Tax time 2025: ATO warns millions of Aussies claiming work-related tax deductions

Australia Broadcast Center

4 days ago

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.
About 9 million Australians claimed about $28 billion worth of work-related expenses in their 2023-24 tax returns (as of 31 March 2025), many relating to working from home.
The average claim made by taxpayers was about $3,000.
But assistant commissioner Rob Thomson says the ATO has recently identified some dodgy claims that the agency has rejected.
"We do see some funny claims — we had someone this year who tried to claim their engagement ring as a donation on the tax return," he told ABC News.
"We had a company director claim the treadmill, juicer, coffee machine, their gaming console and a bunch of other stuff as working-from-home expenses.
"Now on both of those [claims], they're private in nature and you can't claim them on your tax return.
"So we are just reminding people that if they are making a work-related expense to follow the three golden rules — you need to have paid for it yourself, it directly needs to relate to the income that you're earning, and that it can't be private in nature."
Car expenses: $10.3 billion, 3.6 million
Travel expenses: $2.5 billion, 1.5 million
Clothing: $2.2 billion, 6.5 million
Self-education: $1.8 billion, 1 million
Other: $10.8 billion, 7.9 million
Total: $27.6 billion, 9.2 million
(Source: ATO, data to March 31, 2025)
Car-related travel made up the bulk of work-related expense claims.
In 2023-24, 3.6 million people claimed about $10.3 billion in car expenses.
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.
There's the "logbook method", which requires taxpayers to keep a logbook for 12 weeks of the income year, which is a representative sample of their typical work pattern.
The logbook method includes a deduction of a percentage of a taxpayer's car expenses, including fuel, maintenance, and registration, unlike the "cents per kilometre" method, which only allows people to claim a set rate.
The set rate is 88 cents per kilometre for 2024-25 (in 2023-24 it was 85 cents per kilometre), and allows people to claim a maximum of 5,000 business kilometres per car, per year.
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.
"Now, that's an all-inclusive method, so that includes all your motor vehicle expenses, including rego and insurance, but what we do see is people still (incorrectly) claiming those expenses separately on the tax return," he said.
About 4 million Australians claimed expenses for working from home last financial year.
Mr Thomson says there are two methods for claiming expenses related to working from home — the "fixed cost" or "actual cost" method.
The fixed-cost method allows people to claim a fixed amount of 70 cents per hour for every hour they work from home in 2024-25. (Note, the rate for the previous financial year was 67 cents per work hour.)
The fixed-rate method is not as onerous as it doesn't require people to apportion expenses between private and work.
But it restricts them from claiming each expense — such as mobile and internet, or electricity and gas, or home office stationary — separately.
Under the actual cost method, taxpayers can claim each expense they have for working from home separately. It may be worth checking with an accountant if it will result in a bigger tax deduction.
However, Mr Thomson notes that the actual-cost method is more complicated.
He says it requires more detailed record keeping since people need to apportion what's private and what's work-related.
In their 2023-24 tax returns, 1.7 million individual investors claimed rental tax deductions.
This resulted in an average net rental loss of $1,800 down from an average net gain of $100 the year before.
Mr Thomson says common mistakes are people claiming private loans as investment loans.
"People will be using a mixed loan — they'll use part of it for their investment property and part for a private purpose, such as going on a holiday (or) buying a car," Mr Thomson said.
"We are just reminding people that they can only claim the interest related to the income they generate from the [investment] property.
"And they need to do that for the life of the loan, just not once they've paid off the capital that might have related to the car they purchased."
He says they've also seen a case of someone trying to claim expenses for a property manager when they didn't use one.
"So obviously you have to incur the expense to be able to claim it," he said.
About 400,000 people bought or sold cryptocurrencies last financial year. The ATO is currently updating this data.
Mr Thomson says many Australians don't keep any records when it comes to cryptocurrencies.
"Now for most investors that is a capital gain or a capital loss.
"But just a reminder to keep good records both when you're purchasing the crypto and then when you sell it."
The ATO continues to use data matching and analytics to catch tax cheats.
It uses income data from banks, state revenue offices, land titles offices, motor vehicle registries, insurance companies, share registries, ASIC, PayPal, eBay, Uber, Airbnb and crypto asset exchanges.
This information allows the ATO to pre-fill tax returns and ensure taxpayers correctly declare their income. It also allows the agency to identify cases of fraud.
In relation to 2024 lodgements, more than 584,000 individual tax returns were adjusted in its data matching programs and advanced analytical models before issuing tax assessments.
This includes adding omitted income, removing overstated deductions and tax credits, and correcting apparent discrepancies.
Mr Thomson also urges taxpayers not to lodge their returns too early to allow the ATO to get all the information required to pre-fill tax returns.