Employee Tax Deductions Guide (2025–26)

Overview

Australian workers can claim deductions for work-related expenses incurred while earning income, provided the expense is not reimbursed, directly relates to earning that income, and is supported by adequate records.

Common Deduction Categories

Key deductible expenses include car and travel, working from home, tools and equipment, education, clothing (uniforms and protective wear), phone and internet, and professional costs such as union fees.

As a guide: car and travel covers work travel between sites; working from home covers electricity and internet; tools and equipment covers computers and work tools; and education covers courses directly related to your current job.

Key Changes (2025–26)

There are no major structural changes to work-related deductions for the 2025–26 financial year. The fixed working-from-home rate remains at 70 cents per hour, and the existing deduction categories are unchanged. The key difference is increased ATO compliance activity and stricter substantiation requirements.

In practice, the working-from-home rate stays at 70c/hour (unchanged from 2024–25), there is still no general standard deduction available, and ATO compliance has stepped up further through increased data matching.

Upcoming Changes (2026–27)

From 1 July 2026, a $1,000 standard deduction for work-related expenses will be introduced. This means it first applies to the 2026–27 tax return and is not available for the 2025–26 year.

Example Calculation

Consider a worker claiming $700 of working-from-home expenses, $300 of technology costs and $500 of equipment. Their total deductions would be $1,500, reducing taxable income accordingly.

Key Risks

Common issues include claiming non-work expenses, failing to keep receipts, and double claiming the same expense under different methods. Each of these can trigger ATO scrutiny.

Strategic Insights

Workers should track expenses throughout the year, choose the most beneficial claiming method, and ensure records are accurate — both to maximise legitimate deductions and to minimise audit risk.

This guide is general information only. Please seek professional advice tailored to your situation.