Australian Taxation Office Issues 2025 Tax Return Guidelines
Sydney:
Soon, more than 15 million Australians should be lodging a tax return with the Australian Taxation Office in the hope of receiving at least a small refund.
About 60% of taxpayers use an accountant to prepare their tax return while the other 40% lodge their returns via their MyGov account. This links them to the tax office, Medicare and other government services.
The tax office receives about 1000 tip-offs a week from people who know or suspect evasion. Of these, the office deems about 90% warrant further investigation.
What to remember when preparing your tax return
These days, the tax office prefills much of your income information. The ATO will let you know through your MyGov account when your income statements from your employer are 'tax ready'.
But other income including bank interest, dividends and managed investment funds distributions may take longer to appear, so don't rush to complete and lodge your tax return on July 1 if these aren't there. When these items prefill, check them for accuracy and correct any errors.
The tax office does not know about all your income so remember to provide details of other sources including capital gains on investments and income from other jobs for which you have an Australian Business Number.
Some items, such as private health insurance information, are only partially pre-filled so be sure to check that all questions have been answered and all necessary information provided.
How to claim deductions
To claim a deduction you must have spent the money yourself and were not reimbursed from another source.
The expense must be directly related to earning your income from either employment or services provided, from investments such as shares or a rental property, or from a business you operate.
And you must have a record to prove your expense. This usually needs to be in the form of a receipt or a diary.
If you don't know how to record your deductions, an easy option is to use the tax office myDeductions app. You can scan receipts and allocate them to the correct section of your return.
What the tax office will be looking for in 2025
Each year the tax office targets particular areas. For 2025, these are:
Working from home expenses: you can choose between two methods: the fixed rate method or the actual cost method.
The fixed rate method allows you to claim 70 cents for each hour worked from home during the year. You do not need to keep receipts, but you must keep a record of the hours worked at home.
The actual cost method allows you to claim the costs of working from home, but taxpayers must have a dedicated room set aside for the office and remove all private use.
You cannot claim personal items like interest on a home loan or rent expenses unless you are operating a business from home.
Personal items, such as coffee machines, are not claimable even if you use them while working from home. Mobile phone and internet costs are included in the 70 cents per hour fixed rate. The ATO will be looking for taxpayers who claim these twice – for example, on their return and from their employer.
The 70 cents per hour rate does not include depreciation of work-related technology and office furniture, cleaning of the home office and repairs to these items. So these amounts can be claimed separately.
Motor vehicle expenses: there are also two methods to work out this claim. The log book method requires you to have kept a record for 12 weeks. You then need to work out the percentage you used your car for work or business which is applied to your expenses.
The cents per kilometre method allows you to claim 88 cents for each kilometre up to 5,000 km of work or business travel. No receipts need to be kept for this method, but you must be able to justify the total kilometres that you have claimed.
If you use the cents per kilometre method, do not double dip by claiming additional motor vehicle expenses.
Rental properties: make sure the expenses you claim do not include your personal costs. For example, the interest expenses must only be for the rental property and not interest from your personal home.
Also, if you own 50% of the rental you can only claim 50% of the expenses, even if your taxable income is higher than the other owner. If you have a holiday home you can only claim expenses for when that home was rented out, not the whole year.
Cryptocurrency: many taxpayers are buying and selling cryptocurrency. These transactions need to be reported in your tax return when they are sold as a capital gain or capital loss.
Other forms of income: if you earn money through the sharing or gig economies, you must include all income from these activities in your return. If you sell goods online, the tax office may consider it to be a business, and it will expect the income to be declared.
Don't be tempted to cheat
The ATO already knows a lot about your tax situation, which makes it harder than ever to cheat.
The tax office uses data matching to check information you include in your return against data provided by other parties including share registries and your health insurer. It also gathers information from the internet.
If the data doesn't match your return, or your claim is considered excessive, the ATO may contact you. You may be asked to explain why and, if your explanation is unsatisfactory, you might be audited.
Penalties of 25% to 75% of the tax owed may apply for falsely claiming deductions. The more dishonest the claim, the higher the penalty).
The link between what you claim and what you earn has to be real. So do not claim the cost of your Armani suit as a work uniform or your pet as a mascot for your business. Even the cost of a massage chair to relieve work stress cannot be claimed.
Dubious claims received by the tax office in recent years are many and varied. They have included Lego, school uniforms and sporting equipment purchased for kids, $9000 worth of wine bought by a wine expert while on a European holiday, for personal consumption, and a claim using receipts lodged by a doctor for an overseas conference he didn't attend.
What if I make a mistake or the ATO finds an error?
If you make a mistake in your tax return, you can always amend it via MyTax.
The tax office will not fine you unless you did not take reasonable care, but you will have to pay back the shortfall in tax.
The due date to lodge your own return is October 31. If you are having trouble meeting this date, contact the tax office and ask for an extension.
Disclaimer: this is general information only and not to be taken as financial or tax advice.
(Authors: Robert B Whait, Senior Lecturer in Taxation Law, University of South Australia and Connie Vitale, Senior lecturer tax and accounting, Western Sydney University)
(Disclosure statement: Robert B Whait receives funding from the Federal Government as part of the National Tax Clinic Program, Financial Literacy Australia (now Ecstra Foundation), ANZ Bank, and the Consumer Policy Research Centre (CPRC). He is affiliated with the Tax Institute of Australia and Chartered Accountants Australia and New Zealand.
Connie Vitale receives funding from the Federal Government as part of the National Tax Clinic Program. She is affiliated with the Institute of Public Accountants and Chartered Accountants Australia and New Zealand.)
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