Chartered Accountants Australia and New Zealand (CA ANZ) welcomes the Australian Taxation Office’s (ATO) release of draft Law Companion Ruling LCR 2026/D5, which provides detailed guidance on the standard deduction for work-related expenses. The draft ruling explains how section 25-130 of the Income Tax Assessment Act 1997 applies in a range of practical scenarios, offering calculations and examples to help taxpayers and advisers.

CA ANZ’s submission recognises the value of technical detail in the draft ruling. However, it also highlights the need for the ATO’s web guidance to be accessible for taxpayers with limited tax knowledge. Clear, practical information will help individuals understand their choices under the new standard deduction rules.

The submission calls for both the technical ruling and the web guidance to reflect the intent of the legislation and the options available to taxpayers. For those with $1,000 or more in assessable labour income, the guidance should clearly outline the following scenarios:

• Scenario 1: Work-related expenses of $1,000 or less
  • Option 1: The taxpayer automatically receives a standard deduction of $1,000 in their tax return. There is no need to incur or substantiate expenses covered by the standard deduction.
  • Option 2: The taxpayer chooses to manually claim work-related expenses in their tax return. The total deduction (work-related expenses plus standard deduction) will be $1,000, and the taxpayer must incur and substantiate their actual expenses. Option 1 is generally simpler for most taxpayers.
• Scenario 2: Work-related expenses over $1,000
  • Option 1: The taxpayer can choose not to claim a deduction for actual expenses and instead receive the standard deduction of $1,000 automatically, without needing to incur or substantiate expenses.
  • Option 2: The taxpayer chooses to claim actual work-related expenses, which must be incurred and substantiated. In this case, the standard deduction is reduced to nil.

CA ANZ’s submission also makes several recommendations to improve the clarity and accuracy of the draft ruling, and that all guidance is taxpayer-focused, written in plain language and supports taxpayers in making informed decisions.