The Hit List – 2025

The top 10 individual deduction areas that ATO is targeting this financial year.

1.     Work-Related Expenses (Especially Working-From-Home)

The ATO is concentrating heavily on inflated or unsupported claims for work related expenses, particularly home office deductions and mixed-use costs.

Red flags: Claiming fixed-rate home office costs plus actual expense items or claiming equipment/internet expenses when already reimbursed. (Only claim costs that pass the ‘three golden rules’- incurred by you, directly related to earning income and substantiated with records).

2.     Car & Travel Expenses

High vehicle or travel claims inconsistent with your occupation (e.g. an office worker claiming large amounts). Record-keeping is essential: logbooks for car use, trip diaries and invoices for expense tracking.

3.     Rental Property Deductions

Rental property owners face major scrutiny: the ATO estimates 9 out of 10 returns contain errors in categories like interest, repairs, capital works and availability-to-rent.

Common mistakes include over-claiming interest when the loan has a private-use portion or claiming travel costs to inspect a property, which are not allowed.

4.     Cryptocurrencies & Gig-Economy Income

Income form platforms such as Uber, Airtasker or crypto trading is increasingly matched and reviewed. Don’t omit such income; ensure it’s declared and that deductions associated with it are justified and recorded.

5.     Job Search & Education Costs

Claiming courses or training expenses without active employment in the role being developed is risky. Eligible only if directly related to your current income-earning job and substantiated.

6.     Excessive or Unusual Claim Patterns

Claiming markedly large deductions relative to your income or peers raises flags. For example, large single-item claims – like expensive home set ups, designer clothing or gym equipment – are under scrutiny.

7.     Undeclared Income

The ATO matches third-party data (e.g. bank interest, super, investment income, PAYG) against your return. Omitting any source can trigger a review.

8.     Other Personal or Non-Deductible Claims

Claims for personal items—such as vacations, air fryers, pets, or engagement rings—under the guise of business relevance typically fail to meet tax deduction standards and won’t pass the “pub test.”

9.     Record-Keeping Failures

If your total work-related claim exceeds $300 but you lack receipts or fail to explain how it’s calculated – it’s a red flag. Keep digital or physical records for at least five years after lodgement.

10.     Late or Incomplete Lodgements

Failing to lodge on time or lodging an incomplete return can prompt compliance activity or audits.

 

Author

Anitta Rodrigues