How to handle weird tax deduction claims

The article is relevant to members in Australia and was current at the time of publication.

The Australian Taxation Office (ATO) is used to receiving, and knocking back, what could be described as weird tax return deduction claims taxpayers have incorporated into their work-related expenses.

The bizarre claim list

Take one taxpayer, for example, who the ATO says attempted to claim A$17,000 in baby expenses in their 2024–25 tax return. Another sought to claim food delivery charges for their virtual attendance of an in-office morning tea while working from home.

Other claims rejected by the ATO — last financial year — included Secret Santa gifts bought for work functions and a t-shirt purchased for an office Christmas party.

Then there are even more bizarre deductions stories provided by tax agents. 

One taxpayer wanted to claim food and vet bills for their labrador who was allegedly used as a business security dog. Another attempted to claim an exercise bike used in their home office. Other attempted claims included children’s school fees and stationery costs, golf course and horse racing memberships, and costs associated with airline clubs, passports and immunisations.

A costly scam lesson

Michelle Frey CPA, Principal of accounting and business advisory firm TAK Advice, recalls a former client who wanted to claim back money he lost through a business scam.

“Unfortunately, just the way it happened and the nature of it, he had to claim it as a capital deduction, which means he couldn’t claim an immediate tax deduction,” says Frey, who ultimately decided to drop the client after he became aggressive with her.

“Most of our clients are pretty good. When you explain things to them, and how expense deductions need to relate to their business, the majority of people accept it.”

Spotting strange deductions with AI

Jason Robinson FCPA, Co-founder of accounting and business advisory firm Future Advisory, says one of his clients unsuccessfully tried claiming a Louis Vuitton laptop bag, worth thousands of dollars, because they used it exclusively for work purposes.

Another attempted to claim Peter Alexander and Victoria’s Secret pyjamas in their tax return during Covid because they wanted to be comfortable while working from home.

Robinson says accounting firms are increasingly using AI tools to scan client files for discrepancies between tax deduction claims and supporting receipts.

“If a client has thousands of transactions, we don’t have the capacity, time or the budget to click on every single transaction and look at the source data.”

AI technology is making that task easier by quickly analysing transactions and flagging those that need further investigation, Robinson says.

An expense claim too far

“Every year, we see examples of where taxpayers and agents maybe push the line a little bit in terms of attempting to claim work-related expenses that are clearly not deductible,” says ATO Deputy Commissioner Anita Challen.

“Most of them are personal in nature and therefore they’re just simply not deductible. It’s really important to note, from the ATO’s perspective, that those smaller illegitimate claims are still going to pique our attention, and we’re very focused on making sure the deductions that are coming through genuinely fit within those legitimate boundaries in terms of a work-related expense.”

ATO data shows almost 11 million Australians claimed about A$32 billion in work-related expenses in their 2023–24 tax returns, with many relating to working from home. The average claim made by taxpayers was about A$2950.

Work-related expense claims in 2023–24 tax returns

_{Source: Australian Taxation Office, 2023–24 individual tax returns processed by 31 October 2025.}

The three golden rules

Challen says it is important for tax agents to reinforce the ATO’s “three golden rules” for claiming tax deductions with their clients.

First, ensure clients have spent the money themselves and have not been reimbursed by their employer afterwards, which would equate to double-dipping.

Second, any expenses claimed must directly relate to earning income, not to expenses incurred just because a client has a job.

Third, tax agents should remind clients they need appropriate records of their work expenses to prove them, such as receipts.

“We do know there can be some complexity in apportioning expenses, particularly where an expense is incurred for both work and private purposes, and it’s important to note you can only claim a deduction for the work-related portion,” Challen says.

“And it’s really just reminding agents that when they’re having conversations with their clients, they should not fall into the trap of thinking that, if they intentionally claim a little bit more than they’re entitled to, the ATO simply won’t notice.” 

The ATO has over 40 occupation and industry specific guides on its website that outline expenses that can and cannot be claimed. These guides also include common deductions that can be claimed regardless of occupation.

Common taxpayer mistakes

Challen says the ATO knows that, in a lot of instances, taxpayers make genuine mistakes when incorrectly claiming for expenses. 

“And so, this tax time, we’re cautioning all agents and taxpayers to just take an extra second, an extra moment to check the information. It can really save them having to amend or adjust anything later and ensure they get it right the first time.”

Challen adds that while people mainly think about tax at tax time for work-related expenses and other deductions, it can be helpful to think about it throughout the year.

Early lodgement problems

Challen says the ATO sees an increased number of errors when taxpayers lodge earlier.

“I know that many people want to get things done quickly, but it doesn’t add up in the long run in terms of then having to redo things. It’s a lot of time and effort, both for the taxpayer and their agent.

“We know most tax practitioners are all over this, and they look to have those conversations with their clients. We also really appreciate the way they enforce those three golden rules.”