$1000 worker deduction tied to tax hikes as former Treasury official warns of 'disastrous' Budget move

May 26, 2026 - 04:16

The Albanese government is racing to push through changes to capital gains tax as the political fallout intensifies. A former Treasury official has now warned that a proposed $1000 cap on worker tax deductions would amount to a "disastrous" budget move, effectively tying the measure to broader tax hikes.

Under the plan, millions of Australians who claim work-related expenses could see their deductions slashed, with the government reportedly eyeing a flat $1000 limit. The former official argued this would hit low and middle-income earners the hardest, many of whom rely on deductions for uniforms, tools, and travel. "It is a tax hike by another name," the official said, adding that the move would erode trust in the system.

The government has not confirmed the deduction cap, but sources indicate it is being considered alongside other revenue measures to offset spending. Critics say the approach risks punishing workers while failing to address structural budget problems. The debate comes as the government faces pressure to deliver a surplus without stalling the economy. Labor insists it is focused on fairness, but the former Treasury warning has added fuel to opposition claims that the budget is heading in the wrong direction.