The Federal Government has released draft legislation for a new $1,000 instant tax deduction, with around 6.2 million Australian workers set to benefit. 

Should the legislation pass, eligible workers will be able to deduct $1,000 from their taxable income, without needing to keep receipts for everyday work-related claims.

The Government says the reform is designed to cut paperwork, simplify tax returns and provide ongoing cost-of-living relief.

For anyone who has spent a weekend digging through gloveboxes, inboxes and random kitchen drawers looking for receipts come tax time, that may sound like a small miracle.

Treasurer Jim Chalmers says the instant deduction will simplify claims and help people keep more of what they earn. Treaury expects over six million workers (42 per cent of taxpayers) will benefit from the new rule, with an average tax saving of $205.

Women the winners

The government says the new ‘instant deduction’ will benefit everyday Aussies, with women at the top of the food chain. Around 3.3 million women are expected to take up the new deduction. While around 4.5 million people with taxable incomes under $100,000 are also expected to claim the tax break.

Gen Z are in the mix too, with 1.7 million taxpayers under 30 tipped to benefit from the intant deduction, saving around $200 on average.

What changes at tax time

If the legislation is approved, it will commence for the 2026-2027 financial year. The deduction would automatically apply to eligible workers claiming up to $1,000 in work-related deductions.

Got more than $1,000 in work-related expenses? No worries, you will still be able to claim a deduction, as long as you have the records to support your expenses.

Other deductions would remain on top of the new measure. That includes charitable donations, union fees and memberships for trade, business or professional associations.

So, if  you belong to an industry body or pay union dues, those claims would still sit outside the instant deduction.

What small businesses need to know

While the announcement is aimed at employees, many small business owners wear two hats. Plenty pay themselves wages through a company structure, employ staff, or run payroll for teams who would benefit.

Anything that makes tax time less painful for employees is likely to be welcomed by employers too, particularly when money stress remains high.

There may also be flow-on benefits for bookkeepers and payroll teams who spend plenty of time answering deduction questions every July.

When it starts

If the legislation passes Parliament, the deduction would apply from the 2026–27 income year. That means workers would see the benefit when lodging returns in the second half of 2027.

Public consultation on the draft laws is now open, with submissions closing on 1 May 2026. So if you have any objections, now is the time to speak up. In the meantime, make sure to keep your receipts. The shoebox is not retired just yet.

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