The Australian Taxation Office (ATO) is calling on Australians to ensure their tax claims are accurate as the end of the financial year approaches, highlighting a rising number of individuals who are incorrectly listing personal expenses as work-related deductions.
Since July 2019, the ATO has received more than 300,000 reports from the public regarding tax avoidance and other dishonest practices. In the 2024–25 financial year alone, nearly 50,000 alerts were raised by community members who noticed suspicious activities.
Pushing the Boundaries
The ATO notes that many workers are testing the limits of what can be legitimately claimed. Assistant Commissioner Anita Challen explained that for typical office employees, there are limited items that can be deducted.
“Most expenses related to commuting to work or clothing worn to work are private and personal,” Challen said.
However, Challen pointed out that the ATO provides 40 occupation-specific guides detailing unusual deductions for various professions. For instance, hairdressers can claim tools such as scissors, while outdoor sports workers may deduct sun protection items like sunscreen, hats, and sunglasses.
Three Golden Rules
Challen outlined three essential rules for claiming deductions: workers must have paid for the item themselves without employer reimbursement, the expense must directly relate to earning income, and receipts must be kept as evidence.
Regarding subscriptions like streaming services or professional networking platforms such as LinkedIn, most workers cannot claim them unless their job specifically requires their use, such as reviewing movies for payment.
“If you also use the service for personal purposes, such as watching movies with friends on weekends, you must apportion the cost accordingly,” Challen said.
The ATO advises workers to consult the verified guides on its website or seek advice from a registered tax professional to ensure correct claims.
Tax Fraud Expected to Rise
Avinash Singh, Principal Lawyer at Astor Legal, warned that reports of tax fraud will likely increase as the end of the financial year approaches. Tax fraud peaks during this period, involving both individuals and small businesses.
“The bulk of tax fraud stems from over-claiming deductions. Additionally, many small businesses underreport income, especially cash transactions,” Singh said.
Singh noted that common legal issues arise when individuals or businesses illegally reduce tax liabilities by claiming personal expenses as business deductions.
“Many small businesses try to lower their assessable income or inflate deductions to fall into a lower tax bracket. Individuals also use deductions to reduce their taxable income,” he explained.
To stay compliant, Singh emphasized the importance of keeping receipts for all claimed deductions and providing evidence that they are genuine business expenses.
“If the ATO investigates, taxpayers must justify their deductions. Without receipts or proof, this could lead to fines or criminal prosecution,” he said.
Singh warned that the ATO has become more aggressive and sophisticated in detecting tax fraud. If an error is found, early legal advice is crucial.
“People should consult a criminal defence lawyer experienced in tax fraud to correct the error without facing penalties or prosecution,” he advised.
