Australia's $1,000 Work Expense Deduction and WATO: New Tax Benefits 2026
Two new tax benefits for workers
The May 2026 Federal Budget announced two complementary measures to reduce the tax burden on working Australians:
- Standard $1,000 work expense deduction — automatic deduction for work-related expenses without the need to keep receipts.
- Working Australians Tax Offset (WATO) — $250 additional tax offset per year.
Standard $1,000 work expense deduction
How it works
From the 2026–27 income year (the year ending 30 June 2027):
- If your total work-related expenses are under $1,000: you automatically receive a $1,000 deduction — no receipts, no itemisation required.
- If your total work-related expenses are over $1,000: you claim the actual amount as usual, with receipts and records as required by the ATO. The $1,000 floor does not cap you.
How much tax does it save?
The saving depends on your marginal tax rate. The government estimates an average saving of approximately $205 per year for a worker at the typical middle tax rate.
| Marginal tax rate | Tax saving on $1,000 deduction |
|---|---|
| 16% (income $18,201–$45,000) | ~$160 |
| 30% (income $45,001–$135,000) | ~$300 |
| 37% (income $135,001–$190,000) | ~$370 |
Who benefits most?
- Workers with few or no work-related expenses (no uniform, no home office, no work travel).
- Workers who previously claimed $0 or a small amount for work expenses.
- People who don’t currently use a tax agent and simply skip the expenses section.
Who sees no change?
- Workers who already claim more than $1,000 in actual, receipted work expenses. The standard deduction doesn’t help them — they continue claiming the actual higher amount.
- Workers with home office costs, tools, vehicle expenses, professional subscriptions, etc., who can document expenses above $1,000.
Do I need to do anything?
No action required. The $1,000 deduction will be automatically applied when you lodge your tax return via myTax or through a registered tax agent — if your claimed expenses are under $1,000.
Working Australians Tax Offset (WATO)
What is it?
A tax offset directly reduces the amount of tax you owe — unlike a deduction, which reduces your taxable income. WATO provides an additional $250 offset per year for workers with employment income.
When does it start?
WATO applies from the 2027–28 income year (income earned from 1 July 2027). This means you’ll see it in your tax return lodged from July 2028 onward.
How it combines with the $1,000 deduction
The two benefits work together:
| Benefit | Mechanism | Approximate annual saving |
|---|---|---|
| $1,000 standard deduction | Reduces taxable income | ~$205 (at 30% rate) |
| WATO $250 | Directly reduces tax owed | $250 |
| Total combined | ~$455 |
The combined saving of approximately $455 per year (at the middle tax rate) represents a meaningful reduction for many full-time and part-time workers.
What about other deductions?
The $1,000 standard deduction only replaces the need to itemise your work-related expenses when they’re below $1,000. All other deductions remain fully available:
- Home office expenses (fixed rate or actual cost method)
- Vehicle and travel costs for work
- Professional development and membership fees
- Tools, equipment, uniforms
- Self-education expenses
If you have significant deductions in any of these categories, claim them as before — the standard $1,000 applies only where it produces a better outcome than itemising.
This article reflects the Budget announcement of May 2026. Legislative details may change. Not personal tax advice.