ATO Tax Time Targets for 2025
Written by: Adam Ramage | Accounting Team
With Tax Time 2025 here, we want to share with you what is in the spotlight for the Australian Taxation Office (ATO) this year!
Each year, the ATO releases the areas they will be focusing on for taxpayers, and this year, they have highlighted areas where they see common errors. The ATO published data on Work Related Expenses claims by individuals for the 2024 tax year:
- Car Expenses: $10.3 Billion
- Travel Expenses: $2.5 Billion
- Clothing: $2.2 Billion
- Self-Education: $1.8 Billion
- Other: $10.8 Billion
To help ensure you report your income and expenses correctly, please consider the following:
- Work-related expenses, including working from home deductions;
- Reporting all sources of income, including rental properties and “side hustles”;
- Capital Gains, including Cryptocurrency; and
- When you should lodge your Tax Return.
Work-Related Expenses For Your Income Tax Returns
Rob Thompson, ATO Assistant Commissioner, notes:
“If your deductions don’t pass the pub test, it is highly unlikely your claim would meet the ATO’s strict criteria, so we are just reminding people that if they are making a work related expenses, to follow the three golden rules… You need to have paid for it yourself, it needs to directly relate to the income that you’re earning, and that it can’t be private in nature.”
Your work-related expenses must have the relevant nexus (close connection) to your income-earning activities, and you should keep relevant records to back up your claims, such as an invoice or receipt showing you have incurred the expense.
The ATO has published some of the “wild” work-related expenses that taxpayers have attempted to claim in the past, and expects you will have the relevant information to substantiate your claims.
So, compile your records, receipts and invoices so that you are “armed” with the information to support your claims.
Some examples mentioned include claiming expenses for travel to and from work, and even childcare costs. These expenses are personal in nature and cannot be claimed.
Working From Home Expenses This Tax Season
There are two ways you can calculate your deduction for working from home to fulfil your employment duties (not carrying out minimal tasks), and you have to have evidence to prove you incurred additional expenses due to working from home.
Method One: using the fixed rate method allows you to claim 70 cents for every hour you work from home and covers your additional running expenses that are often difficult to apportion, like internet, phone usage, electricity and stationery. Remember, if you use this method, these expenses cannot be claimed elsewhere on your tax return.
Method Two: to claim the actual cost method, you need to have records of all expenses you are claiming and records to support the work-related use.
Tip: We have prepared a Working From Home logbook to assist you, and it can be downloaded here: 2024-25 WFH Logbook
Car Expenses
Again, there are two methods for claiming car expenses, the cents per kilometre rate and the actual expenses method (Log Book). For the 2025 year, the cents per kilometre is 88 cents, and the actual expenses method applies the work-related percentage based on the logbook to be applied to fuel, maintenance, registration, insurance and depreciation. For the cents per kilometre, the ATO requires that you have a reasonable method for calculating kilometres, such as diary entries.
Rental Property Reporting
In the 2024 year, 1.7 million individuals reported rental property deductions, with an average loss of $1,800, and the ATO warns that interest deductions are in the spotlight. Remember that it is the use of the borrowed funds that determines the deductibility of interest, not which property a loan is secured against. Please note that the amount of deductible interest is impacted by any personal drawings from a loan.
Side Hustles
Taxpayers need to report income from all sources, including “side hustles”, for example, ride-sharing services or selling services via an app. Each source of income will have different deductions available to you, depending on the nature of your income and your occupation.
Capital Gains Including Cryptocurrency
The ATO receives income from a wide range of sources, including loan information from mortgage lenders, real estate bodies (including Airbnb), share registry services, and they also receive cryptocurrency information from Australian designated services providers.
Capital Gains Tax related to the disposal of an asset, including cryptocurrency. You should maintain appropriate records for the cost base of all assets to ensure the correct CGT calculations at tax time.
When You Should Lodge Your 2025 Tax Return
The ATO warns against rushing to lodge their tax returns as soon as July 1 comes around.
As a reminder, the ATO has access to data from banks, state revenue offices, land titles, motor vehicles registries, insurance companies, share registries, ASIC, PayPal, eBay, Uber, Airbnb, and Crypto asset exchanges.
Please wait until income from all sources is pre-filled in your tax return before lodging.
Meaning, that when you have interest to include in your tax return from banks, dividend income, payments from other government agencies and private health insurers, you will likely need to wait until the end of July for this to be pre-filled in your tax return.
By lodging in early July, you are effectively doubling your chances of having your tax return flagged as incorrect by the ATO and also resulting in needing to complete an amended income tax return.
If you owed the ATO on your last tax return and would like a better understanding of why, we’ve got the article just for you! Why Do I Owe On My Income Tax Return?
Canny Group + Your Income Tax Return
Well, there’s a lot to know when it comes to Tax Time!
And it’s not exactly easy to make sure everything is done right; however, this is where you’re not alone! Canny Group’s team of expert accountants are here and ready to help.
This year, we have phone appointments available, Monday to Friday 8 am – 7 pm and 9 am – 11 am on Saturday mornings! Better yet, if you prefer to see an accountant in person, just walk into our office at a time that suits you! Our office hours for walk-in tax return preparation are:
Monday + Thursday 9 am – 7 pm | Tuesday, Wednesday, Friday 9 am – 5 pm.
Get in touch with our team to find out how we can help you separate your income tax return this year and stay off the ATO’s watch list.
