1. Increased Scrutiny on Individual Tax Returns: Focus on Work-Related Expenses
The ATO is intensifying audits on work-related expenses claimed in individual tax returns. Some taxpayers have attempted to deduct items with no direct link to their job duties—such as air fryers, televisions, gaming consoles, or microwaves. Notable examples include truck drivers claiming swimwear for rest breaks, or fashion industry workers writing off luxury clothing as “essential for the industry” — all of which have been flagged as irregular.
Recommendations:
• Ensure that any claimed expense is directly related to your job duties and supported by documentation such as employer letters or usage explanations.
• Those working from home should follow ATO’s latest guidelines for calculating relevant deductions and keep daily records (e.g., electricity and internet usage).
• Taxpayers with multiple income sources — such as part-time work, freelancing, or platform-based services — must declare all income streams fully to avoid underreporting.
2. Small Business Instant Asset Write-Off Extended: Cap Set at AUD 20,000
For the 2024–25 financial year, the ATO has extended the instant asset write-off scheme. Eligible small businesses with an annual turnover under AUD 10 million and using simplified depreciation rules can immediately deduct the full cost of assets priced below AUD 20,000 in the year of purchase.
Recommendations:
• Confirm eligibility for the scheme before making purchases, and consult a tax advisor on the optimal treatment.
• Retain invoices, payment records, and asset usage documentation in case of audit.
• Where feasible, plan purchases within the financial year to maximise the deduction benefit.
3. Cracking Down on GST Refund Fraud: Offenders Face Criminal Charges
The ATO continues to clamp down on GST fraud involving fake invoices or business registrations. A recent case involved a Melbourne man who falsely claimed over AUD 390,000 in GST refunds through a fabricated business and attempted to defraud an additional AUD 330,000. He was sentenced to 2 years and 11 months in prison. The ATO emphasises that only those engaged in actual business activity are eligible to register for an ABN or claim GST refunds.
Recommendations:
• Ensure your business has genuine commercial activity and maintain accurate income, expense, and invoicing records.
• Do not fabricate transactions or simulate business operations. If you’re not operating a real business, avoid registering for GST.
• GST returns should be reviewed by qualified accountants and audited regularly to ensure accuracy.
4. Updated Small Business Benchmarks: A Tool for Financial Health Assessment
The ATO has released updated financial benchmarks for over 100 industries, covering metrics such as gross profit ratios and expense rates. These serve both as self-assessment tools and indicators the ATO uses to identify potentially non-compliant businesses.
Recommendations:
• Regularly compare your financials against industry benchmarks to assess your business health.
• Significant deviations from averages should prompt internal reviews to avoid being flagged by the ATO.
• Benchmark data is also valuable for financing, public reporting, or internal improvement efforts.
5. SMSF Reporting: ATO Advocates for Full Digital Transition
The ATO is encouraging all self-managed superannuation fund (SMSF) trustees to switch from paper-based to electronic reporting, aiming to improve security and reporting efficiency.
Recommendations:
• Use the ATO’s online services to submit quarterly activity statements and annual returns.
• Manage system access and data security via trusted individuals.
• Work closely with SMSF accountants or advisors to establish review and reporting routines to ensure compliance.
▲ Conclusion
This latest round of tax updates reflects the ATO’s growing use of audit tools and technology to enhance transparency and identify risk. For individuals, proper documentation of expenses and accurate income reporting is more critical than ever. For businesses, real transactions, compliance in asset management, and financial transparency are key to avoiding tax issues.
All taxpayers are advised to regularly review their tax strategies in line with current policies and to maintain close contact with professional advisors. For further guidance or assistance, feel free to contact our expert tax team.
