iscover Standard deduction final ruling needs more detail than its draft: CPA Australia
BusinessFor a measure intended to simplify compliance, the accounting body has stressed that further clarity and detail are required in the ATO’s draft ruling for its work-related expenses standard deduction.
While CPA Australia supports the ATO’s work-related expenses standard deduction’s policy objective of simplifying work-related expense claims for individual taxpayers, it emphasised that further clarity is needed to resolve uncertainties about expense boundaries, consequential adjustments, record-keeping and less common multi-year or employer payment scenarios.
The draft ruling for the standard deduction, draft Law Companion Ruling LCR 2026/D5: The standard deduction for work-related expenses provides that, “from the 2026–27 income year, eligible taxpayers are entitled to a standard deduction (also referred to as the ‘instant tax deduction’) of up to $1,000 for work-related expenses, without needing to have spent the money or kept records”.
Acknowledging that the draft ruling generally provides clear explanations of how the standard deduction operates, CPA Australia said that there is more detail to be desired, saying that this illustrates the underlying legislative complexity of a measure intended to simplify compliance.
More broadly, in its submission to the draft ruling, the body said a clearer and plain language explanation of parts of the ATO’s ruling, including the dollar-for-dollar reduction mechanism and the more general operation of the standard deduction, is needed.
“Clearer guidance will help taxpayers, employers and registered tax agents apply section 25-130 consistently and with confidence,” the submission said.
“The ATO should also use consistent terminology and avoid describing the mechanism as an election where that could imply that the provisions operate on an all-or-nothing basis,” it said.
Regarding record-keeping, the body said that comprehensive guidance for keeping track of working from home expenses, laundry, and car expenses is a crucial addition for the ruling, particularly where taxpayers are uncertain whether their expenses will exceed the standard deduction.
The submission also urged the ATO to provide greater clarification on its expense boundaries.
“It should also explain the treatment and reasonable apportionment of bundled or mixed-purpose payments. A non-exhaustive schedule of common expenses would further support consistent application without limiting the operation of the legislation,” it said.
In the circumstance where itemised deductions are later disallowed, the body stressed that the legal effect of the variation should be distinguished from the ATO’s administrative process for giving effect to it in the ruling.
“The ATO should publish administrative guidance explaining whether its systems will recalculate the standard deduction when an assessment is amended, how the adjustment will be shown on the notice of amended assessment, and how the recalculated tax shortfall will affect interest and any applicable penalties.”
In addition, the submission called for further guidance should be provided to distinguish between a reimbursement and an assessable allowance, particularly where an allowance is paid with no liability to account or exceeds the employee’s expenditure.
“The ATO should identify these matters in the consultation compendium and refer them to Treasury for monitoring and, where appropriate, legislative review. The final Ruling should not imply that administrative guidance can alter the statutory outcome,” the body said.
“With clearer boundary rules, stronger examples, coordinated guidance and well-designed digital implementation, the final Ruling can provide better certainty needed by taxpayers, employers, registered tax agents and advisers to apply the standard deduction correctly from the 2026–27 income year.”
Want to see more stories from trusted news sources?Make Accountants Daily a preferred news source on Google.
