Labor’s Tax Changes Following the 2025 Federal Election: What It Means for You

Anthony Albanese won the Federal Election held on Saturday, 3 May 2025. His Labor Party secured a strong majority, winning at least 85 seats in the House of Representatives to form government.

Labor took several tax-related proposals to the election, which are now expected to become law. Key tax changes likely to affect Australians include:

New Standard $1,000 Tax Deduction – Starting 1 July 2026

From 1 July 2026, the government will introduce a standard $1,000 tax deduction for work-related expenses. This automatic deduction will not require receipts and is expected to benefit around six million Australians who currently claim less than this amount.

Taxpayers will be able to choose to claim a flat $1,000 deduction instead of listing individual work-related expenses. The goal is to simplify the process, saving time and effort, with no need — in theory — for receipts or invoices to support the claim.

However, in reality, many taxpayers may still need to keep receipts. That’s because you won’t know if your total work-related expenses exceed $1,000 until the end of the financial year.

If your work-related expenses are more than $1,000, you won’t be eligible for the automatic deduction. You’ll need to follow the current rules, which require full substantiation for most deductions.

To help with this, you can use ReceiptHub, our FREE mobile app. ReceiptHub allows you to upload and store receipts, track working-from-home hours, and log vehicle expenses — all in one convenient place. It’s a simple way to stay organised throughout the year and ensure you have the records you need if you plan to claim more than the standard deduction.

The ATO will not review or audit taxpayers who claim the standard $1,000 deduction. This will allow the ATO to focus more on larger claims, including work-related deductions over $1,000. As a result, there may be increased scrutiny on those higher claims, making it more important to keep accurate records.

Currently, taxpayers can claim up to $300 in work-related expenses without needing receipts. If you claim more than $300, you must keep full substantiation for all your expenses—not just the amount above $300. This $300 rule doesn’t apply to certain expenses, such as car costs, meal allowances, award transport payments, or travel allowances. In these cases, taxpayers still need to show how the money was spent and how the deduction was calculated.

It remains to be seen how Labor will implement the $1,000 deduction. Will it be a blanket rule applying to all work-related expenses under $1,000, or will it simply extend the current $300 exception by raising the threshold to $1,000—along with the same exclusions and requirements?

It’s also important to note that this is a standard deduction, not a $1,000 cash refund. The actual benefit will depend on your tax rate. For example, if you’re taxed at 30%, you’ll get back $300 (which is 30% of $1,000).

Taxpayers will still need to lodge a tax return to access the standard deduction. This means the earliest they’ll see the benefit is July 2027.

Reduction in the Lowest Income Tax Rate

From 1 July 2026, the lowest income tax rate will reduce from 16% to 15%. This change applies to income between $18,201 and $45,000, saving taxpayers one cent for every dollar earned in that bracket.

Then, from 1 July 2027, the rate will drop again—from 15% to 14%.

The savings for individuals are relatively modest. From 1 July 2026, the change will save taxpayers up to $268. From 1 July 2027, the savings will increase to $536.

No Broader Tax System Changes Planned

Labor’s tax policy during the election followed a “small target” approach. This means there are no plans to change:

• The negative gearing rules
• The GST (Goods and Services Tax)
• Other income tax thresholds or rates, beyond the changes to the lowest tax bracket

These proposed tax changes from the Labor Government will begin to take effect from July 2026. H&R Block will continue to monitor updates and help you understand what each change means for your tax return.