reduce the standard deduction dollar for dollar. These include self-education, work-related travel, uniforms, home office costs, car expenses and certain depreciating Assets used to earn labour income.

On those mechanics, substantiated claims only add value once they exceed $1,000 in total.

Hypothetical example: three workers, three outcomes

Hypothetical example: Consider three employees in the 2026–27 year, each earning well above $1,000 in salary.

Alex spends about $280 on work items and keeps no receipts. Previously, the $300 exception might have covered this claim. Under the draft, the exception is gone, but the $1,000 standard deduction gives Alex $1,000, which is $720 more than the old claim.

Bree spends $1,400 on deductible work expenses and keeps full records. Claiming the actual costs gives a $1,400 deduction, which is $400 more than the standard amount. At an assumed marginal tax rate of 30 per cent, that extra $400 would be worth $120 in tax, before the Medicare levy.

Chris also spends $1,400 but can only substantiate $900. On the draft's mechanics, the $900 claim reduces the standard deduction to $100, for a total of $1,000. Chris gains nothing by claiming the $900 and would be better off taking the standard $1,000.

These are illustrative figures only. Real outcomes depend on individual circumstances and on the final wording of the ruling.

Timing for this year's return

The new rules are for the 2026–27 income year, not returns for 2025–26. The ATO's Tax Time 2026 guidance says the $1,000 standard deduction does not apply until 2026–27, and that myth-busting messages appear in myTax.

Chartered Accountants Australia and New Zealand's Susan Franks made the same point, saying on 29 October that the deduction "starts in the next financial year, not this return".

For a 2025–26 return, or an amendment to one, the existing rules still apply, including the $300 exception where it is relevant.

Record-keeping from here

Under the draft, the key question for 2026–27 is whether your work expenses are likely to exceed $1,000.

If they clearly won't, the standard deduction may mean far less paperwork for those expenses. Keeping full records from the start of the year matters, since it is hard to rebuild them later.

Full substantiation generally means written evidence, such as a receipt or invoice showing the supplier, the amount, the date and what was bought. Some claims need extra records. Car expenses, for example, can depend on a logbook or a reasonable basis for the kilometres claimed.

Digital copies are generally accepted, so photographing receipts as you go can save a scramble when next year's return is due.

Records may matter in another way too. Paragraphs 32 and 33 of the draft say that if claimed work expenses are later disallowed, the ATO may increase the standard deduction, up to the amount you would otherwise have been entitled to, when making or amending the assessment. This is draft guidance and could change.

Key dates to watch

  • 1 July 2026: start of the 2026–27 income year, the first year the $1,000 standard deduction applies.
  • 9 October 2026: comments on draft LCR 2026/D5 closed. The final ruling's timing has not been announced.
  • Final ruling: watch for any changes to the substantiation paragraphs or to how disallowed claims are treated.
  • 30 June 2027: the end of the first income year under the new rules, after which 2026–27 returns can be lodged.

Until the ruling is finalised, the $300 shortcut is not expected to apply to 2026–27, and a claim over $1,000 needs receipts to back it.