The ATO warns taxpayers: Don't let AI or influencers lead you astray this tax time.
The Australian Taxation Office (ATO) has issued a series of warnings regarding the increase of online misinformation about tax deductions and income reporting, particularly from AI tools and social media influencers. The agency has outlined key areas under scrutiny, compliance measures, and reminders for taxpayers as the end of the financial year approaches.
Key Areas of ATO Scrutiny
ATO Assistant Commissioner Anita Challen stated that rental income, cash jobs, work-related deductions, and online side gigs are being closely examined. The ATO cautions taxpayers against acting on advice that appears "too good to be true," noting that AI-generated advice may rely on outdated or non-Australian tax systems.
Rental Property Deductions
The ATO will closely examine rental income and deductions for properties, including short-stay and informal arrangements. Accounting firm BDO noted that new guidance may prevent property owners from claiming holding costs (e.g., interest, council rates, insurance) if the property is deemed primarily for private or holiday use rather than generating rental income.
Expenses must be apportioned based on genuine income-producing use versus private use. Data indicates that 2 million investors claimed an average net rental loss of $1,290. Common mistakes include claiming private loans as investment loans and confusing repairs with improvements.
Work-Related Deductions
As of the 2024-25 financial year, over 10 million Australians have claimed approximately $31 billion in work-related expenses, with the average claim at $3,100. Assistant Commissioner Challen noted that unusual claims have included $17,000 in baby expenses, $20,000 gifted to a family member, and personal items like Christmas shirts or novelty T-shirts.
Common errors include incorrectly claiming work-related expenses, under-declaring income, and misapportioning home office costs.
Work from Home Deductions
Two methods are available for claiming work-from-home expenses:
- Fixed rate method: 70 cents per hour worked, covering electricity, gas, phone, internet, and stationery. Requires records of hours worked and at least one bill for each expense type.
- Actual cost method: claims the work-related portion of all expenses, including depreciation and cleaning. Requires detailed records of hours, receipts, and calculation methodology.
Private use, such as streaming or children's internet usage, must be excluded from claims.
Other Common Deductions
- Car expenses: $11.9 billion claimed by 3.9 million individuals. Ordinary travel from home to work is not deductible.
- Travel, clothing, self-education: $7 billion claimed. Ordinary clothing is not deductible; must show a direct connection to income.
Valid Deductions
The ATO allows various occupation-specific deductions, such as:
- Sunscreen, hats, and sunglasses for outdoor workers
- Specific footwear for flight attendants
- Guard dog expenses for security workers
- Professional-grade scissors for hairdressers
- Work bags for some employees
Cryptocurrency Reporting
Hundreds of thousands of Australians buy and sell cryptocurrencies. Taxpayers must declare capital gains or losses and keep records of the time, date, and amount of each transaction.
Compliance and Data Matching
The ATO uses data from banks, government agencies, online platforms, and crypto exchanges to pre-fill returns and identify fraud. In 2023-24, over 555,000 returns were adjusted before assessment. AI provides real-time alerts, with human oversight for adverse outcomes.
Taxpayers are responsible for the accuracy of information in their returns, regardless of the source of advice (friends, online, or AI). Intentionally overclaiming deductions can lead to penalties.
Assistant Commissioner Challen advised taxpayers to wait until the end of July to lodge returns for easier pre-filling, and to verify claims against ATO guidance rather than social media or AI misinformation.
Superannuation
The ATO reminds workers to update their superannuation details, as changes including "payday super" take effect from July 1.