Tax Updates: 29 June 2026

Welcome to this week’s review of tax issues where Richard comments on what’s been happening in the world of tax over the past week. If you have a question or would like a second opinion on any national or international tax issues, please contact Richard via email at [email protected].

It’s time for a tax rate update

It’s that time of year again: when the various square metre, standard household costs and mileage rates are updated for the current filing period:

The Income Tax (Kilometre Rates for the Business Use of Vehicles for the 2025-26 income year) Instrument 2026

The Instrument publishes the vehicle kilometre rates which can be used to calculate expense deduction claims for the 2025–26 income year. First used in the 2024-25 income year, and due to what is now perceived as being a significant difference in vehicle running costs between the different vehicle types (Petrol, Diesel, Petrol Hybrid and Electric), a rate has been set for each vehicle category – rather than a single Tier One rate for all vehicle types – to ensure the rates accurately reflect reasonable expenditure related to the business use of that particular vehicle.

The Tier One rates apply to total distance travelled by the vehicle for the year up to 14,000 kilometres, with the rates being applied to the business use proportion in that regard. Where total distance travelled exceeds 14,000 kilometres for the year, then the Tier Two rates should be used for the business portion of the excess.

The 2025/26 rates are set out in the Schedule to the Instrument:

If you want to learn more about how to use the rates correctly, you can refer to either OS 19/04a, “Commissioner’s statement on using a kilometre rate for business running of a motor vehicle – deductions”, or OS 19/04b, “Commissioner’s statement on using a kilometre rate for employee reimbursement of a motor vehicle”.

OS 19/04 does contain a few simple examples, to illustrate the potential use of these rates in different situations.

2026 CPI Adjustment to Operational Statement OS 19/03: Square metre rate for the dual use of premises

The operational statement OS 19/03 acts in tandem with section DB 18AA of the ITA07, which is to allow taxpayers to use a simplified method for the calculation of deductions for premises, that are used for both business and personal purposes. So, instead of having to keep records of all the expenses that relate to your home for example, you can calculate your home office claim using the formula:

(total premise costs × business proportion) + (business square metres × square metre rate);

where total premise costs are those individualised costs like rent, mortgage interest and rates. The square metre rate for the 2026 income year (1 April 2025 to 31 March 2026) is set at $57.30.

2026 CPI Adjustment for Determination DET 09/02: Standard-cost household service for childcare providers

This Determination (DET 09/02) sets out the standard-cost household service that has been provided as childcare services by taxpayers, who are natural persons, in their own domestic accommodation. It also sets out the components of expenditure that are generally incurred in the provision of the standard-cost household service by these taxpayers. Once again, the basis for the initial publication of the Determination is a tax simplification measure: rather than using an actual cost calculation, taxpayers who provide childcare services in their home and are paid an income amount for doing so, can use the standard-cost method to calculate their deduction. When used, the taxpayer is only required to report income in their tax return, to the extent the amount received exceeds the deduction calculated. The 2026 update provides for an hourly standard cost per child of $4.70 for the 2026 income year (1 April 2025 to 31 March 2026), with the annual fixed administration and record keeping standard cost being set at $460.

2026 CPI Adjustment to DET 19/02: Short-stay accommodation

This Determination (DET 19/02) sets standard costs that can be treated as expenditure incurred in deriving income from providing a short-stay accommodation service. If a taxpayer chooses to use the standard costs, income from providing the short-stay accommodation service will be exempt up to the amount of those costs. Income from providing the accommodation will only need to be returned to the extent it exceeds the standard costs. Any additional costs related to providing the accommodation cannot be deducted if they relate to an item covered by the standard costs. The 2026 update provides for a daily standard cost for each guest of $65.00 for an owned dwelling, and $59.00 for each guest in a rented dwelling.

2026 CPI Adjustment to DET 19/01: Household boarding service providers

This Determination (DET 19/01) was initially published to target taxpayers who provide private boarding services in their home, if they have no more than four boarders at any time during the income year. The purpose of the Determination was to set the standard costs that can be treated as expenditure incurred in deriving income from providing the boarding accommodation. As with the previous two determinations, if a taxpayer chooses to use the standard costs, income from providing the private boarding service will be exempt up to the amount of those costs. Income from providing the private boarding service will only need to be returned to the extent it exceeds the standard costs. The 2026 update provides for a weekly standard-cost (per boarder) for the 2026 income year (1 April 2025 to 31 March 2026) of $245.00.

This article was originally published through the ‘A Week In Review’ newsletter. If you would like to receive Richard’s tax updates every Monday morning, you can subscribe here.