What you need to know

Garreth Hanley:
This is With Interest, a business, finance, and accounting news podcast brought to you by CPA Australia.

Jenny Wong:
Welcome to With Interest. I'm Jenny Wong, and in today's show, we're kicking off our 2025 tax time series with important discussion about what you need to know for this tax season. We'll be speaking with Rob Thomson, Assistant Commissioner at the ATO and the official tax time spokesperson. He will share valuable insights regarding updates from the Australian Taxation Office, and tips to ensure you and your clients are well prepared. Welcome to With Interest, Rob.

Rob Thomson:
Thanks, Jenny. Thanks for having me.

Jenny Wong:
Rob, can you give us a high-level overview of tax time 2025 and its key focus areas for this year?

Rob Thomson:
Sure, Jenny. So, look, no real surprises. I think this tax time we mostly want to focus on ensuring people are reporting correctly. So that's reporting all their assessable income in their tax return and only claiming what they're entitled to when it comes to deductions.

When it comes to work-related expenses. And we've seen some pretty wild claims, for example, we’ve seen a mechanic who claimed their air fryer and their TV. We’ve seen a truckie who tried to claim their swimwear. So, these are obviously personal expenses and denied. Not all deductions, we see for personal expenses, are so wild and extreme. But we just think it's a good reminder to people that in order to claim a work-related expense, it does need to directly relate to the income that you're earning.

Working from home deductions is another one we're focused on. So, in 2024 more than 10 million people claimed a work-related expense, and about half of those, claimed a working from home deduction.

So we just want to make sure that people are calculating their working from home deductions correctly, whether they use the fixed-rate method, which is now $0.70 for every work hour they've worked from home for the 2025 financial year, or they're using the actual cost method where they need to calculate the claim of the actual expenses incurred in using their records and receipts.

And finally, when it comes to income, just reminding taxpayers they need to include and declare all sources of income in their tax return, and make sure that they've included it in their tax return. This includes side hustles, for example, whether you're either selling services through an app or selling goods through an app. Either way that needs to be included in your tax return at tax time.

Jenny Wong:
Rob, what are some of the common errors you're seeing when it comes to claiming deductions. And do you have some advice on how these can be avoided?

Rob Thomson:
Most errors we see on deductions can either be linked to poor record keeping, a lack of connection between the expense and the way someone earns income, and the incorrectly apportioning or not apportioning claims to account for any private use. So, there's a key thing that people need to remember when they're claiming a work-related deduction is our three golden rules.

So, the first is you need to have spent the money yourself and not be reimbursed for it. The second is that the expense must directly relate to the income that you're earning. And the third is that you need to have a record, normally in the form of a receipt, to show that you've spent the money.

We're also encouraging people to use our occupational-specific guidelines, which are on the ATO website, and that helps people to work out what they can and cannot claim specific to their work or industry. And we've got about 40 of those, and they're on our website, and they can actually be a handy tool also, for tax agents and accountants to be able to give them to their clients so their clients can understand what they can and cannot claim, make sure that they've got all their records in place for this tax time, but also make sure that they start collecting their records and receipts for next tax time, so they can maximise the claim that they're entitled to claim.

Jenny Wong:
When it comes to record keeping. What are some of your top tips to ensure taxpayers are able to substantiate their claims for work-related expenses?

Rob Thomson:
So I think the main one is to make sure you keep all your receipts. If you're claiming a deduction, you need to record the expense. And in most cases, the record needs to include written evidence, for a supplier like a receipt, and it needs to show the cost, the name of the supplier, the date it was purchased, the nature of the expense, and the date that the document was provided.

And there might also be other specific documentation or recordkeeping requirements specific to certain expenses, such as a logbook for car expenses.

I think another tip is that a bank or credit card statement on its own is normally not enough to substantiate your claim. And that's a kind of common mistake we see made. I remember a year or so ago, a tax agent came up to me and said, “Well, what else would the tradie be buying at the servo other than fuel.” And I'm like, “You know, chocolate milk, cigarettes, sausage rolls.” So, you know, definitely need the receipt attached to it, just not the bank statement. A reminder that people need to keep their records for five years, or at least five years, after the date they've lodged and in certain circumstances, this can be even longer.

And I think the last thing is we know records fade. Kept in the shoebox, I don't know. I think sometimes the taxi receipts, I always find fade a little bit. So you can keep your receipts digitally as well. So don't forget that. And our myDeductions tool on the ATO app is actually a really easy way for people to keep all their receipts in one place in digital format. And that can be shared with your tax agent or can be used if you're lodging online yourself. So, a really good tool there.

Jenny Wong:
Yeah, I've downloaded the app and it's pretty handy I think. You mentioned work from home deductions are a focus for the ATO again this year, Rob. What are the key things we need to know?

Rob Thomson:
So to claim a working from home deduction, you actually need to be working from home to fulfill your employment duties Jenny. So you can't just be like quickly checking the email, you know, taking the occasional phone call. It needs to be a little bit more than that. You also need to have the right records for your expenses.

So if you're eligible to claim a working from home deduction, there's the two methods you can use. There's the fixed-rate method or there's the actual cost method. So the fixed rate method allows you to claim a fixed rate for every hour that you work from home. And for the 2025 financial year, that's $0.70 per work hour you work from home which covers all your expenses. So electricity, gas, internet, stationery. So you can't claim those expenses separately on your tax return. And that's an error we do see people kind of make a mistake occasionally.

The actual cost method, you have to claim the actual expenses you incurred when working from home. With either method, you also need to keep records, to show that you've incurred the expense as a result of working from home. And the exact records you need will depend on whether you're using the fixed rate or the actual cost method.

So there's lots of information on our website about those. But like, for the flexibility for people to choose which method that they want to use, then really they should probably just keep all their records and then can choose at the end of the tax year, which gives them the best outcome. So you need to keep the hours you've worked at home for the whole year. Now that can be a spreadsheet, a diary, you know, whatever works as long as you can show us that.

Evidence of your running expenses so things like your power bill, your internet bill, receipts of any depreciating assets, or equipment that you've used when working from home and records of your personal and work-related use of those assets.

Jenny Wong:
What about claims for self-education? Talk to us about the eligibility for claiming costs of a training course or to attend a work-related conference, Rob?

Rob Thomson:
So Jenny, you can claim a deduction for self-education expense if at the time you incur that expense, it either maintains or improves the specific skills and knowledge required to your current job or it results, or it's likely to result in an increase in income within your current job. So self-education expenses can include general course expenses, the decline in value of depreciating assets, conference or seminar fees, and in some cases, meals and accommodation if the education requires you to travel and be away from home for one or more nights.

What you can't claim is a few things when it comes to self-education expenses. So you can't claim a deduction for self-education if you're not employed. So that's the first one. The second is if it doesn't have a sufficient connection to your work activities or only kind of relates in a very general way. And the third is, it can't be for the purpose of getting a new job that's unrelated to your current job. So a really good example of this is, even if you're a dental technician training to be a dentist, your current job is the dental technician. So if you're training to be a dentist, those expenses you couldn’t claim as self-education.

Jenny Wong:
We've covered off some of the key ones, but there is a lot to unpack when it comes to deductions and work expenses. Where would you point people if they were looking for further information before lodging this tax time, Rob?

Rob Thomson:
So obviously the best place to find information is the ATO website. Or you can obviously speak to a registered tax agent if you've got questions. And I've already mentioned them, but the occupational-specific guidelines, are a really great resource for learning what deductions people can claim with respect to their actual occupation and job, making sure that people can claim exactly what they're entitled to, but no more.

We also we also have a tax time toolkit, which includes seven additional guides for common deductions. And this is for things, like work-related expenses, car expenses, self-education, and it outlines the types of records that you need to keep. So some really great information there as well.

Jenny Wong:
We've talked a lot about topics that relates to people's work. But for income from other investments such as shares or property investments, what are some of the common mistakes that you see investors make and any tips for avoiding these?

Rob Thomson:
So we've talked a lot, I think over the years, about some of these and we still see mistakes. We know errors occur around borrowing, so, where they've borrowed part of the loan for personal purposes and part of the loan for the finance for their rental property. So that's one area we continue to see. Of course, people can increase the size of their investment property loan and use part of it for personal costs, like your school fees or a new car.

And also, we know that people that can draw down on their rental loan or refinance it, and so, you know, the way you use that loan can create some issues we see in people making mistakes. And the key issue is that you can only claim the interest on the loan that's for the part of the investment purposes. This can be complicated because you need to keep that calculation going for the life of the loan, and any subsequent refinancing. And so it's just not once you've paid off the amount of capital related to the personal that you can claim the rest. So that's one area we do continue to see some mistakes made.

So every year we're encouraging tax agents to just ask their clients if they've made any changes to their loan facilities or their financing arrangements around their investment property when they come to see us to lodge their tax return.

And we've recently updated our investor toolkit on the ATO website. So that has lots of information you can share with your clients about the expenses they can claim for their investment property, but also the records they need to keep, to make sure that they can both claim what they can during tax time, but then they've also got the right records when they go to dispose the property later on.

Jenny Wong:
Any final tips for this tax time, Rob, or to help us prepare for the new financial year?

Rob Thomson:
So the first is download the ATO app. It's an easy, fast and secure way to manage your tax and super on the go. You can follow the progress of your 24-25 tax return from start to finish. So that's quite good. People always want to know whether their tax return is up to, so you simply need to log in to the ATO app and select your return for 24-25.

You can plan for next year. We've talked about the myDeductions tool Jenny. And that lets you keep all expenses in one place so you can share that both with the tax agent or if you lodge online yourself. You go to ato.gov.au/app to find out more and download it. Or you can download it from Google Play or the Apple Store.

The second is, probably tax time is a good opportunity just to check your super. I know it's probably not the first thing that comes to mind, but we're reminding people to check it. Your super is one of the biggest assets that you'll accumulate during your life. So it's important to take control and understand your entitlements and make sure you've made the best choices on your future when it comes to super. So we’re just telling people to do a super health check and that's five simple checks that you can do at tax time.

So the first is to check your contact details are correct. The second is to check your super balance and make sure your employees are contributing to your super like they should be. And the third is to check if you've got any lost or unclaimed super. The fourth is to check if you've got multiple super accounts and consider consolidating those into one account. And the fifth is to check your nominated beneficiaries, for your super, and most of those checks only take a few minutes and can all be done online.

Jenny Wong:
It’s clear that there’s a lot to consider, when preparing for tax time, so thank you so much for joining us today.

Rob Thomson:
Thanks Jenny. Thanks for having me.

Jenny Wong:
Your insights have been invaluable. And thank you for listening to With Interest. Don't forget to check the show notes for links and resources from CPA Australia and the ATO. If you like this episode, please share it with your friends and colleagues and hit the subscribe button so you don't miss future episodes. Until next time, thanks for listening.

Garreth Hanley:
You've been listening to with Interest, a CPA Australia podcast. If you've enjoyed this episode, help others discover with interest by leaving us a review and sharing this episode with colleagues, clients, or anyone else interested in the latest finance, business and accounting news.

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