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What’s on the ATO’s 2025 Hitlist for Individual Taxpayers — And How to Stay Off It


By Defy Gunadi August 19, 2025 | Tags: ,

The majority of Australians genuinely want to do the right thing at tax time. But too often, people are led astray by poor advice from inexperienced accountants, or by tips from self-proclaimed “experts” on TikTok, Facebook, and other social media platforms. Believe it or not, the ATO has even issued warnings urging taxpayers to be cautious about following the guidance of social media influencers when making deductions.

We are now seeing more and more people being reviewed or audited by the ATO. With the rollout of advanced AI tools, ATO data-matching technology, and a substantial funding boost from the government, the ATO is knocking on almost everyone’s door — from everyday employees to small business owners and Self-Managed Super Fund (SMSF) trustees.

From our own audit experience, there’s a clear pattern to the areas the ATO is focusing on. In this article, we’ll break down those key targets and share practical steps you can take to reduce your audit risk.

Non-Lodgement and Late Lodgement

Failing to lodge your tax return on time — or not lodging at all — is a fast way to get the ATO’s attention. Thanks to its pre-fill data, the ATO already knows much of your income from employers, banks, and investment platforms before you even submit your return. If you delay or skip lodgement, the ATO can issue a default assessment based on that data, which may not include all your eligible deductions. Staying on top of your lodgement deadlines is one of the easiest ways to avoid unnecessary penalties and unwanted reviews.

Claiming a Large Tax Deduction — ATO Benchmarks and Audit Risks

One of the ATO’s most effective tools is data-matching your claims against people in similar jobs. If you’re an engineer, for example, the ATO compares your deductions with the average deductions made by other engineers. If your claim is significantly higher than the industry benchmark, it may trigger a review or audit.

Claiming a large deduction isn’t an issue if you can back it up. The key is having receipts for every expense and ensuring those expenses are directly related to earning your income. If you’re not sure whether a deduction is valid, it’s best to consult your tax accountant or registered tax agent before lodging your return.

Claiming Travel Expenses — ATO Rules and Real Audit Cases

Travel expenses remain a common ATO travel expenses audit trigger, especially where the ATO suspects the travel may be private in nature. The rules are clear: trips between your home and your usual workplace are generally not deductible.

Interesting Case in Point:

In a recent Administrative Review Tribunal (ART) decision, an engineer working for a large oil and gas producer claimed nearly $31,000 in accommodation, meals, and incidental costs for time spent in Perth, Darwin, and Broome between offshore shifts. While he argued these were work-related, the ART found they were private — incurred while travelling to the offshore facility or between rotations when he was off duty.

The tribunal ruled that because his permanent workplace was the offshore facility, any travel to get there was considered preliminary to his work duties. It also clarified that receiving an allowance doesn’t automatically make an expense deductible. Ultimately, most of the travel claims were denied, though his home office expenses were allowed.

Takeaway: Only claim travel that is directly connected to your duties — for example, travel between two different work sites on the same day. Keep detailed records to support your claims.

Claiming Motor Vehicle Expenses — Records, Limits, and Audit Triggers

Motor vehicle claims have always been one of the most heavily scrutinised areas for both employees and business owners. After property deductions, they’re the most common reason the ATO initiates a review.

From 1 July 2025, the car limit for depreciation purposes is $69,674. This is the maximum value you can use to calculate depreciation if the vehicle is first used in the 2026 income year.

If you use a car for both private and business purposes, you can only claim the business-use percentage — and you must have records (such as a logbook) to prove it.

The cents-per-kilometre rate for the 2025/26 financial year remains at 88 cents per kilometre, up to a maximum of 5,000 business kilometres per vehicle.

Example: In another ART case, a sports presenter successfully claimed car expenses for trips between his home and the ABC studio. His job had two clearly distinct roles — a Digital Role producing ABC Sport Digital Radio content (which he performed entirely from home) and a Live Role producing live sports broadcasts such as NRL football (which could only be done at the ABC’s Southbank Studios).

During the pandemic, he would start his working day at home fulfilling his Digital Role, then travel to the studio to work on the Live Role before returning home. The tribunal determined this travel wasn’t the typical “home-to-work” trip, which is usually private and non-deductible. Instead, it was travel between two separate places of work for the same employer on the same day, undertaken as part of his income-earning activities.

Work From Home Claims — Updated ATO Rules for 2025

Simply owning a laptop and answering emails from the couch doesn’t automatically make your work-from-home claim legitimate. If you’re genuinely working from home, the space usually has the hallmarks of an office — a dedicated area, set up for productive work, and used regularly for your job.

The ATO is paying closer attention to WFH claims than ever, especially since the fixed-rate method was updated. In the motor vehicle case above, the sports presenter wasn’t just splitting his time between two work locations — his home also served as a genuine workplace. During the pandemic, government restrictions and his employer’s requirements meant he produced his digital broadcasts entirely from a spare bedroom, day in and day out. This wasn’t a casual arrangement; it was a functional workspace where most of his income was earned. Recognising this, the ART allowed him to claim a portion of his rent as a genuine home office expense.

Here are the ATO’s key points for Tax Time 2025 if you’re looking to comply with the ATO work from home deduction rules 2025:

  • No minimum hours are required to qualify for a deduction, but you must be working from home to fulfil your duties — not just checking emails.
  • Record keeping is essential. If using the fixed rate (70 cents per hour), you must record every hour worked from home between 1 July 2024 and 30 June 2025. Estimates or representative records are no longer accepted.
  • If you use the actual cost method, you need a record showing a continuous four-week period that reflects your usual WFH pattern.
  • Under the fixed-rate method, phone and internet costs are already included. To claim these separately, you must use the actual cost method.
  • Rent, mortgage interest, and insurance are generally not deductible for employees unless part of the home is set aside as a dedicated “place of business.”

Be Wary of Investment Property Claims — Common ATO Red Flags

Investment property deductions remain one of the ATO’s biggest audit targets — and for good reason. While most investors aim to get their claims right, even small errors can draw unwanted attention. Common issues include:

  • Claiming repairs that are actually capital improvements.
  • Using an old depreciation schedule from a previous owner on a second-hand property.
  • Mismatching your reported rental income with the figures the ATO collects from property managers and online platforms.
  • Claiming loan interest for funds that were partly used for private purposes, such as redraws for holidays, renovations to your own home, or personal spending.
  • Incorrectly apportioning interest after refinancing or using a single loan for both investment and private purposes — the ATO now checks these splits very closely.

From our experience, these rental property tax audit reviews often start with a simple data mismatch or unusually high claims compared to similar properties. The ATO’s sophisticated data-matching tools can see your rental income, property purchase details, loan statements, and even renovation timelines. If something doesn’t line up, it’s likely to trigger a review.

If you’d like to better understand the ATO’s approach and learn how to safeguard your claims, you can read our detailed guide on ATO audits of investment property claims and how to avoid them in 2025.

Cryptocurrency Transactions — ATO Audit Focus in 2025

Every crypto activity — selling coins for cash, swapping one cryptocurrency for another, transferring between wallets, staking, or earning rewards — can have tax consequences. Many taxpayers mistakenly believe crypto transactions are untraceable, but with exchange data and blockchain analysis, the ATO can easily link activity to individual taxpayers. Failing to declare crypto gains, losses, or income is a growing audit trigger, especially for large or frequent trades. To stay compliant, keep detailed records of every transaction, including dates, amounts, wallet addresses, and the Australian dollar value at the time.

What Should You Do Next?

The ATO’s 2025 audit focus areas show just how easy it is for simple mistakes — or bad advice — to put you under the microscope. The best way to protect yourself is by keeping accurate records, understanding the rules before you claim, and getting guidance from an experienced tax professional who deals with these issues every day.

At Investax, we specialise in helping individuals and investors navigate complex tax rules while maximising legitimate deductions. An accounting fee paid to a good accountant should be seen as an investment — not a cost. Especially when that fee is 100% tax deductible, it makes sense to work with someone who understands the complexity of tax law and ATO audits. If your current accountant isn’t experienced in these matters, maybe it’s time to give Investax a go.

We offer a 15-minute free consultation to discuss your tax, property investment and business needs. Book your complimentary consultation now.
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General Advice Warning

The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.Although every effort has been made to verify the accuracy of the information contained on this page and on our website, Investax Group, its officers, representatives, employees and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.

Reference

Tarvel Expense – Case in Point

Travel Expense – Hall & Commissioner of Taxation 

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