As the 2025 tax season approaches, the Australian Taxation Office (ATO) has issued a timely reminder for taxpayers to tread carefully when claiming work-related expenses. This comes after a number of questionable claims were recently flagged — many of which failed to meet the basic requirement of being clearly tied to income-producing activities.
What Not to Claim: Recent ATO Crackdowns
Recent reviews by the ATO have revealed several inappropriate deductions, which the average person wouldn’t think they’re fair or reasonable. Here are real examples from recent ATO reviews:
- Mechanic: Tried to deduct air fryer, microwave, vacuum cleaner, TV, and gaming equipment as work-related tools.
- Truck Driver: Claimed swimwear as a necessity for driving in hot weather.
- Fashion Retail Manager: Lodged over $10,000 in luxury clothing and accessories for work related events.
In each case, these claims were disallowed. The ATO ruled the expenses to be private in nature and not directly related to earning assessable income.
Key takeaway: Just because you use an item at work doesn’t make it deductible. The expense must have a clear and direct connection to your income-earning activities.
When in Doubt: Leave It Out
If you’re ever uncertain whether something is deductible, it’s safer to either:
- Leave it out of your tax return, or
- Speak to a registered tax agent for tailored advice.
ATO’s 2025 Focus Areas: What You Need to Know
To help taxpayers stay compliant, the ATO has outlined its priority areas for the 2025 tax year:
1. Work-Related Expenses
Claims must be directly related to earning income and supported by evidence such as receipts or invoices. Just because an expense is incurred while working doesn’t automatically make it deductible — personal and private costs are generally not allowed.
Example: If you use your personal internet 30% of the time for work, you can only claim 30% of the costs.
2. Working from Home (WFH) Deductions
To qualify, taxpayers must demonstrate that they incurred additional expenses as a result of working from home. The ATO offers two calculation methods for WFH deductions:
a) Fixed Rate Method (70 cents/hour)
- Covers electricity, gas, internet, mobile and home phone use, and stationery. You are allowed to claim these even without a dedicated home office.
- You must keep a detailed log of your actual work hours — estimates are not sufficient.
- You can separately claim the decline in value of assets like office chairs or monitors.
b) Actual Cost Method
- Allows you to claim the exact amount spent on eligible WFH expense.
- Requires comprehensive documentation, including receipts and records of usage.
- This method allows for potentially larger claims, but has stricter substantiation requirements.
Important: You can’t claim expenses twice — if you use the fixed rate method, you can’t also claim those same expenses separately under the actual cost method.
3. Multiple Income Streams
Whether you’re juggling a side hustle, freelance work, or gig economy jobs (like Uber, Airtasker, or OnlyFans), all income must be fully declared.
Each income stream may have its own set of allowable deductions, but again, records are key.
Example: A freelance graphic designer may claim software subscriptions and design tools, but not gym memberships or fashion items “for client impressions.”
Final Thoughts: Get it Right the First Time
Tax laws can be complex, and even well-meaning taxpayers can get it wrong. A disallowed deduction could not only reduce your refund — it may also flag your return for audit, leading to penalties or interest.
Tip: If you’re unsure whether an expense qualifies or need assistance preparing your tax return, don’t hesitate to get in touch. It’s always better to check first than risk a deduction being denied.
Need Help?
We can assist you in reviewing your tax position before year-end to ensure you’re making the most of the opportunities available while reducing your exposure to compliance risks. Contact us today for a tailored review.
Pitt Martin Group is a firm of Chartered Accountants, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.
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This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.
By Zoe Ma @ Pitt Martin Tax
