Tax time 2025: the ATO's three focus areas and the records they demand

142,000 people who lodged in the first two weeks of July 2024 had to lodge an amendment, or had the ATO investigate and amend the return for them. That is the ATO's own number, published in its June 2025 warning against lodging too early. Almost none of those corrections came from a hard technical question. They came from lodging before the prefill data arrived. The ATO has named three focus areas for tax time 2025, and every one of them is really a question about records.

The three areas the ATO named for 2025

On 7 May 2025 the ATO published its tax time priorities for 2025: work-related expenses, working from home deductions, and multiple income sources. Assistant Commissioner Rob Thomson set the standard in one sentence. Work-related expenses "must have a close connection to your income earning activities, and you should be prepared to back it up, with records like a receipt or invoice".

More than 10 million people claimed a work-related deduction in 2024, so this is not a niche audit program. The ATO also repeated two claims it will not accept from anybody: travel between home and work, and childcare. Both are private in nature. So is conventional clothing, no matter how much your job depends on presentation. The ATO gave the example of a fashion industry manager who claimed well over $10,000 in luxury branded clothing and was refused.

Rental properties and capital gains are not on that list of three. They sit inside the third one. Rental income, a capital gain on a sale and a side hustle are all income sources, and omitted income is the easiest error for the ATO to find, because it already holds the data.

The three golden rules have not moved

The ATO's guidance on claiming deductions sets three conditions for a work-related deduction, and all three must be met:

• You spent the money yourself and were not reimbursed.
• The expense directly relates to earning your income.
• You have a record to prove it, usually a receipt.

Two riders matter as much as the rules themselves. The expense must not be private, domestic or capital in nature. And where an expense is part work and part private, you claim only the work-related share — which means you must apportion it and be able to show your working.

That is the whole test. There is no fourth rule about the claim being reasonable, and no discretion to round a figure up because it feels close.

Working from home: 70 cents an hour, or actual cost

For the 2024–25 income year the fixed rate is 70 cents for every hour you work from home. The ATO's fixed rate method guidance confirms the rate for 2024–25, up from 67 cents in 2023–24.

The rate covers four things: home and mobile internet or data, mobile and home phone usage, electricity and gas for heating, cooling and lighting, and stationery and computer consumables. If you use the fixed rate, you cannot claim any of those four separately anywhere else in your return. Mr Thomson's phrase for it was "no double dipping".

What you can still claim on top is the decline in value of the equipment and furniture you work with — desks, chairs, computers, bookshelves — and the repairs and maintenance on those items. If an item cost $300 or less and you use it mainly to produce non-business income, you deduct the full cost in the year you buy it. Above $300, it is written off over its effective life.

The record each method demands is where people come unstuck

This is the part that is worth reading twice, because the simpler method carries the stricter record.

Fixed rate. You need a record of the number of actual hours you worked from home across the entire income year — a timesheet, roster, diary or spreadsheet kept at the time. The ATO's guidance is explicit that an estimate of your hours will not be acceptable, and unlike the actual cost method there is no representative four-week period. You also need at least one record for each running expense the rate covers: one quarterly electricity bill, one internet bill, one receipt for stationery.

Actual cost. The actual cost method guidance allows either a full year of actual hours or a continuous four-week period that represents your usual pattern of working from home. In exchange, you need records of every expense you claim and evidence of its work-related use, plus your calculations. You also cannot claim for a room where other members of the household are sitting with you, because you are not incurring an additional cost.

So the trade-off is not effort against accuracy. It is one careful hours record against a full set of expense records.

A worked example

Take an employee living in Robina who worked from home two days a week through 2024–25. This is an example, not a client.

She keeps a spreadsheet of start and finish times as she goes, which totals 742 hours for the year. In October 2024 she buys a desk chair for $280 and uses it only when working at home. She keeps one quarterly electricity bill, one monthly internet bill and one mobile phone bill.

Under the fixed rate method:

• 742 hours × 70c = $519.40
• Chair, $280, deducted in full because it cost $300 or less
• Total $799.40, claimed as $799 — the ATO disregards the cents rather than rounding them

She cannot then claim her internet or phone bills separately. At a 30% marginal rate plus the 2% Medicare levy, that $799 deduction is worth about $255 in tax.

Had she kept no record of her hours until March, only the hours from March onward would count. The earlier months would be an estimate, and estimates are not accepted. That is not a penalty; the deduction simply does not exist without the record. Getting the record-keeping set up at the start of the year is one of the cheapest things we do inside accounting.

Rental properties: the interest apportionment trap

The ATO's warning to rental property owners found the majority were making errors, despite 86% of them using a registered tax agent. The most common mistake is the line between repairs and capital.

A repair can generally be claimed immediately. A capital item — a dishwasher, curtains, a heater — is deductible immediately only if it cost $300 or less; otherwise it is written off over time. Ripping out a kitchen and installing a better one is a capital improvement, not a repair.

Interest is the bigger number. The ATO's example: you hold an $800,000 mortgage on a rental property, then redraw $50,000 to upgrade the family car. You can claim interest on $800,000, not on $850,000. Repaying the private portion later does not fix it either. Payments have to be apportioned between the private and investment components for the life of the loan.

The ATO receives data from banks, land title offices, insurance companies, property managers and sharing economy platforms, and cross-checks it against lodged returns. Stamp duty is not deductible while you rent the property out (outside the ACT), but you keep the record until you sell, because it goes into the cost base and reduces the capital gain.

Capital gains: crypto and property

A capital gain is not a cash event you can time by feel. The ATO's guidance on working out CGT on crypto lists when a CGT event happens: you sell a crypto asset, gift it, trade or swap one crypto asset for another, convert it to Australian or foreign currency, or buy goods or services with it.

Swapping one coin for another is the one people miss. No dollars moved, so it does not feel like a sale. It is a disposal, and the gain is calculated in Australian dollars at the time. Hold an asset for at least 12 months and the CGT discount may apply. A net capital loss cannot be deducted against your salary. It carries forward against future capital gains.

Property works the same way on disposal, which is why the records you keep during ownership matter years later.

What 31 October actually means

If you lodge your own return, the ATO's guidance on preparing your tax return puts the due date at 31 October. In 2025 that is a Friday, so there is no weekend rollover. If that return produces a tax bill, payment is due by 21 November.

A registered tax agent's lodgment program is a different arrangement, and it is worth understanding what it does and does not give you. Under the registered agent lodgment program due dates for individuals, the date depends on your history:

• 31 October where one or more prior year returns were outstanding at 30 June
• 31 March where your latest lodged return produced a tax liability of $20,000 or more
• 15 May for everyone else, with a concessional date of 5 June for individuals, provided any payment due is also made by then

The condition attached is the part that catches people. You must already be on that agent's client list. The ATO's position is that if you are engaging an agent for the first time, or changing agents, you must do it before 31 October. Signing up in November does not retrieve the extension you have already lost.

That extra time is not procrastination room. It buys the space to reconcile a rental schedule, work out a cost base, or chase a missing bank record before the return goes in rather than after. Where a side hustle or a second income stream is involved, it is also when the structure question is worth asking, which is business advisory work rather than a lodgment task.

If your affairs are more than a payment summary and a bank account, the deadline is the least useful thing about using an agent. Come and talk to us about taxation and compliance before October, not in the last week of it.