ATO warns Aussies against claiming personal expenses as tax deductions amid thousands of community tip-offs

The Australian Taxation Office (ATO) is urging Australians to get their tax claims right as tax time approaches, warning of a growing number of people incorrectly claiming personal expenses as work-related deductions.

The ATO said it received over over 300,000 tip-offs from the community about “tax avoidance and other dishonest behaviours” since July 2019.

WATCH VIDEO ABOVE: ATO cracks down on dodgy tax deductions

In the 2024–25 financial year alone, almost 50,000 red flags were said to have been raised by members of the community who spotted something suspicious.

The ATO said many workers are pushing the boundaries when it comes to what can legitimately be claimed.

ATO Assistant Commissioner Anita Challen said for most typical office workers, there isn’t a lot that can be claimed on tax returns.

“Most of getting to work, what you wear to work, they’re all private and personal expenses,” Challen said.

However, Challen said the ATO does have 40 occupation and industry-specific guides that outline unusual deductions for certain professions.

Workers in the sporting industry who spend time outdoors may be able to claim sun protection items like sunscreen, hats and sunglasses, while hairdressers can claim scissors and other tools they use.

Challen outlined three golden rules for claiming deductions: workers must have paid for the item themselves without reimbursement from their employer, the expense must have a direct connection to earning income, and receipts must be kept as proof.

When it comes to subscriptions like streaming services or premium networking platforms like LinkedIn, most workers won’t be able to claim them.

The exception would be if someone’s job specifically required them to use these services, such as reviewing movies for payment.

“The important thing with that is if you’re then using it on the weekend to watch movies with friends, you do need to apportion for those personal expenses,” Challen said.

The ATO recommends workers check the verified guides on their website or seek advice from a registered tax professional to ensure they’re claiming correctly.

Tax fraud still expected to spike

Principal Lawyer at Astor Legal, Avinash Singh, said reports of tax fraud will only continue to spike with the end of financial year less than a month away.

Tax fraud is most significant during End of Financial Year (EOFY), ranging from individual to small business offences, he said.

“The largest part of tax fraud comes from over-claiming deductions. There are also a number of small businesses who regularly underreport income, particularly cash transactions,” Singh said.

According to Singh, individuals or small businesses commonly run into legal issues when they illegally reduce their tax liabilities claiming certain personal use expenses as business-related deduction.

“Many small businesses will attempt to reduce their assessable income or increase their deductions so that they fall into a lower tax bracket. Individuals also tend to try to use deductions as a way of reducing their assessable income,” he said.

“The most common mistakes people can avoid making to stay compliant this EOFY is ensuring they have receipts for any purchases being claimed as deductions and having evidence that those items are genuine deductions.

“If the ATO commences an investigation, it asks the taxpayer to justify their deductions. If there are no receipts or evidence that a deduction was a genuine business expense, then this could result in fines or even a criminal prosecution.”

Singh warned that the ATO has become more aggressive and sophisticated in detecting tax fraud, and if an error is found, legal adivce should be sought early.

“People should seek advice from a criminal defence lawyer with experience in tax fraud to ensure the error is corrected in a manner that does not expose you to penalties or prosecution.”