ATO to Start Micro-Checking Tax Deductions

The Australian Taxation Office (ATO) is sharpening its focus on tax deductions in 2025, announcing plans to micro-check claims with greater scrutiny than ever before. This comes after a series of eyebrow-raising deduction attempts were uncovered, including claims for air fryers, gaming consoles, luxury-branded clothing, and even swimwear. These personal items were rightly denied, as they lacked any genuine connection to income-earning activities. The ATO’s message is clear –  deductions must meet strict criteria, and personal or lifestyle-related expenses won’t be tolerated.

One of the main areas under review is working from home (WFH) deductions, which continue to be among the most frequently claimed. Taxpayers are reminded that only actual additional running costs can be deducted, and they must use either the fixed rate method (70 cents per hour) or the actual cost method, with proper records to back it up. Attempting to double-dip or claim unrelated expenses may raise red flags. Furthermore, all sources of income, including side gigs like ride-sharing or freelancing, must be declared to avoid penalties.

The ATO is urging Australians to take their tax obligations seriously. Those caught making false, exaggerated, or unsupported claims may face significant consequences, including audits, financial penalties, and in severe cases, legal action. As the ATO begins micro-checking deductions, taxpayers are advised to keep detailed records, avoid assumptions, and when unsure, consult the official ATO guidance or speak with a registered tax professional. With enforcement tightening, playing it safe is no longer just good advice, it’s essential.

Examples of Wrong or Rejected Tax Deductions

1. Air Fryer and Microwave
   Claimed by a mechanic as “work-related kitchen appliances” — denied, as they were personal household items with no connection to earning income.
2. Gaming Console and Accessories
   Attempted deduction for a gaming setup, claiming it was for stress relief after work — rejected as not directly related to job duties.
3. Swimwear for a Truck Driver
   Claimed because the driver wanted to swim during rest stops on hot days — denied, as it was a personal lifestyle choice.
4. Luxury Clothing and Accessories
   A fashion industry worker tried to claim over $10,000 in branded clothing for attending work events — denied, since conventional clothing (even expensive) is not deductible unless it’s occupation-specific, protective, or a uniform.
5. TV for Office Use (at Home)
   Claimed as a “home office screen” — denied when the ATO found it was used primarily for personal entertainment.
6. Travel to and from Work
   Regular commuting costs were claimed as work-related — not allowed, as travel to and from your workplace is considered private.
7. Childcare Costs
   Some taxpayers attempted to claim daycare and babysitting fees — denied, as childcare is a private expense, not directly tied to earning income.

How to Avoid Making These Mistakes

1. Ask yourself – Is This Directly Related to Earning My Income?
   If not, it’s probably not deductible.
2. Keep Accurate Records
   Save receipts, invoices, and logs for all work-related expenses. Use tools like the myDeductions app to track everything.
3. Don’t Rely on Assumptions or Hearsay
   Just because a colleague claimed it doesn’t mean it’s valid.
4. Be Realistic – the “Pub Test”
   Would a reasonable person believe your expense is legitimately work-related? If not, don’t claim it.
5. Avoid Double Dipping
   If using the fixed rate method for working from home, don’t also claim individual items like electricity or internet separately.
6. Declare All Income
   Report earnings from side hustles, freelancing, or apps. Hidden income is a red flag for audits.

Taking a few extra steps now can save you from audits, penalties, or worse later. The ATO is watching closely in 2025, make sure your return is clean, compliant, and defensible.