For the 2025 tax season, the Australian Taxation Office (ATO) is urging taxpayers to exercise caution when claiming work-related expenses. This comes in response to a wave of claims that failed to meet basic standards of reasonableness — or as the ATO puts it, didn’t pass the ‘pub test’.
Here are a few examples that didn’t make the cut
- A mechanic tried to claim an air fryer, microwave, two vacuum cleaners, a TV, gaming console, and accessories as work-related expenses.
- A truck driver attempted to deduct the cost of swimwear bought during a trip, citing hot weather.
- A fashion industry manager submitted over $10,000 worth of luxury branded clothing and accessories as deductions for work-related events.
These claims were considered personal expenses and didn’t demonstrate a clear link to earning income. The takeaway? If you’re unsure, it’s best to leave it out — or check with us first.
2025 priorities
The ATO is zeroing in on areas where mistakes are commonly made, including:
- Work-related expenses: As mentioned earlier, deductions must be directly related to earning income and supported by records such as receipts or invoices. Even if an expense seems connected to your job, it typically can’t be claimed if it’s considered private. Many commonly assumed deductions often don’t qualify.
- Working from home: To claim home office deductions, taxpayers must show they’ve incurred extra costs as a result of working from home. The ATO provides two calculation methods: the fixed rate method and the actual cost method (explained further below).
- Multiple income streams: All income must be declared — including earnings from side hustles or gig work. Keep in mind, each income source may have its own set of eligible deductions.
Home office expense claims
If you work from home, there are two ways to calculate your deductions:
- Fixed rate method: Allows you to claim 70 cents per hour for extra running costs like electricity, internet, and phone use — even without a dedicated home office. To use this method, you must keep a record of the exact number of hours worked from home throughout the income year. Estimates aren’t acceptable.
- Actual cost method: Lets you claim the precise expenses you’ve incurred, supported by detailed records. While this method may result in a higher deduction, it comes with more demanding record-keeping requirements.
Keep in mind that double-dipping isn’t permitted. For example, if you use the fixed rate method, you can’t also claim mobile phone expenses separately.
As always, if you’re uncertain or need assistance with your tax return, don’t hesitate to get in touch.
