Navigating the $1k work-related deduction: HR’s role in employee guidance

Australia’s new $1,000 standard work-related deduction will change how many professionals will apply their tax returns from the 2026–27 income year.

On April 20 2026, the Albanese government opened public consultation on its proposed $1,000 instant tax deduction policy, which would allow workers to knock $1,000 off their taxable income without providing receipts, and ultimately aimed to deliver cost-of-living support and reduce compliance costs for taxpayers.

Tax professionals such as CPA Australia’s Jenny Wong have argued that the proposed $1,000 standard deduction could create hidden costs by discouraging taxpayers from keeping records.

Ultimately, HR professionals will need to help employees understand when the measure applies, what the deduction actually means and when claiming actual expenses may be more beneficial.

Talking to HR Leader, H&R Block director of tax communications Mark Chapman outlined the key considerations and typical misunderstandings that employers should address.

When does the deduction apply?

For HR professionals, one of the most important points that Chapman communicated is addressing when employees can actually use the new deduction.

Because the $1,000 policy is being introduced as employees submit their 2025–26 tax returns, significant confusion has arisen regarding the particular time to which it is enforced.

“The new $1,000 standard deduction applies from the 2026–27 income year, which began on 1 July 2026; it therefore has no application to the 2025–26 tax returns that employees are currently lodging,” Chapman said.

“For those 2025–26 returns, employees still need to follow the existing rules for claiming work-related expenses.

“The new system will first become relevant when employees lodge their 2026–27 tax returns after 30 June 2027.”

Managing employee expectations

HR professionals will need to manage expectations around what the $1,000 figure actually means.

Employees may have the assumption that the measure essentially means an extra $1,000 in their pocket, but the reality is that it all depends on their individual tax situations.

“A $1,000 deduction is not a $1,000 refund; a deduction reduces the amount of income on which an employee pays tax,” Chapman said.

“The actual cash benefit therefore depends on the employee’s circumstances, including their marginal tax rate.

“For example, ignoring interactions with matters such as the Medicare levy and tax offsets, an employee whose marginal tax rate is 30 per cent would generally save about $300 in income tax from an additional $1,000 deduction; someone on a lower marginal rate would generally save less.”

The need for employees to keep records

Chapman highlighted that HR teams should know that workers must continue maintaining proper documentation despite the introduction of the new standard deduction.

For individuals with substantial job-related outlays, detailing actual costs could yield greater tax savings compared to opting for the flat rate, accentuating that thorough record-keeping is essential.

“The $1,000 standard deduction is primarily a simplification measure. It won’t necessarily produce the best tax outcome for everybody,” Chapman said.

“Once an employee’s deductible work-related expenses exceed $1,000, it will generally make sense to compare the standard deduction with claiming the actual expenses.

“Employees who regularly incur significant work-related costs should continue to keep receipts, invoices, diaries, logbooks and other records that they would normally retain.

“This will be particularly important for employees who travel extensively for work, use their own vehicles for work purposes, purchase tools or equipment, undertake substantial self-education or incur significant working-from-home costs.”

Keeping the role of HR

The new deduction noted the importance of setting clear boundaries around HR’s role.

Chapman said that HR teams can help employees understand the broad changes and direct them towards the right information, but individual tax circumstances can vary significantly.

“HR teams should be careful not to turn themselves into their employees’ tax advisers,” Chapman said.

“The useful role for HR is to explain the broad operation of the new system, make clear which income year it applies to, and ensure employees understand the difference between a deduction and a refund; employees with substantial expenses should still do the math before choosing it.”

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