Tax Time 2025: ATO Alerts Millions of Aussies on Work-Related Deduction Changes

Australians are being warned by the Australian Taxation Office (ATO) to stop claiming private expenses as work-related or as donations on their tax returns.

Around 9 million Australians reported claiming approximately $28 billion in work-related expenses for their tax returns between July 2023 and June 2024, with numerous claims pertaining to remote work costs as of 31 March 2025.

The typical claim submitted by taxpayers amounted to roughly $3,000.

[TAX SEASON 2025: GUIDELINES FOR ALLOWED AND PROHIBITED CLAIMS]

However, Assistant Commissioner Rob Thomson states that the ATO has recently spotted some questionable claims which the organization has turned down.

"I've come across some amusing assertions; this year, someone attempted to list their engagement ring as a charitable donation on their tax return," he shared with ABC News.

A company director asserted that their treadmill, juicer, coffee maker, along with their gaming console and various other items should be considered work-from-home expenditures.

Regarding both of these claims, they are personal in nature and cannot be included in your tax return.

Therefore, we’re simply advising folks that when claiming a work-related expense, they should adhere to the three key principles—firstly, you must have personally covered the cost; secondly, it has to be closely linked to the income you generate; and lastly, it shouldn’t pertain to personal matters.

Car-related travel claims make up most work-related claims

Vehicle-associated journeys comprised most of the work-related expenditure claims.

In the period from 2023 to 2024, approximately 3.6 million individuals made claims totaling around $10.3 billion for vehicle costs.

Mr Thomson says there are two methods that people can use to make car travel claims, but urges people not to "double dip" by claiming the same items.

The "logbook approach" involves maintaining a logbook over a period of 12 weeks within an income year, capturing a comprehensive snapshot of one’s usual working activities.

The logbook approach involves deducting a certain percentage of a taxpayer’s vehicle costs such as fuel, upkeep, and licensing. This differs from the "cents per kilometre" method, which permits individuals to claim a fixed rate instead.

The established rate will be 88 cents per kilometer for the fiscal year 2024-25 (it stood at 85 cents per kilometer in 2023-24). This permits individuals to claim up to a maximum of 5,000 business kilometers per vehicle annually.

Mr Thomson says while the cents per kilometre method doesn't require written evidence to show exactly how many kilometres you travelled, the ATO may still ask people to show how they worked out their business kilometres, for example, via diary records.

"What we have here is a comprehensive approach, covering all your car-related costs such as registration and insurance. However, many individuals continue to incorrectly claim these expenses individually on their tax returns," he explained.

How to apply either the 'fixed cost' or 'actual cost' approach when claiming home office expenses.

Approximately 4 million Australians reported costs related to working from home during the previous fiscal year.

Mr Thomson states that there are two approaches for reclaiming costs associated with remote work—the "fixed expense" or "actual expense" method.

The fixed-cost approach enables individuals to deduct a set sum of 70 cents for each hour worked at home during the 2024-25 fiscal period. (It’s worth noting that the figure for the preceding financial year stood at 67 cents per working hour.)

The fixed-rate approach isn’t too burdensome because it doesn’t necessitate dividing costs between personal and professional use.

However, they cannot claim these expenses — like mobile and internet costs, or electricity and gas bills, or home office supplies — individually.

Using the actual cost approach, individuals are allowed to individually claim each expenditure incurred while telecommuting. You might want to consult with an accounting professional to see if this could lead to a more substantial tax reduction.

Mr Thomson points out though that the actual-cost method is more intricate.

He mentions that this demands more precise documentation as individuals must separate their personal activities from those related to work.

Property investors leasing homes under scrutiny

For their 2023-24 tax filings, 1.7 million personal investors listed rental tax deductions.

As a result, there was an average net rental loss of $1,800 compared to an average net gain of $100 the previous year.

Mr Thomson states that typical errors include individuals listing personal loans as investment loans.

"Individuals will utilize a blended loan—allocating portions towards their investment property and others for personal expenses like vacationing or purchasing a vehicle," stated Mr Thomson.

Just a reminder: People can only claim the interest associated with the income generated from their investment property.

And they must continue doing this throughout the entire duration of the loan, not only after they have repaid the principal amount associated with the car they bought.

He mentions they have encountered a situation where someone attempted to seek reimbursement for a property management fee despite not actually employing a property manager.

"Clearly, you must bear the cost to be able to claim it," he stated.

Hundreds of thousands of Aussies trade and exchange digital currencies.

Around 400,000 individuals purchased or traded cryptocurrencies in the previous fiscal year. The Australian Taxation Office (ATO) is presently refining these figures.

Mr Thomson states that numerous Australians do not maintain any records regarding cryptocurrencies.

He mentioned that you must report the cryptocurrency gains or losses on your tax return.

For the majority of investors, this would be considered a capital gain or a capital loss.

Just a heads up to maintain proper documentation both when buying the cryptocurrency and later when selling it.

How the ATO employs data matching to nab tax evaders

The Australian Taxation Office keeps using data matching and analytics to track down tax evaders.

This system utilizes earnings information sourced from financial institutions, government tax departments, property registry bureaus, automobile registration agencies, insurance firms, stock records, Australian Securities & Investments Commission (ASIC), digital payment platforms like PayPal, online marketplaces such as eBay, ride-sharing services including Uber, lodging service providers like Airbnb, along with cryptocurrency exchange platforms.

This data enables the ATO to auto-complete tax returns and confirm that taxpayers accurately report their earnings. Additionally, it helps the agency spot instances of deception.

Regarding the 2024 filings, over 584,000 personal tax returns underwent adjustments through their data-matching processes and sophisticated analytic techniques prior to generating tax assessments.

This involves incorporating missed income, eliminating exaggerated deductions and tax credits, as well as fixing noticeable inconsistencies.

"If someone’s staying with us and something seems off—say, a guest tries to list a power drill as an expense—we’ll prompt them to review their deductions and gently encourage them to double-check everything during the tax submission process," Mr Thomson explained.

Mr Thomson likewise encourages taxpayers not to submit their returns prematurely so as to provide the ATO sufficient time to gather all necessary data for pre-filling tax returns.