Quick Summary: ATO’s 2025 Audit Priorities
The ATO has increased audit activity with nearly $1 billion in additional funding. Here are the top targets for 2024-25:
- Rental Property Claims (High Risk – 90% error rate detected)
- Work-From-Home Deductions (High Risk – $8.7 billion tax gap)
- Cryptocurrency Transactions (Medium Risk – 500K-1M affected)
- Gig Economy Income (Medium Risk – Uber, Airbnb, Airtasker)
- Small Business Expenses (Medium Risk – Business/personal mixing)
Bottom line: The ATO’s data matching technology now tracks over 350 sources. If you’ve earned it, they likely know about it.
The tax landscape has fundamentally shifted this year. With nearly $1 billion in fresh compliance funding and sophisticated data matching technology, the ATO is watching everything. As tax professionals who’ve helped thousands of Australians navigate ATO reviews, we’ve seen how the game has changed, and know its potential to wreak havoc on unsuspecting taxpayers!
The ATO’s algorithms now cross-reference information from over 350 sources, from your morning Uber ride to weekend Airbnb earnings. But here’s the thing — if you’re doing the right thing, this increased scrutiny actually works in your favour through faster processing and larger legitimate refunds.
What Really Triggers an ATO Audit in 2025?
The ATO’s audit selection is a calculated, data-driven process. Think of it as a digital detective that never sleeps, constantly comparing what you’ve reported against what banks, employers, and platforms are telling them about you.
The system automatically flags returns where reported income doesn’t match third-party data, deductions significantly exceed industry averages, or lifestyle seems inconsistent with declared earnings. Previous compliance issues also put you on their radar for future years.
1. Rental Property Claims: The 90% Problem
Risk Level: HIGH
Here’s a statistic that should make every property investor pay attention: recent ATO audits found errors in 90% of rental property returns they reviewed. According to ATO Assistant Commissioner Tim Loh, rental property claims have become their number one compliance priority.
The most common traps involve interest deduction errors — claiming family home loan interest as rental expenses, or incorrectly apportioning between personal and investment portions. Then there’s the eternal confusion between repairs and improvements. The ATO is cracking down on people claiming capital improvements as immediate repairs.
Holiday homes and Airbnb properties receive particular scrutiny. The ATO wants clear evidence that your property was genuinely available for rent during claimed periods, not being used for family getaways while claiming rental expenses.
The ATO has dramatically expanded data collection from 17 major mortgage lenders covering 2021-22 to 2025-26, property management software affecting 1.6 million taxpayers, and short-term rental platforms.
To audit-proof your claims: Keep loan statements showing investment vs personal splits, maintain all expense receipts, and crucially, keep evidence your property was genuinely available for rent — online listings, advertising records, vacancy reports.
2. Work-From-Home Deductions: The $8.7 Billion Gap
Risk Level: HIGH
Work-related expenses contribute a staggering $8.7 billion to Australia’s individual tax gap, and home office claims have become the ATO’s second major target.
The rules got tougher for 2024-25. While the ATO bumped up the rate from 67 cents to 70 cents per hour, they now want you to track every single hour you work from home throughout the year — no more guestimates or keeping a diary for just a few weeks. It’s quite a change from the pandemic days when you could claim 80 cents per hour with the temporary shortcut method (March 2020 to June 2022) and barely had to keep any records at all.
The 70 cents rate covers electricity, gas, phone, internet, stationery, and computer consumables, but you cannot claim separate deductions for these covered items if using this method of claiming. The actual expenses method may be a better option if your work related phone, internet and stationery expenses are substantial. You also can’t claim rent, mortgage interest, council rates, or insurance unless running a business from home.
Documentation is non-negotiable: Think daily timesheets, employment contracts supporting work-from-home arrangements, utility bill comparisons, and separate equipment purchase receipts.
3. Cryptocurrency: Digital Assets Under Watch
Risk Level: MEDIUM-HIGH
The ATO’s crypto assets data matching program quietly collects comprehensive exchange data back to 2014-15. They know about your Bitcoin purchases, Ethereum trades, and even forgotten joke coins.
The biggest mistake is treating all crypto activity as capital gains when some should be classified as income. Mining, staking rewards, crypto trading businesses, or receiving crypto payments are income, not capital gains.
Many people don’t realise crypto-to-crypto trades are taxable events. Trading Bitcoin for Ethereum is a disposal of Bitcoin for capital gains purposes, even without converting to Australian dollars.
Essential records: Exchange histories, wallet addresses, transaction IDs, purchase/sale dates with AUD amounts, transaction purposes, and mining pool records with electricity costs.
4. Gig Economy Income: Side Hustle Spotlight
Risk Level: MEDIUM
The ATO now receives data from sharing economy platforms including Uber, Airbnb, Airtasker, and 50+ others, making it virtually impossible to hide gig earnings.
All platform income must be reported — Uber rides, Airbnb bookings, Airtasker tasks, freelance work. What surprises many is the GST obligation: driving for hire requires GST registration regardless of income level.
Legitimate deductions include: Vehicle expenses, work-related phone/internet costs, equipment, and platform fees.
5. Small Business: Personal-Professional Blur
Risk Level: MEDIUM
Small businesses mixing personal and business expenses remains a common error that’s easy for ATO algorithms to detect. Red flags include personal expenses claimed as business deductions and round-number claims without documentation.
The solution: Separate bank accounts and credit cards, contemporaneous record-keeping, and regular business activity statement reconciliation.
Your Compliance Action Plan
Before lodging your 2025 return, declare all income from every source — the ATO’s data matching means they likely know about income you think is hidden. Keep detailed records for every deduction with original receipts, bank statements, and supporting documentation.
For work-from-home claims, maintain daily timesheets throughout the year. For rentals, keep evidence properties were genuinely available. For crypto, track every transaction with AUD conversions.
Avoid red flags: don’t use round numbers without documentation, don’t estimate when records are required, and never mix personal and business expenses without clear separation.
When Professional Help Becomes Essential
Professional help with your taxes becomes really important with multiple income sources,and for rental properties, cryptocurrency investments, sole trader operations, previous ATO correspondence, or significant deductions. The cost of professional advice is almost always less than audit penalties and stress, so don’t risk doing things yourself and flagging an ATO audit.
At ITP, we’ve seen how proper preparation transforms potential audit risks into compliance confidence. Our systematic approach to record-keeping means our clients rarely face compliance issues.
The Reality Check: Compliance as Competitive Advantage
The ATO’s message for 2025 is clear: they have unprecedented technology, substantial funding, and determination to identify non-compliant taxpayers. With data matching covering everything from bank accounts to crypto wallets, flying under the radar has ended.
However, as we mentioned at the start, this benefits honest taxpayers through faster processing and larger legitimate refunds. The ATO’s sophisticated systems catch the non-compliant, not punish the compliant.
Treat compliance as competitive advantage rather than burden. Accurate reporting with proper documentation protects you from audit risk and often reveals missed legitimate deductions. Good record-keeping saves time, reduces stress, and provides clear financial evidence.
The bottom line: compliance is no longer optional, but doesn’t have to be complicated. With proper systems, professional guidance, and commitment to accuracy, you can navigate the new landscape with confidence.
Find your local ITP office today and book in for an audit-safe tax return with maximum benefits.
FAQs: Your Tax Audit Questions Answered
What are the ATO’s main audit targets for 2025?
The five primary targets are rental property claims with their 90% error rate, work-from-home deductions contributing to the $8.7 billion tax gap, cryptocurrency transactions, gig economy income, and small business expense mixing.
How does ATO data matching work?
The ATO collects information from over 350 sources including banks, employers, and platforms, then uses algorithms to identify discrepancies requiring investigation.
What should I do if I’ve made a mistake?
Contact a registered tax agent immediately for voluntary disclosure options. The ATO treats voluntary disclosures more favourably than discovered errors.
How long should I keep tax records?
Five years from lodgement date, in most cases. For capital gains assets like property and crypto, keep records until five years after disposal.
Disclaimer: This provides general information only and should not replace professional tax advice. Tax requirements change regularly and individual circumstances vary. Consult a qualified tax professional for tailored advice.