Key takeaways
- The two focus areas are work-related deductions and omitted income.
- Three golden rules: the expense must relate to earning your income, you must have paid it yourself without reimbursement, and you must have a record.
- Working from home can be claimed at a fixed rate of 70 cents per hour, or by the actual cost method with full records.
- A deduction returns your marginal rate, not the full amount. $1,000 claimed is worth about $320 at a $85,000 salary.
- Side hustles, cash jobs, interest and rental income all have to be declared.
- The ATO is warning specifically about tax tips from AI platforms and finfluencers.
What the ATO is watching this year
Assistant Commissioner Anita Challen put it plainly: the ATO will focus on areas where taxpayers most often get it wrong, meaning work-related expenses and income that does not make it onto the return. The warning against quiet over-claiming was blunt, that assuming a slightly inflated claim will fly under the radar is a mistake given the data matching now in place.
The context is worth knowing. ATO data matching adjusted more than 595,000 individual returns in 2024-25. Covered in more detail in our tax time 2026 update.
The three golden rules
The ATO repeats these every year because they decide almost every deduction dispute:
- The expense must relate directly to earning your income.
- You must have spent the money yourself and not been reimbursed.
- You must be able to support the claim with a record such as a receipt, invoice or logbook.
If a claim fails any one of the three, it fails. The ATO also publishes occupation and industry specific guides, which are the fastest way to see what your job can legitimately claim. Some are unexpectedly specific: guards may claim guard dog expenses, hairdressers may claim professional-grade scissors, and outdoor fitness workers may claim sunscreen and sunglasses.
Working from home: two methods, pick one
| Method | How it works | Records needed |
|---|---|---|
| Fixed rate | 70 cents for every hour worked from home, covering running costs that are hard to apportion such as internet, phone, electricity and stationery | Hours worked from home |
| Actual cost | Claim the real expenses and the work-related portion of each | Records of every expense claimed and its work-related use |
The fixed rate is simpler and safer for most people. Actual cost can be worth more if you have a genuinely dedicated workspace and the paperwork to prove apportionment.
What a deduction is actually worth
This is the part misinformation gets wrong most often. A deduction reduces your taxable income, so it returns your marginal rate, not the full amount you spent. Claiming $1,000 does not put $1,000 in your pocket.
| Salary | Deduction claimed | Actual tax saving |
|---|---|---|
| $45,000 | $1,000 | $220 |
| $85,000 | $1,000 | $320 |
| $150,000 | $1,000 | $390 |
Computed on 2026-27 resident rates including the Medicare levy. Buying something you do not need to get a deduction always costs more than it returns.
Income people leave off
The other focus area is income that never makes the return. The ATO listed side hustles, cash jobs, rental properties, online activity and content creation. Pre-fill will catch employment income, bank interest and dividends because third parties report them, but it will not catch cash or platform income you do not declare.
If a second income has no tax withheld from it, the shortfall shows up as a bill at assessment rather than a refund. That mechanism is explained in why is my tax refund so low, and a second job with withholding is modelled in the second job tax calculator.
The newer problem: where the advice comes from
The ATO devoted a whole media release in April to tax misinformation, calling out AI platforms, finfluencers and well-meaning family advice. Its point about AI was specific and fair: these tools draw on broad and inconsistent sources, including overseas tax rules and outdated Australian ones.
Challen also made the accountability clear. Taxpayers remain responsible for what goes on their return regardless of where the advice came from, including advice prepared with AI tools. That is a reasonable standard, and it is the same reason every figure on this site is computed from published ATO rates and cited rather than asserted. Our methodology page sets out how.
Frequently asked questions
What can I claim on tax without receipts?
What are the ATO focus areas for tax time 2026?
How much is the working from home rate?
How much does a deduction actually save me?
Do I have to declare income from a side hustle?
Can I rely on AI or social media for tax advice?
Sources
- ATO media release, 27 April 2026: From hacks to half-truths: ATO warns of tax time misinformation and reveals focus areas
- ATO media release, 27 July 2026: ATO reveals tax time dos and don'ts as lodgments get underway
- ATO media release, 22 June 2026: Over 595,000 tax returns adjusted as ATO warns against early lodgment
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Narelle Hartigan is a CPA-qualified tax accountant with over a decade of experience in Australian personal taxation and payroll. She founded PAYG Calculator Australia to make tax withholding easy for every Australian worker to understand.