15 Million Aussies On ATO ‘Hit List’ As Common Claims Are Targeted – The Australian Taxation Office (ATO) has announced a comprehensive review targeting approximately 15 million taxpayers for the 2025 tax season. This initiative focuses on curbing exaggerated or incorrect claims, particularly in areas contributing to a significant $8.7 billion tax gap.
15 Million Aussies On ATO ‘Hit List’ As Common Claims Are Targeted
| Area of Focus | Common Issues | ATO’s Stance |
|---|---|---|
| Work-Related Expenses | Claims for luxury items like yachts, vacations, and personal grooming as work-related expenses. | Must be directly related to income-earning activities and substantiated with appropriate records. |
| Working From Home (WFH) | “Double-dipping” by claiming both fixed rate and individual expenses separately. | Choose either fixed rate or actual cost method; proper documentation is essential. |
| Side Hustles | Undeclared income from gig economy activities like ride-sharing and online sales. | All income must be declared; the ATO is increasing scrutiny in this area. |
| Rental Property Claims | Overclaimed deductions, incorrect apportionment of rental income and expenses. | Ensure all rental income is declared and deductions are accurately reported. |
| Small Business Compliance | Misuse of company funds for personal expenses, inappropriate claims of deductions. | Maintain clear records separating personal and business transactions. |
The ATO’s intensified scrutiny for the 2025 tax season underscores the importance of accurate and honest tax reporting. With powerful data analytics and a sharp eye on red flags, taxpayers must be more diligent than ever. By understanding the rules, maintaining proper documentation, and seeking professional advice when necessary, taxpayers can ensure compliance and avoid potential penalties.claiming work-related expenses
Work-Related Expense Claims
The ATO has identified a trend of taxpayers making dubious claims, such as luxury yachts, tropical island vacations, engagement rings, and pilates machines, all presented as work-related expenses. Expenses must be directly related to income-earning activities and substantiated with appropriate records. Personal expenses, including commuting and childcare costs, are not deductible.
Working From Home (WFH) Deductions
Taxpayers can choose between a fixed rate method (70 cents per hour) or the actual cost method for claiming WFH expenses. The ATO warns against “double-dipping,” where individuals claim both the fixed rate and individual expenses separately. Proper documentation, such as timesheets or work diaries, is essential.
Common Mistakes with WFH Claims
Some taxpayers wrongly claim expenses like rent or mortgage interest. These are only deductible under strict conditions where the home is a principal place of business—not just a WFH arrangement. Others forget to adjust their claims for shared use with family or roommates.
Side Hustles and Gig Economy Income
With nearly one million Australians engaging in secondary income sources, the ATO emphasizes the importance of declaring all income from side hustles, including ride-sourcing services and online sales. Failure to report such income can lead to penalties and interest charges.
Examples of Gig Income
Side gigs include freelance writing, tutoring, reselling on eBay, Etsy or Facebook Marketplace, Uber driving, or delivery services like DoorDash. Even renting out equipment or properties on Airbnb qualifies. All income—regardless of how small—must be declared.
Rental Property Claims
The ATO is focusing on overclaimed deductions, such as excessive interest expenses and incorrect apportionment of rental income and expenses. Property owners must ensure all rental income is declared and deductions are accurately reported. Common errors include claiming deductions for periods when the property was not genuinely available for rent.
ATO’s Data Matching Techniques
The ATO uses data-matching technology to cross-reference property records, loan data, and rental income reported on platforms like Airbnb. Inconsistencies can trigger audits or automatic reassessments.
Small Business Compliance
The ATO is addressing issues like the misuse of company funds for personal expenses, inappropriate claims of deductions, and participation in the shadow economy. Businesses are urged to maintain clear records separating personal and business transactions. The ATO is also focusing on contractors omitting taxable income and small businesses misunderstanding major deductions.
New Tools and Benchmarks
The ATO has introduced business performance benchmarks to identify outliers. Small businesses outside typical ranges for their industry may receive warning letters or review notices.
Tips for Taxpayers
- Maintain Accurate Records: Use tools like the ATO’s myDeductions app to keep track of expenses and receipts.
- Understand Deduction Criteria: Ensure that any claimed expense is directly related to earning income and is not personal in nature.
- Seek Professional Advice: Consult with a registered tax agent or refer to the ATO website for guidance on eligible deductions.
- Avoid Unsubstantiated Claims: Refrain from making claims that cannot be supported with evidence, as this may lead to penalties.
- Use ATO Tools: Leverage calculators and checklists available on ato.gov.au to validate your claims.
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FAQs
Q1: Can I claim a deduction for my home internet if I work from home?
Yes, if you use the actual cost method, you can claim the work-related portion of your home internet expenses. If you use the fixed rate method, internet expenses are included in the 70 cents per hour rate.
Q2: Is travel to and from work deductible?
No, commuting expenses are considered personal and are not deductible.
Q3: Can I claim a deduction for a home office setup?
Yes, you can claim depreciation on home office furniture and equipment used for work purposes. Immediate deductions are available for items costing $300 or less.
Q4: What if I rent out my property for only part of the year?
You can only claim deductions for the period your property was rented out or genuinely available for rent. Claiming a full year’s worth of deductions is not permissible.
Q5: How do I report income from my side hustle?
All income from side hustles must be declared in your tax return. Keep detailed records of all earnings and related expenses.
Q6: What happens if I’m audited by the ATO?
You’ll be asked to provide receipts, records, and possibly bank statements. If discrepancies are found, penalties and interest may apply. Being honest and cooperative can reduce penalties.
Q7: Can I prepay expenses to reduce my tax?
Yes, eligible small businesses and individuals can prepay certain expenses (like insurance or subscriptions) to claim deductions in the current year. Conditions apply.
