Nick Bruining: Taxpayers to expect $320 boost in next year’s refund with ‘tick the box’ tool

A $1000 “tick-the-box” tax deduction means the average taxpayer can look forward to a boost in next year’s refund by about $320 following the Albanese Government’s re-election.

While the election promise still needs Parliamentary approval, the dominance of the left in both houses of Parliament virtually guarantees passage of the required legislative amendments.

In the lead-up to the May 3 election, Prime Minister Anthony Albanese said the idea was to simplify the tax deduction process for nearly six million taxpayers.

“This will guarantee that everyone can opt for an automatic tax deduction of $1000 on their work expenses. No paperwork, no box of receipts, no scrolling through your online banking. Just tick the box and your return’s ready to go,” he said.

The idea of a simplified tax deduction was first proposed more than 15 years ago by then-treasurer Wayne Swan.

Under the current rules, an employed taxpayer can claim a maximum deduction of $300 a year without receipts. Once you exceed the limit, you are required to be able to prove all of the expenses.

A person earning between $45,000 and $135,000 pays 30 per cent tax, plus 2 per cent Medicare levy.

A $1000 tax deduction in this case effectively translates to a $320 tax credit, which either reduces the additional tax payable, or boosts the tax refund.

A person in the highest tax bracket stands to gain a $470 benefit from the change.

The commencement date of July 1, 2026 ties in with the first stage of proposed tax cuts, which will result in an extra $5.15 per week for most workers.

The lowest marginal tax rate will fall to 15 per cent on July 1, 2026 and then to 14 per cent on July 1 2027, resulting in another $5.15 per week increase.

The new $1000 tax deduction regime only applies to those who are employed, and not to those who are self-employed or those who receive passive income, typically through investment income or family trust distributions.

These changes do not limit the ability to claim more than $1000. It’s just that if you are subsequently audited, you need to be able to prove all of the expenses you have claimed as a deduction actually occurred.

While tax law clearly states any expenses that are claimed must have occurred, it is unlikely taxpayers using the new option will be audited.

In reality, many people who currently claim less than $1000 are likely to take the tick-a-box option and see the boosted tax refund.

It could also spell bad news for tax agencies that specialise in doing simple tax returns for people. These typically pop up in shopping centres and other places at the end of the financial year.

Rather than paying $150 or more for a tax return, many people are likely to turn to the free tax return lodgement service operating on the my.gov.au portal and using the $1000 tick-a-box option.

Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association.