As we head into the 2025 tax season, I’m reminded of some of the more creative work-related expense claims that have crossed my desk – and unfortunately, the ATO’s rejection notices that followed. While I appreciate entrepreneurial thinking, there’s a fine line between legitimate business expenses and wishful thinking.
The Australian Taxation Office has been particularly vocal this year about reminding taxpayers to exercise caution when claiming work-related expenses. They’ve rolled out examples that frankly made me shake my head – and I suspect they’ll make you do the same.
When Creative Becomes Problematic
Take the mechanic who tried to claim an air fryer, microwave, two vacuum cleaners, a TV, gaming console and gaming accessories as work-related expenses. Or the truck driver who attempted to deduct swimwear purchased during transit because of hot weather. Perhaps most ambitious was the fashion industry manager who claimed over $10,000 in luxury branded clothing and accessories for work-related events.
The common thread? These claims were deemed personal in nature and lacked sufficient connection to income-earning activities. The ATO wasn’t buying it, and neither should you attempt similar claims.
My advice remains simple: if you’re genuinely unsure whether something qualifies, either leave it out or give us a call. It’s much easier to have a conversation beforehand than to deal with an audit later.
What’s on the ATO’s Radar for 2025
The ATO has made it clear they’re focusing on areas where frequent errors occur, and honestly, the patterns are predictable:
Work-related expenses continue to be the biggest issue. Claims must demonstrate a clear connection to your income-earning activities and be backed up with proper records – receipts, invoices, the works. Even if an expense appears work-related on the surface, it won’t fly if it’s fundamentally personal in nature.
Working from home deductions are another hot spot. You need to prove you actually incurred additional expenses because of working from home. The ATO offers two calculation methods, each with its own requirements and limitations.
Multiple income sources are increasingly common, and the ATO knows it. Whether it’s your side hustle, gig economy work, or investment income, everything needs to be declared. Each income source may have different deductions available, which adds complexity but also opportunity when done correctly.
Getting Working from Home Deductions Right
For those juggling home and office work, understanding your options is crucial:
The Fixed Rate Method allows you to claim 70 cents per hour for additional running expenses like electricity, internet and phone usage. You don’t need a dedicated home office, but you absolutely must record the actual hours worked from home throughout the income year. A reasonable estimate won’t cut it – the ATO wants precision.
The Actual Cost Method lets you claim actual expenses incurred, provided you have records to back everything up. This method potentially delivers larger deductions, but the record-keeping requirements are significantly more demanding.
One critical point: double dipping isn’t allowed. If you’re using the fixed rate method, you can’t separately claim mobile phone costs. Choose your method and stick to its rules.
The Bottom Line
Tax time doesn’t have to be stressful if you approach it methodically. Keep good records throughout the year, understand what genuinely qualifies as a work-related expense, and don’t try to push the boundaries with creative interpretations.
The “pub test” remains a useful benchmark – if you wouldn’t be comfortable explaining your claim to a stranger at the pub, it probably won’t pass muster with the ATO either.
If you’re feeling uncertain about any aspect of your return, that’s exactly when you should reach out to us. We’d rather spend time ensuring your return is compliant from the start than helping you navigate an audit down the track.
For assistance with your tax return or business advice, contact our TSP team on 4926 4155 or email ad***@****************om.au for an appointment time.
With 30+ years of experience, David is a highly skilled tax and business advisor with expertise spanning primary production, transport, retail, medical, and professional industries. His broad knowledge allows him to provide practical, results-driven strategies for clients of all sizes.
David is a member of Chartered Accountants Australia and New Zealand and is also an ASIC-registered SMSF auditor. His commitment to helping businesses grow makes him a vital part of the TSP leadership team.
Qualifications & Expertise:
✅ Chartered Accountant (CA)
✅ SMSF Auditor & Registered Tax Agent
✅ Business & tax planning across multiple industries
📧 davida@tspaccountants.com.au |
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