No one loves tax time. Filing your annual return can be frustrating and stressful if you’re doing it for yourself, and even with the help of a tax accountant, it can be confusing if you were expecting a refund that never arrived. To make life a little easier, we wanted to get some tax return tips from a professional.
We spoke with Mark Chapman, the Director of Tax Communications at H&R Block Australia, to understand what the Australian Tax Office (ATO) is looking for this year, the best ways to minimise your risk of being audited, and understand exactly what you can and can’t claim as expenses.
From common mistakes people make and what happens when you get audited, to the kinds of things you can claim as work-related expenses and the risks of using ChatGPT to do your tax return, we cover it all. Read Chapman’s general advice below.
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ATO Focuses During EOFY 2025
As has been the case for the last few years, the ATO is taking a particularly close look at work-from-home expenses. Last financial year, around 9 million Aussies claimed about $28 billion in expenses, making it a big target for the tax office to find potentially dodgy claims.
“The ATO is looking at specific risk factors, which are related to work-related expenses. The ATO estimates that there’s about an $8.5 billion deficit between the amount of tax that people are expected to pay and the amount of tax that people actually are paying, and the ATO believes that the bulk of that relates to people incorrectly claiming work-related expenses.”
“So they’ve got a real laser-eyed focus on excessive work-related expenses, and the tip is to make sure you can prove all the things that you’re claiming, and don’t attempt to embellish claims and overclaim because you’re simply setting yourself up for an ATO audit by doing that.”
Industries Under Scrutiny
If your mate has confidently told you the ATO is targeting tradies, personal trainers, or any other specific industry, we’ve got some good news – they aren’t.
“There aren’t any industries or occupations under extra scrutiny this year – that isn’t the way the ATO looks at people these days.”
Deductions Under Scrutiny
To ensure you avoid the ATO knocking on your door this tax season, make sure you take extra care to ensure your work-from-home expenses have been properly calculated and you can prove all of your expenses. Thinking, “She’ll be right,” and clicking “submit” on your return isn’t going to be good enough this year.
“The ATO has really highlighted working from home deductions. So you can either claim the ‘actual cost method’, where you need to keep a record of all of your expenses, and you properly apportion all of those expenses between private and work-related as a part of the substantiation requirements. The ATO are looking particularly closely at that.”
“The other option is the ‘fixed-rate method’ or the 70 cents per hour fixed deduction that the ATO allows. It has fewer substantiation requirements, and you just need to keep a record of working from home expenses for the entire year to substantiate all of your hours that you claim to be working from home.”
“You or your employer can keep timesheets or a roster, or you can keep a diary. The ATO believes that there are rich pickings here because many people won’t have done that, so they’ll be on tricky ground in terms of claiming the fixed-rate method.”
AI Tax Returns
Unsurprisingly, using ChatGPT or any other AI platform isn’t a good idea. It might make preparing your return easier, but it could make your life harder in the long run.
“AI is inherently risky because it isn’t always correct, and it’s only as good as the information that goes into its system. It can spit rubbish out, and I wouldn’t recommend that you use AI to prepare a tax return.”
“It is better to use human assistance in the form of a tax agent to prepare your tax return rather than ChatGPT, which is unreliable.”
How Long Does An Audit Take?
If you do get audited, it’s unlikely to be an enjoyable experience. Fingers crossed the ATO only questions one or two figures in your return, because if they audit your entire return, it could be an expensive and lengthy process to get through.
“A full audit can potentially take a couple of years, unfortunately. You can either be audited in respect of one particular figure that the ATO believes is wrong, or alternatively, if the ATO regards you as high risk, they can go to town on your tax return and audit the whole thing.”
“If they’re just going to inquire about one particular figure, then you just need to be able to provide substantiation behind that figure, and that could be quite a quick process.”
“If the ATO decides to audit your entire tax return, then the timeframe can blow out, and it can become a very time-consuming process. It can also be a resource-consuming process because you’ll probably have to engage a tax agent to handle the audit on your behalf.”
Common Mistakes That Lead To An Audit
Once again, make sure any expenses you’re claiming can be backed up with invoices, log books, or timesheets, because claiming more than you’re owed isn’t a good idea. If you haven’t done that for this year, now’s the perfect time to start doing it for the upcoming financial year.
“People do tend to over-claim deductions. They claim things that they’re not entitled to, such as people claiming the 5,000 kilometres using the cent-per-kilometre deduction method for their motor vehicle, when in actual fact they haven’t driven for work at all.”
“Another common one is not keeping adequate substantiation. People might claim something because they know they spent it, but they can’t actually prove that they spent it because they don’t have a receipt or an invoice. Therefore, technically, they can’t make the claim, and that can be very expensive on their part.”
“You ideally need the receipt of the invoice – a bank statement or a credit card statement can be helpful, but if you’re claiming for something that you bought at Coles, that wouldn’t be adequate because there’s inevitably a question as to whether it was for work use or whether it was for private use.”
“On the other hand, if you’re claiming something from Office Works [using a bank or credit card statement], then that could be sufficient. It just depends on what the item is that you’re claiming and what the item of expense is on the bank or credit card statement.”
Clothing Claims
You can claim uniforms as deductions, but you can’t claim anything you’d be able to wear to coffee with a mate. As much as you’d like them to, R.M. Williams do not count as work boots and suits aren’t a uniform even if they feel like one.
“Conventional clothing that you could wear outside the workplace [isn’t allowable]. As an example, personal trainers claiming running shoes or athletic gear are never allowed because they’re not strictly work-related.”
“The ATO does allow a deduction for work-related uniforms and protective gear, such as boots, glasses, or facemasks, but wearing normal clothing like business suits will never be allowable by the ATO.”
Car Claims
Car claims are fine, so long as you can demonstrate to the ATO how you’ve used it at work.
“You can claim deductions for your work vehicle, whatever the work vehicle is. If you use it for work and you can prove that you use it for work, then deductions are absolutely fine.”
“In terms of the cost, you would have to depreciate the cost over the expected life of the vehicle, which is typically four years, and there’s a cap of $69,674, beyond which you can’t depreciate it. So if it’s somebody who’s claiming a fancy car, they won’t be able to claim the entire cost.”
Weird & Wonderful Claims
Unsurprisingly, Chapman has seen more than his fair share of ambitious claims to the tax office, but while most of them aren’t allowed, there are a few unexpected ones that are.
“We’ve had some fairly outlandish claims over the years, like people trying to claim cosmetic surgery, such as breast enhancements, who work in the adult industry. That isn’t allowed because medical procedures generally aren’t.”
“Some unusual deductions are allowable. We had a sword swallowing circus performer who claimed his sword, and that was allowable, because his profession was a professional sword swallower. If you’re in an unusual profession, you can make unusual deductions, like musicians can claim musical instruments and actors can claim acting classes.”
“It’s uncommon, but it just depends on your profession.”
