With the 2025 tax season fast approaching the Australian Taxation Office (ATO) is reminding taxpayers to be careful when claiming work related expenses.

This is in reaction to a spate of claims that didn’t quite pass the ‘pub test’.

The ATO is looking for claims which they deem ‘personal in nature’ and which lack a sufficient ‘connection’ to income earning activities.

The advice here would be – if in doubt leave it out or run it by us.  

2025 priorities 

The ATO is focusing on areas where frequent errors occur including: 

• Work related expenses: as above, claims must have a clear connection to income earning activities and be substantiated with records including receipts or invoices. Even if an expense seems to relate to income earning activities, it can’t normally be claimed if it is a private expense. There are a wide range of common expenses that normally don’t qualify for a deduction. 
• Working from home deductions: taxpayers must prove they incurred additional expenses due to working from home. The ATO offers two methods for calculating these deductions: the fixed rate method and the actual cost method (more detail below). 
• Multiple income sources: all sources of income, including side hustles or gig economy work must be declared. Each source may have different deductions available. 

Working from home deductions 

For those working from home there are two methods to calculate deductions: 

• Fixed rate method: claim 70 cents per hour for additional running expenses such as electricity, internet and phone usage even if you don’t have a dedicated home office. This method can only be used if you have recorded the actual number of hours you worked from home across the income year. A reasonable estimate isn’t enough.  
• Actual cost method: claim the actual expenses incurred, with records to substantiate the claims. This method potentially enables a larger deduction to be claimed, but the record keeping obligations are more onerous. 

It’s important to note that double dipping is not allowed. For instance, if you claim deductions using the fixed rate method you can’t separately claim a deduction for your mobile phone costs.  

As always, if you’re unsure or need help with your tax return please reach out.