Key Highlights

  • Assets mainly used to earn labour income can no longer enter a low-value pool from 2026–27.
  • The pooling change accompanies the $1,000 standard deduction.
  • Work laptops and other depreciating Assets mainly used to earn labour income can be affected.
  • The article discusses draft guidance, so the final ruling remains relevant to implementation.

Workers who bought a laptop, monitor or headset for their Job this year may find that a familiar way of claiming it has gone. Draft ATO guidance on the new $1,000 standard deduction says that from 2026–27, assets mainly used to earn labour income can no longer be placed in a low-value pool. Because the change covers the current income year, it already affects equipment bought since 1 July, well before most people sit down to lodge.

What the draft says about the low-value pool

The statement appears in draft Law Companion Ruling LCR 2026/D5, published on 26 August 2026. Comments closed on 9 October, and the ruling is proposed to apply from 1 July 2026.

According to the draft, from the 2026–27 income year, assets mainly used to earn labour income can no longer be allocated to a low-value pool.

The draft also refers to an optional fixed 50% reduction, under section 40-291A, that is available for some assets.

The ruling is still a draft. It sets out the ATO's view of how the new standard deduction law applies, and the final version could differ in detail.

How the low-value pool has worked

The low-value pool has been a long-standing feature of Australia's Depreciation rules. It lets taxpayers group cheaper assets together and claim their decline in value at set rates, instead of tracking each item over its own effective life.

Broadly, assets costing less than $1,000, or whose written-down value has fallen below $1,000, could be pooled. A newly added low-cost asset has generally been depreciated at 18.75% in its first year, with the pool balance then declining at 37.5% a year.

Only the work-related proportion of an asset's cost goes into the pool, so an item used partly for private purposes contributes less.

For employees, the pool was often the simplest way to claim items such as a modest laptop or a set of tools. There was no effective life to look up, and the deduction each year was predictable.

A separate long-standing rule has allowed an immediate deduction for items costing $300 or less that are used mainly to earn non-business income.

Where the standard deduction comes in

The pooling change is part of the broader shift to the $1,000 standard deduction, which is law from 2026–27. According to the draft, the deduction is the lesser of $1,000 and a person's assessable labour income.

It is reduced dollar-for-dollar by claimed expenses such as working from home, car, self-education, uniforms and work travel. The draft's FBT discussion also treats laptops and phones as covered expenses, which suggests equipment of this kind sits inside the same regime.

Some claims do not reduce the standard deduction. The draft lists income protection premiums, union and professional association fees, and deductions for investment, rental, tax affairs and donations.

The practical effect is that, for many workers whose itemised claims total less than $1,000, the standard deduction tops them up to $1,000 anyway. The draft's own worked example shows a person with $650 of labour income and $400 of claimed expenses receiving a standard deduction of $250.

Hypothetical example: a $900 laptop under the old and new settings

Hypothetical example: Priya, an employee, buys a $900 laptop in July 2026 and uses it 80% for work.

Under the old pooling approach, $720, the work-related share, would have gone into the low-value pool. Her first-year deduction at 18.75% would have been $135.

In the second year, the pool would have declined by 37.5% of the remaining $585, a deduction of about $219.38.

From 2026–27, the draft says the laptop cannot go into the pool. Its decline in value would instead be worked out under the general depreciation rules, or using the optional fixed 50% reduction if that applies to the asset.

Now add the standard deduction. Suppose Priya's only other claim is $300 of work travel. If her laptop claim and travel together come to less than $1,000, the standard deduction makes up the difference, and her total work-related deduction is $1,000 whatever the exact depreciation figure.

In other words, the choice of depreciation method mainly matters for workers whose total claims exceed $1,000.

Open questions, and an FBT twist

The optional fixed 50% reduction is the least explained part of the change. Which assets qualify, and how it interacts with an asset's work-use percentage, are details taxpayers and agents will want spelled out.

Assets already sitting in a low-value pool from earlier years are another area of interest. The draft's statement is framed around 2026–27 onwards, and agents will be looking for clarity on balances carried forward.

CPA Australia's submission asked the ATO to include a "non-exhaustive schedule of common expenses" in the final ruling, and to stop describing the standard deduction as an "election".

The draft also says that if claimed expenses are later disallowed, the standard deduction "may be increased" on assessment or amendment. That offers some protection to workers whose claims are cut back on review.

The same draft has an FBT dimension that affects anyone thinking of getting a work device through their employer instead.

From FBT years starting on or after 1 April 2027, it says the "otherwise deductible" rule is unavailable for salary-packaged covered expenses, so salary-packaged laptops and phones lose the work-related items exemption.

With FBT charged at 47% for the year ending 31 March 2027, according to the ATO, losing that exemption could make packaging a device far less attractive. Workers weighing whether to buy equipment themselves or through their employer therefore face changes on both sides within months.

Dates to watch

The final LCR 2026/D5 has no announced release date. Its proposed start date of 1 July 2026 means it would cover the current income year.

Returns for 2026–27, the first year of the standard deduction, can be lodged from July 2027. Receipts and records for equipment bought this year remain important, especially for anyone whose claims may exceed $1,000.

The FBT change for salary-packaged devices described in the draft would apply from 1 April 2027.

More broadly, the Senate Economics Legislation Committee is due to report on Labor's trust and housing tax bills on 13 November, and MYEFO is expected in December.