The common tax mistakes that could spark an ATO audit trigger

1. Work-Related Expenses (A Common Tax Mistake With Audit Trigger Potential)

The ATO estimates a tax cost of over $8 billion in incorrect claims, much of it tied to work-related deductions. To claim these expenses, you must meet all three of the following conditions:

• You spent the money yourself and weren’t reimbursed.
• The expense directly relates to earning your income.
• You have a record to prove it (e.g. receipt, logbook, invoice).

Example:
You bought a new suit for work. It looks sharp and you wear it to meetings — but unless it’s a compulsory uniform (with a logo or specific design), it’s not deductible. The ATO is clear: conventional clothing, even if worn exclusively for work, doesn’t qualify.

2. Working From Home Expenses

One of the fastest-growing tax mistake areas is work-from-home deductions. This year, the fixed rate method increased to 70 cents per hour. It covers:

• Electricity and gas
• Phone and internet
• Stationery and computer consumables

You can’t claim these items separately if you use the fixed rate. But you can still claim:

• Depreciation on office furniture
• New equipment (e.g. monitor, desk, chair)
• Repairs to your home office setup

To use the fixed rate, you must keep detailed records — diary entries, spreadsheets, or timesheets showing hours worked from home. Alternatively, the actual cost method lets you claim the exact portion of expenses attributable to your work. It’s more complex but can be worthwhile if you have high costs or a dedicated home office.

Example:
Harry works from home three days a week. He logs his hours and uses the fixed rate method. He also bought a $1,200 standing desk and a $500 monitor. He claims the 70c/hour rate plus depreciation on the desk and monitor.
His colleague uses the actual cost method, calculating 25% of their electricity and internet bills based on floor space and usage. It takes more effort, but their total claim is higher.

3. Investment/Holiday Home Expenses (Another ATO Audit Trigger)

In 2023, the ATO found errors in 90% of holiday home tax returns it reviewed. These types of tax mistakes are easy to make, especially when you’re mixing personal and rental use.

If your property is used for both, you must:

• Apportion expenses accurately between private and rental use.
• Ensure the property is genuinely available for rent — meaning it’s listed at market rates, advertised during peak periods, and not just “available” when you’re not using it.
• Apply different rules if rented to friends or family at below-market rates.

Example:
You own a holiday home in Lorne. You stay there every January and rent it out the rest of the year. You can only claim expenses for the rental period — not the month you used it privately. If your cousin stays for free in March, that’s also excluded.
The ATO may also question claims if the property is only advertised during off-peak times or at inflated prices that discourage bookings. If it’s not genuinely available for rent, that period doesn’t count.

4. Crypto Gains and Misreporting

Crypto is a rapidly growing area of confusion — and a magnet for audit triggers. The ATO is collecting more data than ever and can now match wallet addresses, transactions, and even overseas exchanges.

If you’ve bought or sold crypto, you need:

• Purchase and sale dates
• Amounts and costs
• Transaction fees
• Records of transfers between wallets

You also need to determine whether you’re a passive investor (capital gains tax applies) or a trader (income tax rules apply).

Example:
You bought Bitcoin for $3,000 and sold it for $5,500. That’s a $2,500 capital gain.
But if you’re trading daily, using bots, and running a crypto business, the ATO may treat it as income — and tax it at your marginal rate.

5. Rental Repairs vs. Capital Improvements

In 2023, the ATO found errors in 90% of holiday home tax returns it reviewed. These types of tax mistakes are easy to make, especially when you’re mixing personal and rental use. If your property is used for both, you must:

• Apportion expenses accurately between private and rental use.
• Ensure the property is genuinely available for rent — meaning it’s listed at market rates, advertised during peak periods, and not just “available” when you’re not using it.
• Apply different rules if rented to friends or family at below-market rates.

Example:
You own a holiday home in Lorne. You stay there every January and rent it out the rest of the year. You can only claim expenses for the rental period — not the month you used it privately. If your cousin stays for free in March, that’s also excluded.
The ATO may also question claims if the property is only advertised during off-peak times or at inflated prices that discourage bookings. If it’s not genuinely available for rent, that period doesn’t count.

6. Car Claims and Logbook Issues (Classic Audit Trigger Territory)

Car claims are often misunderstood — and one of the ATO’s most consistent audit trigger areas.

If you use your car for work (excluding commuting), you can claim expenses using:

Cents per kilometre method:
Up to 5,000 km per year at 85c/km (2024–25 rate). No logbook needed, but you must be able to show how you calculated the distance.

Logbook method:
Track your work-related use for 12 continuous weeks. You can then claim that percentage of all car expenses (fuel, rego, insurance, servicing, depreciation).

Example:
You drive from Ballarat to Melbourne for a client meeting — that’s deductible. But driving to your regular office? That’s commuting and not claimable.
If you use the logbook method and your work use is 40%, you can claim 40% of your total car expenses for the year.