What a deduction is actually worth

The single most useful thing to understand about deductions is that they reduce your taxable income, not your tax. What you get back is the deduction multiplied by your marginal rate.

flowchart TD
  spend[You spent a dollar] --> need{Did you need it for work?}
  need -->|No| skip[Do not buy it for the deduction]
  need -->|Yes| proof{Can you substantiate it?}
  proof -->|Yes| back[You get back your marginal rate]
  proof -->|No| zero[Worth zero]

The 2026–27 resident rates

Taxable income	Marginal rate
$0 – $18,200	Nil
$18,201 – $45,000	15%
$45,001 – $135,000	30%
$135,001 – $190,000	37%
$190,001 and over	45%

The 2% Medicare levy sits on top for most people, and because a deduction lowers the income the levy is calculated on, the effective saving is usually your marginal rate plus 2%.

The rate on the $18,201–$45,000 band fell from 16% to 15% on 1 July 2026, and is legislated to fall again to 14% on 1 July 2027.

So a $1,000 deduction returns

Income	Marginal rate	Roughly back
$40,000	15%	$170
$85,000	30%	$320
$150,000	37%	$390
$220,000	45%	$470

Two consequences follow.

Don't buy things for the deduction. On $85,000, a $1,000 purchase you didn't need costs you $680 net. Tax-effective spending is only tax-effective if you needed the thing anyway.

Do chase records, not purchases. A deduction you already earned but can't substantiate is worth zero. Recovering it costs nothing but the record.

Where the real money usually is

For a typical hybrid PAYG employee, the categories that add up are unglamorous:

• Working from home hours. 900 hours at 70c is $630. At 32% that's about $200 back — and it's almost entirely a record-keeping exercise, not a spending one.
• Work kilometres. 3,000 work km at 91c is $2,730, worth roughly $870 back at 32%.
• Depreciating assets. A laptop, a monitor, a desk, spread across their effective lives.
• The small recurring stuff. Union fees, professional memberships, subscriptions, income protection premiums.

None of those requires a strategy. They require knowing the numbers, which requires having written them down as the year went by.

A note on refunds

A "big refund" mostly means you overpaid through the year. It isn't free money, and a small refund with correct withholding isn't a worse outcome. What deductions change is your final tax, not the theatre of the refund.

The practical takeaway

Estimate your marginal rate once. Then, for every deduction category, ask two questions: is it genuinely work-related, and can I substantiate it?

If both answers are yes, you get your marginal rate back. If the second answer is no, the answer to the first stops mattering.