The $1,000 ATO Tax Deduction Explained

Unknown · 00:00Jase: Welcome to another episode of The Numbers Game. I'm Jason. I'm here with Nick. How are you, mate?

Unknown · 00:04Nick: Always well, mate. Always well. Looking forward to what you've got to bring to the table today. There's been some high-quality episodes. We're saving people time, giving people days off. So I'm keen to see what you're bringing.

Unknown · 00:15Jase: Now I'm ready to give people free money.

Unknown · 00:17Nick: Well, that sounds right. What else is there? Time and money?

Unknown · 00:20Jase: Time and money.

Unknown · 00:20Nick: What else do you need?

Unknown · 00:21Jase: This is according to the government and the ATO. So I'm going to put a big asterisk right up front. But how does this sound for 6.2 million Australians? An automatic $1,000 tax deduction. No receipts, no accountant, no paperwork. You literally tick a box and you're done.

Unknown · 00:39Sounds pretty good.

Unknown · 00:41Nick: Yes.

Unknown · 00:43Jase: Yep. They make it sound simple, right? So, you know, deduction or cashback. Ah, there you go. So what is always and often misconstrued is that a tax deduction is equal to the same amount of money you'll get back in your pocket.

Unknown · 00:57Nick: So it's a deduction.

Unknown · 00:58Jase: It is a deduction, right? Not the refund and not an offset. So we had this many years ago. There was a $1,000 tax offset and that actually did put $1,000 back into the taxpayer's pocket. Yeah. This is an automatic $1,000 tax deduction.

Unknown · 01:14Okay. So essentially what the government and the ATO are moving towards is the self-lodging system. Again, bypass the accountant. Don't worry about keeping your receipts. But I always, you know, when you see these things and not just because of the vested interest of being an accountant, accountant and having an accounting firm, thinking genuinely about what's best for my clients and the people out there working and spending money to do their jobs, how this particular news can be misconstrued as a win for

Unknown · 01:44the general taxpayer. Now, don't get me wrong, there are some people out there that they don't have to shell out money to do their job. You know, the boots are provided. They're working on a job site where there's no out-of-pocket expenses. Their travel to work and from work is non-deductible. So, you know, sometimes they go and sit with their accountant and you're sitting there searching for deductions.

Unknown · 02:05You know, you can't make stuff up. You can't claim stuff that doesn't exist. So back in the day, there was a standard $300 of work-related expenses. Think of your general knickknacks, you know, glasses, sunglasses. You bought, you know, some pens from Officeworks or, you know, a manila folder to keep your receipts in, whatever.

Unknown · 02:23Cool. $300. Now, What they turned around and saw here is that there's been a rising increase in what people have been spending, what people have been claiming, not necessarily spending on their tax returns. So what has this mastermind thing at the government and the ATO coming out with this $1,000 automatic tax deduction is to stop people from getting in and adding laundry, motor vehicle, donations, all of these different things that they may have genuinely spent.

Unknown · 02:52But some people just like to do it easy, right? Like the idea of $1,000, oh well, can't be bothered going through my receipts, that'll do. Now, the reason this has kind of got me a little bit riled up is people are leaving money on the table, in my opinion.

Unknown · 03:08I believe that for people who do have genuine work-related expenses, if they actually kept their receipts, did a little bit of due diligence during the year, created a folder on their Apple or their phone or their Google Drive, whatever, and called it Tax 2026, and every time time you go and spend money, take a photo of the receipt, chuck it in the folder.

Unknown · 03:27And then when it comes to tax time, share that folder with your accountant and they'll go through it into the deductions or get you to summarise it. Or in this day and age, connect Claude to the folder and get Claude to do a summary of your deductions. And it's highly likely that if you have driven your car places, you've done your laundry, you've worked at home sometimes under the $0.70 per hour fixed rate method, you've done some donations during the year and you paid your accountant their tax agent fees, you're going to have more than $1,000 of tax deductions.

Unknown · 03:57My fear as part of this is people who then can't be bothered going through that are just going to tick a box. So to put that into—

Unknown · 04:06Nick: No, there you go. I think, I think you're about to answer my question.

Unknown · 04:09Jase: Yeah. So to put that into numbers for you, Nick, what a $1,000 instant tax deduction actually means is worked out by knowing your marginal tax rates. So if you earn $45,000 or less, and you tick the $1,000 tax deduction box, you're going to get back $160.

Unknown · 04:26So that's based on being paying tax at an average rate of 16 cents to the dollar or 16 cents for your marginal tax bracket.

Unknown · 04:34Nick: Just go— so $45,000 or less. Yep.

Unknown · 04:38Jase: If you earn less than $135,000 or up to $135,000, you're now in the 30-cent tax bracket. So you're going to get back $300 from the ATO. And then $135,000 to $190,000 is 37%. So you're going to get $370 back.

Unknown · 04:56And if you're a higher income earner in the biggest bracket over $190,000, you're going to get back $450. Hmm. Now, when you start to think of these numbers, is it really worth it?

Unknown · 05:09Nick: No. Well, you would know this better than I do because you obviously see live and real cases. But I would assume anyone that's you know, north of $100,000, even just south of it, is claiming more than $1,000.

Unknown · 05:28Jase: Correct.

Unknown · 05:29Nick: Can you, just on that, with the work from home environment at the moment, how does it work with claiming electricity? And can you claim that if you're working from home?

Unknown · 05:42Jase: Yep. So, so your 70 cents per hour fixed rate method is what keeps you safe from capital gains and all the other things because you're not claiming the actual cost of your particular room. So if you work from home and you opt for the fixed rate method or the shortcut method—

Unknown · 05:58Nick: $6 a day, give or take.

Unknown · 06:00Jase: Yep. So $0.70 per hour. So if you did 38 times 5—

Unknown · 06:03Nick: Well, there's nearly $600, $700 there if you're at home 3 days a week.

Unknown · 06:08Jase: Correct. Just 3 days a week. Exactly.

Unknown · 06:10Nick: Which is a lot of people.

Unknown · 06:11Jase: I'm not saying this is why. I know that the intention that they might come out with is to make lodging tax returns and getting a refund easier for, for, you know, the basic taxpayer. I just think my message is you are leaving money on the table if you tick that box.

Unknown · 06:27If in the past you've used an accountant or done it yourself but actually tracked your kilometres, tracked your home office hours, you do your laundry on your logoed uniform or protective gear or recognised uniform, let's say nurse, doctor, hi-vis, you know, think about donations as well.

Unknown · 06:43So all of these things that you will be shelling out of money for during the year If you tick the $1,000 auto deduction, you don't get to claim anything else, even if you've got receipts of more than that.

Unknown · 06:53Nick: Is there a limit on donations? No.

Unknown · 06:56Jase: Hmm. Why? How much? How much you want to donate?

Unknown · 06:58Nick: No, I'm just—

Unknown · 07:01Jase: obviously within realm, right? If you're on $100K salary and you donate $200K, you're putting yourself into a loss. There's no tax benefit for the extra money. So you wouldn't want to donate more than you've actually earned in salary.

Unknown · 07:12Nick: But I guess I'm just getting to the point that most people would be over $1,000, which is what you mentioned. Correct. Is there a stat in the country on what the average taxpayer claims?

Unknown · 07:25Jase: It's close to $3,000, $3,500.

Unknown · 07:27Nick: It's close to $3,500.

Unknown · 07:29Jase: Yeah.

Unknown · 07:29Nick: So clearly there's an agenda here because they would know that stat.

Unknown · 07:34Jase: Yep. I think it's, it is giving people the easy way out. And, and, you know, I'll further add to that, um, in the previous years, your home office method, you know, you'd have some diary entries, you'd work out a snapshot in time to work out your time working from home.

Unknown · 07:51Now you need a full diary, 365 days. You need to have a full diary of every day you worked from home and how many hours you worked from home. And if you get audited and they review your diary and the dates don't line up, you had a lunch break that didn't line up, you had an appointment, or you said something about your logbook for your car, said you were out on the road that day but you claimed Home Office— they're all— it's all looking for ways to catch you out.

Unknown · 08:17So this is where, yes, I'm saying do your homework, keep your receipts, do things properly. But the government, on the ATO, on the government side, they've put in further barriers to make it harder for people to want to do the right thing.

Unknown · 08:31Nick: So was there talk that there would be a sliding scale? Because this is the smart thing that I think about. If there's $3,500 the average, that people claim. What's the average for people in the $1,000 to $1,500 earning bracket?

Unknown · 08:51Jase: They would have these stats.

Unknown · 08:52Nick: If the average is $3,000, make it $2,500. Make it $2,000. Like, make me go, you know what, I get that I'm going to lose a bit, but I can't be bothered with all that. So it's a win-win because the extra $500 deduction, if it's $2,500, not $3,000, I'm cool with that 'cause at 30 cents on the dollar, it's $270.

Unknown · 09:15The government gets a win 'cause they're bringing down the average tax deduction for that income bracket.

Unknown · 09:21Jase: Yeah.

Unknown · 09:22Nick: And then have a sliding scale because as you pointed out, different incomes will have the ability to claim more. That's not blanket rule, but generally 'cause their job might mean they're travelling around or doing other things, so.

Unknown · 09:35Jase: Yep. No, no, completely agree. I think as well, what we kind of move towards here is for these 6.2 million taxpayers that they're saying can self-lodge and do it easy, you know, they're the ones that don't have necessarily an investment property, capital gains, complex tax affairs, or they're trying to get those that would usually claim the 3 to go, "Oh, I didn't really keep all my receipts.

Unknown · 09:57Oh, oh well, I can just do it quickly on my app." They want to gamify it and make it easy. So the ATO app now is designed Little pop-up, log in through myGov. Next, next, next, next, next. $1,000. Next, next, next. Done. Here's your money. And then your money's coming back. Again, sounds easy.

Unknown · 10:14You're going to get your refund back. Often, sometimes you might have had additional tax withheld. So, if your employer has withheld more tax based on your number of weeks worked and when the paydays fall, you might say that you're getting $1,000 back or $1,500 or $700.

Unknown · 10:30Like, your refund is always going to be different not just what deduction you put in, because there'll be some other credits that might be there, some other offsets. So if somebody goes next, next, next, next, next, and likes the number that's there, they'll click lodge even though they've left money on the table.

Unknown · 10:47So they, you know, they've come out and said that the average saving of $205, which is generous considering most of the workers this is targeting are going to be at that 30% bracket. So, you know, I think the numbers kind of are facing the other way. So the other thing you got to remember, that $3,500 amount, you know, you're looking at rather than $450 refund as a top earner, you're looking at a $1,500, close to $1,500 refund or $1,350 as a top earner.

Unknown · 11:14So again, it's don't be lazy throughout the year. I shouldn't say the word lazy. You actually put in the effort, put in the effort throughout the year to track your receipts, set up a system that fills in your work from home diary for you, you know, log it in your calendar, track your car kilometres.

Unknown · 11:34So the ATO does have a car kilometre tracker as part of its app. If you don't trust the ATO app to track your data and monitor your phone, use Driver's Note or other technology out there. But Driver's Note's been a great one that our clients have used for years. There is a paid version that they send you a Bluetooth dongle that sits in your centre console of your car, and it means every time you get in and out of your car, it pings your phone to say was that a business trip or a personal trip?

Unknown · 12:00So it makes doing your logbook super easy. It's, again, you want to make things easy and work in your favor. Using car kilometers is one of the biggest, best ways to get a bigger tax refund for the everyday employee.

Unknown · 12:16And then beyond that, your home office expenses. If you're not tracking your home office, maybe it's your mobile phone, your internet, and your other out-of-pockets.

Unknown · 12:23Nick: So is there an easy way receipts, for example, because that's probably where people fall down the most. Obviously the car's a separate one, but receipts. I've gone out and I've taken a client for lunch or, you know, I've spent this. Is there a system where I can take a photo of that?

Unknown · 12:40What's the easiest way?

Unknown · 12:44Jase: Yeah, if you trust having the ATO app, which I'm not saying you can't trust it, just some people have come back and gone, I don't really want to take it on the ATO app and then have them have that data. But if you're doing the right thing, there's nothing wrong with that because you're going to claim it anyway. So the ATO does have a good app. It is all protected and whatnot.

Unknown · 12:59My thing, I like to keep it simple. It's either emailing it to yourself and typing in Tax 2026 and setting up a rule that forwards it to a tax folder, or on my phone I've got a photo album for Tax 2026, and every time I do something, I take a photo and save it to that folder.

Unknown · 13:17Nick: So there's no app where you can Apart from the ATO, like Xero, can you do it through Xero?

Unknown · 13:23Jase: Xero does have the functionality to upload files, but again, not— I mean, business owners, yes, you'd be on Xero. You'd be using Hubdoc or Dext or Expensify. If you're an employee, that's where you're then probably looking to kind of make it a simpler system.

Unknown · 13:39Emails, saving it to your photos on your phone, having a Google Drive or a OneDrive or whatever on your computer. But ultimately it's record keeping. If you can just be prudent in your record keeping, scrap the $1,000 deduction because realistically, for the sake of $200 or $300 refund, you're going to be much better off.

Unknown · 13:57And when you think about, you know, there's professionals and, you know, you go tradies, teachers, nurses. By the time you've paid for your professional development and your other bits and pieces, your clothing, your cleaning, your union fees, I go, again, is it another government policy that looks good in the news to help, you know, people get a better refund in marketing and in the news?

Unknown · 14:21But realistically, the more I look at the numbers, I go, who are we really catering to here?

Unknown · 14:26Nick: Yeah.

Unknown · 14:27Jase: And when you compare to the UK, for example, the— an employee doesn't lodge a tax return. There is no tax returns. I've had, um, uh, workers come over here, move to Australia and take a job, and then they get told you got to do— and you go and do your tax return. They're like, Why?

Unknown · 14:42Oh, you can get money back from the ATO. What? I can get money back? But I'm an employee. I've earned a wage job. Why would they give me money back? Oh, claim your mobile phone, your home office, your driving, you know, pay a donation, it's tax deductible and the ATO will give you money back.

Unknown · 14:59And they are blown away going, this is amazing. Tax in Australia is great. They're going to give me money back. But again, you think of the record keeping, the due dates, you know, again, I'm not trying to sell convince the government to take a job away from accountants.

Unknown · 15:14But I'd say a big percentage of accounting firms out there these days are less worried about individual tax returns, and they want to focus on, you know, helping, helping business owners, business advice, advisory. But there is a place for it. I mean, the work that we do with our clients that then get to come and see Innov8 for financial planning, mortgage broking, asset finance— there's a win-win-win where we can help look after you know, the mum and dad on a wage or the, you know, and the kids growing up, you want to make sure they're looked after and learn the tax

Unknown · 15:44system so that if they do, you know, move on to be investment property owners or investors, they've already got good habits and routines around lodging their tax return and doing things properly. So I mean, look, don't have to overcomplicate it. There's a few other things around what the ATO is doing that I will touch on just briefly for those that are sticking with us and haven't gone to lodge their tax return and click the $1,000 button.

Unknown · 16:08I must note that this does come into effect for the 2026 tax year. So if you— we're kind of getting to the end of financial year now. So when we roll over into July '26, this is when you'll first have that opportunity to tick the $1,000 box.

Unknown · 16:23If you've got no expenses, go and do it. You're going to get more money back than if you didn't have it. If you've been working with an accountant for years and you know they're asking you questions around your car, your logbook, you know, your travel, your uniform, your education, your donations, all these things.

Unknown · 16:40Go back and stick with the same person. That'll help you get a better result. Beyond that, there's the other things to kind of make— work sure you're working into. When you go and sit with your accountant, these are the conversations you should be having. Super contributions. So again, accountants can't advise on why to put money into super and investments and whatnot, but we can talk about the tax benefits of a super contribution.

Unknown · 17:03If you are pushing, you know, Again, Nick, you can probably comment more on the age where you'd start to look at making super contributions to boost your retirement savings. Yep.

Unknown · 17:14Nick: Well, first thing I'll say about that is timing's very important. So that conversation needs to be had early June.

Unknown · 17:20Jase: Yep.

Unknown · 17:20Nick: Probably to get everything to line up and get it in there in time. But yeah, to your point, generally, you know, people in their 50s, early 50s where the mortgage is probably not a problem anymore. And they've got spare cash flow. Or just high income earners, high income earners that are out of options to reduce tax.

Unknown · 17:43Mortgage is not a problem, it's covered. They don't, you know, they can get a big win by putting a certain amount in. So high income earners, definitely, and those that have knocked off most of the mortgage.

Unknown · 17:54Jase: And brief explainer there is, there's a $30,000 cap you can put into super and get a tax deduction for. So let's say your employer's put in $20,000, there's a $10,000 gap that if you then voluntarily put that in and claim a tax deduction for that, if you're in the 45-cent bracket, you get a tax deduction.

Unknown · 18:11That $10,000 will give you a $4,500 refund. You'll lose $1,500 in super because it's taxed at 15 cents to the dollar. Net result, you're $3,000 better off. So that's the conversation where as accountants we talk about the tax benefit of a super contribution. That's all we're allowed to talk about.

Unknown · 18:27But this is why if you're sitting with an accountant doing your tax, these are the nuggets of gold that you should be getting. There's a reason that, you know, if they want to make you tick a $1,000 box, if you're not getting this, you're probably feeling like, why would I go back to my accountant if my refund's $300?

Unknown · 18:43I'll tick the box. And if you're not asking these questions as well, two-way street, but hopefully your accountant's driving it. If you've got an investment property, it is really important to get that right. We've touched on the number one, like up there audit things that are triggered. Investment properties are one of them. Are you claiming depreciation on your property?

Unknown · 19:00Are there repairs and maintenance and other things going on? There's trust distributions, there's negative gearing. There's getting your business structure right. They're all things that accountants do really well. And then depending if you're a business owner, you got DIV 7A, which is always having a bit of fun at this time of year.

Unknown · 19:15So get in and have those end of year conversations with your accountant. This message, while it is about me not believing the $1,000 benefit is all it's cracked up to be, I wanted to make sure people were getting the news that they're not getting $1,000 cold hard cash in their Skyrocket. It's looking at more like a couple of hundred bucks.

Unknown · 19:33So, you know, you've got to keep them accountable. I want to share the news in that aspect. Other things coming into next year that are important, just so I can touch on it. I did have way too many notes here, Nick, so you're going to have to bear with me here. The instant asset write-off, big one for end of financial year.

Unknown · 19:51So, you know, this time of year around May, June, you're going to sit with your accountant and do tax planning. They haven't continued as far as we know, unless budget has come out in the meantime. But the $20,000 instant asset write-off was marked to be gone by the end of 2026.

Unknown · 20:06They renew it most years, so make sure you check that if it is still in place. If it's not, if you're considering buying a new asset before 30 June, up to $20,000 can be an immediate tax deduction pending budget night next year. That, that's not the case. It'll be $1,000 again.

Unknown · 20:22I'd If I'm a betting man, I'm saying they've probably extended the $20,000 into the new year. The cap for super contributions will be $32,500 next year, which means there's more that you can put in. And if you are trying to work out if you're better off claiming the $1,000 deduction or not, there's things like the 70%— 70-cent-per-hour home office rate.

Unknown · 20:41So if you work out, just like the calculation you did, number of hours you work from home times by a number of weeks times by 70 cents, you can already start to figure out there's a some pretty decent tax deductions to be had there.

Unknown · 20:54Nick: Awesome, mate. So that was a really good update. And I think obviously the key message for me is just the timing on this stuff. Like you need, you can't be doing this stuff after 30 June.

Unknown · 21:10So, and that's always a big problem we see, particularly with the super contributions. It's too little, too late. And so, you know, and we've said it 1,000 times on this podcast, but if you don't have an appointment booked with your accountant prior to June 30 and you're not sure about any of this stuff, you need to get that done.

Unknown · 21:30Jase: 100%.

Unknown · 21:30Nick: Or your other option is just to tick a box and get your $1,000 deduction.

Unknown · 21:36Jase: Yep.

Unknown · 21:37Nick: And mate, I guess my big learning from today is no receipts, no accountant. No problem, according to the ATO. Game over.

Unknown · 21:49Jase: This podcast is for educational and informational purposes only. The conversations are of a general nature and do not qualify as financial or tax advice. We recommend before you make any financial decisions, you consult a licensed professional. Individuals on the podcast may hold positions in the companies discussed. ---