Think Before You Claim: ATO Cracks Down on Dodgy Work-Related Tax Deductions This Tax Season

As the 2025 Financial year approaches, the Australian Taxation Office (ATO) is sounding the alarm on false and exaggerated work-related tax deductions. With over $28 billion in work-related tax deductions claimed in 2023–24 alone, and an average of $3,000 per taxpayer , the ATO tax deductions crackdown is in full force.

Some of the recently uncovered examples clearly fail to meet the standard of what would be considered reasonable or allowable under the ATO tax deduction rules of 2025.

From engagement rings to gaming consoles and even swimwear for hot days on the road, dodgy tax claims in Australia are stretching the boundaries of what qualifies as “work-related.” But the ATO is reminding everyone that if it’s not genuinely linked to earning your income and if you didn’t pay for it yourself, it’s not deductible.        

ATO Spotlights Unjustified Work-Related Tax Deductions

ATO Assistant Commissioner Rob Thomson has called out some particularly eyebrow-raising claims this year. Among them:

1. A taxpayer tried to claim an engagement ring as a donation.
2. A company director attempted to write off their juicer, gaming console, and coffee machine as WFH tools.
3. A truck driver tried to claim swimwear to beat the heat during long hauls.

It’s a clear sign: the ATO tax deductions crackdown isn’t just a threat — it’s happening. The ATO is using data matching and sophisticated analytics to sniff out false tax deductions before assessments are even issued.

The Three Golden Rules

So, what can you claim on tax? The ATO makes it simple with three rules:

1. You must have spent the money yourself.
2. The expense must directly relate to your income.
3. The expense must not be private or personal in nature.

Car Expenses: The Big-Ticket Tax Deduction

Car-related travel continues to be the most commonly claimed expense, with $10.3 billion claimed by 3.6 million Aussies in 2023–24.

Under the ATO car deduction rules, there are two main ways to claim:

1. Cents per kilometer method: In 2024–25, this is 88 cents/km (up from 85 cents/km last year). You can claim up to 5,000 km per car per year without a logbook, but you must still be able to show how you calculated the distance.
2. Logbook method: Requires a 12-week logbook and allows you to claim a percentage of all car-related costs, including fuel, rego, insurance, and maintenance.

Just don’t try to double dip by using both methods and claiming rego separately If using the cents-per-kilometre method, the ATO is onto it.

WFH Deductions: Choose Your Method Wisely

With around 4 million people claiming working-from-home expenses last year, the ATO work-from-home deduction area is another major focus.

Two methods are allowed:

1. Fixed Rate Method (70 cents/hour for 2024–25): Covers electricity, internet, phone, stationery no need to apportion costs, but a record of actual work hours is essential.
2. Actual Cost Method: Claim the exact expense amounts, but be prepared with detailed receipts and calculations, including separating work from personal use.

You can’t mix and match if you use the fixed rate, don’t try to also claim internet separately.

Rental Properties and Mixed Loans

The ATO also has its eye on the 1.7 million Aussies who claimed rental deductions last year. They’re particularly cautious about:

1. Mixed-purpose loans: Only the portion used for the investment property is deductible. If a loan is partly used to buy a car or fund a holiday; that interest isn’t claimable.
2. Phantom services: Don’t claim for property managers or repairs you didn’t actually pay for.

Crypto, Side Hustles, and Transparency

Cryptocurrency trading, gig work, and side hustles are also under surveillance. Over 400,000 Aussies traded crypto last year, but many aren’t keeping records or declaring gains.

Whether it’s Uber, eBay, Airbnb, or OnlyFans, all income must be declared, and the ATO’s data-matching capabilities are making it easier than ever to detect what’s missing. In 2024, over 584,000 individual returns were adjusted thanks to these programs.

High Claims? Expect a Pause

If your tax deductions in Australia for 2025 are significantly higher than the norm for your income or job, you may be at risk.

Expect your tax return to be flagged by the ATO and delayed for review

They use sophisticated data analytics to compare your claims against similar taxpayers, and if something looks off, they’ll request supporting documents like receipts, invoices, logbooks, or usage records.

So, before you hit "submit," make sure you can back up every claim with actual documentation. If you can’t prove it, you shouldn’t claim it.

Lodge with Confidence With a Registered Tax Agent in Australia  

At Lodge Pro, we know that tax can be confusing, especially when the line between personal and work expenses gets blurry. That’s why we never guess or gamble with your tax deductions. We only claim work-related tax deductions for what you’re legally entitled to and nothing more, making your tax time stress-free.  

At Lodge Pro, our AI-powered system and expert teamwork work hand in hand to ensure you claim the right deductions for all your work-related expenses accurately, legally, and confidently.

So, skip the stress and second-guess lodgeing. Let us take care of your tax return the right way. Start lodging now with Lodge Pro.