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Tax Calculator Australia 2025: Why It’s Still the Easiest Way to Estimate Your Refund

Planning your finances around your tax refund? Don’t guess when you can calculate. With tax laws becoming increasingly complex and new deductions available each year, using a reliable tax calculator remains the smartest way to get an accurate estimate of your 2024-25 tax refund before you lodge.

As tax professionals who process thousands of returns each year, we’ve seen how valuable it is for our clients to understand their tax position before sitting down with us. A good tax calculator doesn’t just give you a number – it helps you identify potential deductions you might have missed and plan your financial year ahead.

With the 2024-25 tax return season now underway, getting an early estimate of your refund can help you make informed decisions about major purchases, debt reduction, or investment planning. The best part? Modern tax calculators make this process faster and more accurate than ever before.

Quick Summary: Why Use a Tax Calculator in 2025

Tax calculators provide instant estimates of your refund or tax payable using current ATO rates and thresholds. They help you to:

  • Identify potential deductions
  • Plan your finances
  • Spot any issues before lodging your return

While calculators can’t replace professional advice for complex situations, they’re excellent for getting quick, accurate estimates and ensuring you’re prepared for tax time.

The bottom line: A few minutes with a quality tax calculator can save you from financial surprises and help you maximise your refund through better deduction planning.

What Is a Tax Calculator and Why Should You Use One?

A tax calculator is a digital tool that estimates your tax refund or amount payable based on the income, deductions, and circumstances you enter. These calculators use the same tax rates and thresholds that the ATO applies to actual tax returns, giving you a reliable preview of your tax outcome.

The primary benefit of using a tax calculator is removing the guesswork from tax time. Instead of wondering whether you’ll receive a refund or face a tax bill, you can get a realistic estimate within minutes. This information helps you make informed financial decisions throughout the year and avoid the stress of unexpected tax obligations.

Quality tax calculators incorporate current tax rates, thresholds, and basic deductions to provide estimates for straightforward tax situations. While they may not capture every nuance of complex tax scenarios, they’re excellent for getting a baseline understanding of your tax position.

“We encourage all our clients to use a tax calculator before their appointment,” explains senior ITP tax advisor Jennifer Liu. “It helps them understand their tax position and often reveals deductions they hadn’t considered claiming. When clients come prepared with a general understanding of their situation, we can focus on optimising their outcome.”

The ATO provides its own income tax estimator, which offers comprehensive functionality for most tax situations. At ITP, we’ve also developed our own free tax calculator that provides reliable estimates using current tax rates and thresholds.

What Information You Need for an Accurate Calculation

Getting an accurate tax calculator result requires gathering the right information before you start. The quality of your estimate depends entirely on the accuracy and completeness of the data you provide, so taking a few minutes to collect your documents pays dividends in reliability.

Your primary income information includes your salary or wages, with the total amount earned during the 2024-25 financial year and the total tax withheld by your employer. You’ll find these figures on your payment summary or payslips. If you have multiple jobs, you’ll need the combined figures from all employers.

Investment income adds another layer of complexity to your calculation. This includes bank interest, dividend payments, rental property income, and any capital gains from asset sales during the year. Don’t forget to include franking credits from Australian share dividends, as these can significantly impact your refund amount.

For deductions, gather records of all work-related expenses, including vehicle costs, uniforms, tools, professional development, and home office expenses if you worked from home. The calculator will need the total amount of each deduction category. Remember that substantiation requirements apply regardless of what the calculator suggests you can claim.

Other income sources might include government benefits, foreign income, or business income if you’re self-employed. Each of these has specific tax treatment that quality calculators can accommodate. Having your bank statements and payment summaries organised before starting the calculation process ensures you don’t miss any income sources.

Personal circumstances that affect your tax calculation include your relationship status, number of dependants, private health insurance coverage, and any HECS-HELP debt. These factors influence various tax offsets and surcharges that can materially change your final tax outcome.

When a Calculator Helps and When You Need Professional Advice

Tax calculators excel at providing accurate estimates for straightforward tax situations, but they have limitations when dealing with complex circumstances. Understanding when to rely on a calculator versus seeking professional advice can save you time, money, and potential compliance issues.

Calculators work best for employed individuals with standard work-related deductions, simple investment income, and uncomplicated personal circumstances. If your tax situation primarily involves salary income, bank interest, a few work-related expenses, and perhaps some dividend income, a quality calculator will provide highly accurate results.

The complexity threshold where professional advice becomes valuable includes scenarios like rental property ownership, business income, significant capital gains or losses, foreign income, or family trust distributions. These situations involve nuanced tax rules that calculators may not fully capture, particularly regarding timing of deductions, depreciation calculations, or CGT discount eligibility.

“Calculators are excellent for getting the big picture right, but they can’t replace professional judgement for complex scenarios,” notes ITP business tax specialist Amanda Rogers. “We see clients who’ve used calculators to get a baseline estimate, then discover significant additional opportunities when we review their full circumstances professionally.”

Investment property owners particularly benefit from professional advice beyond calculator estimates. While calculators can estimate basic rental income and expenses, they rarely account for depreciation schedules, capital works deductions, or the complex rules around property-related travel and interest deductions.

Business owners and contractors face additional complexity that calculators struggle with. The interaction between business income, GST obligations, superannuation contributions, and various business deductions requires expertise that goes beyond automated calculations.

However, even complex taxpayers benefit from using calculators as a starting point. Getting a baseline estimate helps you understand whether you’re likely to receive a refund or face a tax bill, enabling better financial planning even if the final professional calculation differs from your initial estimate.

Making the Most of Your Tax Calculator Results

Once you have your calculator results, the real value comes from understanding what the numbers mean and how to act on the information. A tax refund estimate isn’t just a number – it’s a financial planning tool that can guide decisions throughout the year and help you optimise your tax outcome.

If your calculator shows a large refund, consider whether you’re having too much tax withheld from your pay. You might benefit from adjusting your tax file number declaration with your employer to reduce withholding and increase your take-home pay. Conversely, if you’re facing a tax bill, you might want to increase withholding or make quarterly installments to avoid a large payment at tax time.

Review the deductions section carefully to identify categories where you might be missing legitimate claims. If your calculator shows minimal work-related deductions, consider whether you’re tracking all your eligible expenses throughout the year. Common overlooked deductions include professional development, work-related subscriptions, and proportionate home office costs.

Use your calculator results to plan major financial decisions. If you’re expecting a significant refund, you might time large purchases or debt payments around when you expect to receive it. Alternatively, if you’re facing a tax bill, you can start setting aside money or adjusting your spending plans accordingly.

The calculator can also help you evaluate the tax impact of financial decisions you’re considering. Before making additional superannuation contributions, claiming significant deductions, or realising capital gains, you can model how these decisions affect your overall tax position.

For couples, running calculations for both partners helps optimise your combined tax outcome. You might discover opportunities to time income or deductions between partners to minimise your total tax liability or maximise family benefit entitlements.

How ITP Can Help Maximise Your Tax Outcome

At ITP, we understand that a tax calculator is just the beginning of getting the best possible tax outcome. While our free tax calculator provides reliable estimates using current ATO rates and thresholds, our experienced tax professionals can help you go beyond basic calculations to maximise every opportunity.

Our tax professionals bring over 50 years of experience helping Australians optimise their tax positions. We understand the nuances that calculators can’t capture and regularly identify deductions and strategies that significantly improve our clients’ outcomes beyond their initial calculator estimates.

When you work with ITP, we conduct a comprehensive review of your financial situation to ensure you’re claiming every eligible deduction correctly. This includes identifying often-overlooked deductions, ensuring proper substantiation, and applying the most favourable treatment for complex income sources.

“Many clients are surprised by how much we can improve their position beyond their calculator estimate,” explains Jennifer. “Professional preparation isn’t just about accuracy — it’s about maximising opportunities and ensuring full compliance with ATO requirements.”

We offer flexible consultation options to suit your needs, whether you prefer in-person meetings at one of our locations across Australia, phone consultations, or comprehensive online services. Our team is equipped to handle everything from straightforward employed individual returns to complex business and investment scenarios.

The value of professional preparation often exceeds the cost through better tax outcomes, time savings, and peace of mind knowing your return is optimised and compliant. When you’re ready to maximise your tax refund beyond calculator estimates, our team is here to help.

Tax Calculator Best Practices for 2025

Getting the most accurate and useful results from any tax calculator requires following some best practices that ensure reliability and help you avoid common pitfalls that can lead to disappointing actual results.

Start with complete and accurate information. Take time to gather all your income documents, deduction records, and relevant financial information before beginning the calculation. Estimates and guesses significantly reduce the calculator’s accuracy and can lead to false expectations about your refund.

Be conservative with deduction estimates, particularly for categories where substantiation is required. It’s better to underestimate your refund and be pleasantly surprised than to overestimate and face disappointment or compliance issues. Remember that claiming deductions requires appropriate records, regardless of what a calculator suggests you’re entitled to claim.

Update your calculations as your circumstances change throughout the year. If you change jobs, make significant purchases, or have changes in investment income, running a new calculation helps you stay on top of your evolving tax position.

Use the calculator as a planning tool, not just an estimate generator. Run scenarios with different deduction amounts or income levels to understand how various decisions affect your tax outcome. This helps you make more informed financial choices throughout the year.

Don’t rely solely on calculator results for complex situations. If your circumstances involve business income, rental properties, significant capital gains, or other complex elements, treat the calculator result as a starting point and seek professional advice for optimisation and compliance assurance.

Start with ITP’s Free Tax Calculator Today

Understanding your tax position before lodging your return empowers you to make better financial decisions and ensures you’re maximising your refund opportunities. Whether you’re expecting a windfall or preparing for a tax bill, having accurate estimates helps you plan with confidence.

Try our free tax calculator to get your 2024-25 refund estimate in minutes. Our calculator uses current ATO rates and thresholds to provide reliable estimates for most tax situations.

For comprehensive tax return preparation that goes beyond calculator estimates, our team can help you identify every eligible deduction, ensure full compliance, and optimise your tax outcome. We’re available at convenient locations across Australia and have been helping Australians maximise their tax refunds for over 50 years.

Whether you need a simple tax return or complex tax planning advice, book a consultation with our experienced team to ensure you’re getting the best possible outcome from your tax return.

Your Tax Calculator Questions Answered

How accurate are tax calculators compared to professional preparation?

Quality tax calculators are highly accurate for straightforward tax situations, often within a few dollars of professional calculations for employed individuals with standard deductions. However, professional preparation adds value through deduction optimisation, compliance verification, and identification of opportunities that calculators might miss. Complex situations require professional expertise that calculators cannot provide.

Can I use a calculator if I have rental property income?

Most comprehensive calculators can handle basic rental property calculations, but they typically don’t account for depreciation schedules, capital works deductions, or complex expense apportionment rules. Use calculator results as estimates only for rental properties, and consider professional advice to ensure you’re claiming all eligible deductions correctly.

Should I adjust my tax withholding based on calculator results?

Calculator results can inform withholding decisions, but be conservative about making changes. If calculations consistently show large refunds, you might consider reducing withholding, but ensure you account for any variable income or deductions that might change your tax position. Discuss significant withholding changes with a tax professional to avoid unexpected tax bills.

What if the calculator shows I’ll owe money instead of getting a refund?

Owing tax isn’t necessarily a problem – it might indicate that your withholding is accurately matched to your tax liability rather than over-withholding for a refund. If you owe a significant amount, consider making quarterly instalments or adjusting your withholding for the following year. The ATO offers payment plans if you need time to pay.

How often should I use a tax calculator during the year?

Using a calculator quarterly or when your circumstances change significantly helps you stay on top of your tax position. This is particularly valuable if you have variable income, make large deductible purchases, or are considering financial decisions with tax implications. Regular calculations help you plan and avoid surprises at tax time.

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Disclaimer: This information is general in nature and doesn’t take into account your specific circumstances. Tax laws can be complex and change frequently. For advice tailored to your situation, please consult with a qualified tax professional.

Rental Property Tax Deductions Australia 2025: Complete Guide

Picture this: You’re sitting at your kitchen table with a shoebox full of receipts, wondering if that emergency plumber visit counts as a tax deduction. Suddenly, a hot sweat comes over you as you realise the ATO might be coming at you with an audit if you don’t get it right. Sound familiar? You’re not alone. Thousands of Australian property investors are leaving money on the table each year, either missing legitimate deductions or incorrectly claiming expenses that land them in hot water with the ATO.

Here’s the thing about rental property deductions — they’re not as straightforward as you might think. That weekend trip to “inspect” your investment property? Sorry, that’s a no-go under the current rules. But that annoying repair bill when your tenant’s washing machine flooded the laundry? That’s potentially golden.

As tax professionals who’ve been helping property investors navigate these murky waters for over 50 years, we’ve seen it all. From the optimistic investor who tried to claim their entire home office (when they managed just one property) to the meticulous record-keeper who discovered they’d been missing thousands in legitimate depreciation claims. The difference between getting it right and getting it wrong? Often thousands of dollars and a much better night’s sleep.

With the ATO’s 9 in 10 rental property owners making errors in their returns and tax laws that seem to change faster than Melbourne weather, understanding what you can and can’t claim has never been more crucial for your investment success.

Quick Summary: Your Rental Deductions Maximisation Cheat Sheet

The golden rule is simple: if an expense directly relates to earning rental income, you can probably claim it. Things like:

  • Loan interest 
  • Property management fees
  • Repairs that fix things (not improve them)
  • Insurance
  • Rates

The catch? Travel to inspect your property is off-limits for residential properties, and anything that makes your property better than before counts as a capital improvement, not a repair.

Here’s your quick mental test: does this expense help me earn rental income right now? If yes, it’s likely deductible. Does it make my property worth more or better than before? That’s probably a capital improvement you’ll need to depreciate over time.

Bottom line: Focus on ongoing expenses, keep every receipt, and learn the difference between fixing and improving. Your future self (and bank account) will thank you.

The Good News: What You CAN Claim on Your 2024-25 Return

Let’s start with the exciting stuff — the expenses that can legitimately reduce your tax bill. The ATO’s rental property expense guidelines are actually quite generous when you understand what qualifies.

Loan Interest: Your Biggest Friend

For most investors, this is the heavyweight champion of deductions. Every dollar of interest you pay on loans used to buy, build, or improve your rental property is fully deductible. Whether your property is making money or bleeding cash doesn’t matter. If the loan was for investment purposes, the interest is claimable.

Property Management and Letting Fees

Using a property manager? Every fee they charge (from finding tenants to collecting rent to handling maintenance) is fully deductible. Even if you manage the property yourself, you can claim advertising costs for finding tenants and other direct letting expenses.

Repairs and Maintenance: The Goldilocks Zone

This is where it gets interesting. You can claim repairs that restore your property to its previous condition, but not improvements that make it better than before. Fixing a broken tap? Deductible. Upgrading to a fancy new mixer? That’s a capital improvement.

“I see investors get confused about this constantly,” explains ITP senior property tax advisor Sarah Mitchell. “If you’re replacing like with like — old carpet with similar carpet, broken fence palings with new palings — that’s usually a repair. But if you’re upgrading from basic to premium, or adding something that wasn’t there before, that’s typically an improvement.”

Insurance and Ongoing Costs

All your property insurance premiums are deductible — building insurance, contents insurance if you provide furnishings, and landlord insurance. Council rates, water rates, strata fees, and land tax are all claimable too, as long as you’re the one actually paying them.

Professional Services

Your accountant’s fee for preparing your rental property tax return? Deductible. Legal fees for lease agreements or tenant disputes? Yep. Even the cost of getting a depreciation schedule prepared is claimable (and usually pays for itself many times over).

The Reality Check: What You CAN’T Claim

Now for the part that often catches investors off-guard. Some expenses that seem obviously related to your rental property are specifically excluded, and claiming them incorrectly can result in penalties that make a bad tenant look like a minor inconvenience.

Travel Expenses: The Big No-No

Since 1 July 2017, you can’t claim any deductions for the cost of travel you incur relating to your residential rental property unless you are either in the business of letting rental properties or an excluded entity (like a company). Period. Doesn’t matter if you drive across town or fly interstate, whether the inspection was urgent, or if you combined it with other business. The ATO’s travel restrictions for residential properties are crystal clear and non-negotiable.

Pre-Rental Repairs: Timing is Everything

Did some work before first renting out your property? Those costs are generally considered capital improvements, not deductible repairs. The property needs to be earning income (or genuinely available for rent) for repair costs to be deductible.

Capital Improvements: The Long Game

Added air conditioning where there was none? Built a deck? Renovated the kitchen? These improvements make your property more valuable, which means they can’t be claimed immediately. Instead, they might be eligible for depreciation over many years or added to your property’s cost base for capital gains tax purposes.

Personal Use: The Honesty Test

If you or your family use the property for holidays or personal purposes, you need to reduce your deductions proportionally. Used your beach house rental for a two-week family holiday? You can’t claim expenses for those two weeks, and you need to apportion other annual expenses fairly.

Depreciation: The Deduction That Keeps on Giving

Here’s where many investors miss out on serious money. Depreciation allows you to claim deductions for the decline in value of your property and its contents over time, even when you’re not spending any money out of pocket.

Two Types of Depreciation

Building depreciation (capital works) applies to the structure itself for properties built or renovated after certain dates. You can claim 2.5% of the construction cost each year for 40 years for most residential properties. For a building that cost $400,000 to construct, that’s $10,000 per year in deductions.

Plant and equipment depreciation covers removable items like appliances, carpets, blinds, and air conditioning. Each item has an “effective life” over which it can be depreciated.

The Catch for Established Properties

For properties purchased after 9 May 2017, you generally can’t claim plant and equipment depreciation on second-hand items that came with the property. But here’s the opportunity: any new items you add can still be depreciated from day one.

“A quality depreciation schedule often identifies $5,000 to $15,000 in annual deductions that investors would otherwise miss,” notes Sarah. “It’s one of those situations where spending a few hundred dollars on professional advice can save you thousands in tax.”

Smart Strategies for 2025-26 and Beyond

Successful rental property tax management isn’t just about claiming deductions after you’ve spent the money. Strategic thinking about timing, record-keeping, and planning can significantly boost your investment returns.

Timing Your Expenses

Consider bunching deductible expenses into years when you need them most. Expecting a higher income this year? Bringing forward some maintenance work can provide valuable tax relief. Planning to be in a higher tax bracket next year? Maybe defer some discretionary repairs.

The Prepayment Opportunity

You can often prepay certain expenses like insurance premiums and property management fees to accelerate deductions into the current year. If you prepaid a rental property expense, such as insurance or interest on money borrowed, that covers a period of 12 months or less and the period ends on or before 30 June 2025, you can claim an immediate deduction.

Record-Keeping That Actually Works

Forget the shoebox approach. Modern property management apps can automatically categorise expenses, store receipts digitally, and generate reports that make tax time a breeze. Some even integrate with accounting software to streamline the whole process.

Annual Strategy Reviews

Your property’s tax position should be reviewed annually, not just at tax time. New purchases, renovations, and changes in tax law can create opportunities you might miss if you’re only thinking about tax once a year.

The Costly Mistakes We See Every Year

After decades of helping property investors, we’ve noticed the same expensive mistakes crop up repeatedly. Learning from others’ errors can save you significant money and stress.

The Missing Depreciation Schedule

This is probably the biggest money-loser we see. Investors assume depreciation isn’t worth bothering with, or they don’t realise it exists. A professional depreciation schedule typically costs $600-800 but often identifies thousands in annual deductions.

Repair vs Improvement Confusion

The classic mistake: claiming a kitchen renovation as a repair when it’s clearly an improvement. The ATO has seen this before, and getting it wrong can result in penalties plus interest on the tax you should have paid.

Inadequate Record-Keeping

“I know I had that receipt somewhere” isn’t a defense that works well with the ATO. Poor record-keeping not only means you might miss legitimate deductions, but it also puts you at risk if your return is reviewed.

Personal Use Miscalculations

Some investors conveniently forget about that week they spent at their holiday rental, or they allow family to stay without charging market rent. The ATO expects honesty in apportioning expenses, and getting this wrong can be costly.

Travel Expense Claims

Despite clear guidance, some investors still try to claim travel costs for property inspections. This is a red flag for ATO reviews and can lead to deeper scrutiny of your entire return.

Staying Compliant: Your Safety Net

The ATO takes rental property deductions seriously, and having proper documentation isn’t just good practice — it’s your insurance policy against penalties and stress.

The Five-Year Rule

Keep all records related to your rental property for five years after lodging your tax return. This includes receipts, bank statements, loan documents, insurance policies, photos of repairs, and any professional reports.

What Good Records Look Like

For each expense, you should be able to show what was purchased, when, how much it cost, and how it relates to earning rental income. Photos of damage before and after repairs can be invaluable for substantiating claims.

Professional Documentation

Keep detailed records of any professional advice or services. Property management agreements, legal correspondence, and tax preparation fees all need proper documentation showing the specific services provided.

Regular Reviews and Updates

Don’t wait until tax time to organise your records. Set up systems to capture expenses throughout the year, and review your deductions quarterly to ensure you’re not missing anything or claiming something incorrectly.

Your Rental Property Tax Deduction Questions Answered

Can I claim expenses for repairs done before the property was first rented?

Generally no — repairs done before a property is first available for rent are considered initial improvements rather than deductible repairs. The property needs to be earning income or genuinely available for rent for repair costs to be deductible. However, if you bought a property that was already being rented and needed immediate repairs to keep it rentable, these might qualify.

What’s the difference between a repair and a capital improvement for tax purposes?

A repair restores something to its previous working condition and is immediately deductible. An improvement enhances the property beyond its original condition and must be depreciated over time. For example, replacing broken floorboards is a repair, but upgrading from basic carpet to hardwood flooring is an improvement. The key test is whether you end up with a better asset than before.

Can I still claim depreciation on items that came with my investment property?

For properties purchased after 9 May 2017, you generally cannot claim plant and equipment depreciation on second-hand items unless you were the first owner to use them. However, you can still claim building depreciation if the structure qualifies, and any new items you purchase and install are eligible for depreciation from when you first use them.

How do I handle expenses if I occasionally use the rental property myself?

You must apportion all expenses based on the period the property was genuinely available for rental at market rates. If you use the property for personal holidays or let family stay for free, you cannot claim deductions for those periods. Keep detailed records of when the property was available for rent versus personal use, and apportion annual expenses like rates and insurance accordingly.

What records do I need to keep for rental property tax deductions?

Keep all receipts, invoices, bank statements, loan documents, insurance policies, and property-related correspondence for five years after lodging your tax return. For repairs, include photos and detailed descriptions of work performed. For depreciation claims, keep purchase invoices and professional depreciation schedules. The more detailed your records, the better protected you are if the ATO reviews your claims.

Can I claim home office expenses for managing my rental property?

You can claim a portion of home office expenses if you use part of your home exclusively for managing your rental property business. However, for most investors with just one or two properties, it’s difficult to justify that any part of their home is used exclusively for property management. The ATO expects the area to be set aside solely for this purpose, not just a corner of the dining table used occasionally.

Professional Help When You Need It Most

Managing rental property taxes becomes increasingly complex as your portfolio grows or when you’re dealing with unique situations like commercial properties, property development, or sophisticated ownership structures. Sometimes the cost of getting it wrong far exceeds the cost of getting it right.

Our team at ITP has been helping property investors navigate these challenges for over 50 years. We understand that every property is different, every investor’s situation is unique, and the tax rules seem to change just when you think you’ve got them figured out.

Whether you’re buying your first investment property and want to understand your obligations, or you’re an experienced investor looking to optimise your strategy, our property tax specialists can help you maximise legitimate deductions while ensuring full ATO compliance.

Consider professional advice if you’re dealing with multiple properties, significant renovations, complex ownership structures, or if you’re simply not confident about what you can and can’t claim. Book a consultation with one of our experienced advisors, or visit one of our offices across Australia to discuss your specific situation.

Remember, the best tax advice is proactive, not reactive. Getting your property tax strategy right from the start can save you thousands of dollars and countless headaches down the track.

Other Helpful Articles

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Disclaimer: This information is general in nature and doesn’t take into account your specific circumstances. Tax laws can be complex and change frequently. For advice tailored to your situation, please consult with a qualified tax professional.

Rental Property ATO Compliance 2025: Audit Triggers and Prevention Guide

The ATO’s rental property compliance focus has reached new heights in 2024-25. Their review of income tax returns shows 9 in 10 rental property owners are getting their return wrong, and they’re done being patient about it.

Here’s what’s changed: the ATO now collects comprehensive data from property managers, banks, landlord insurance providers, sharing economy platforms like Airbnb, and rental bond authorities. This information, together with rental data from banks, landlord insurers, rental bond authorities and sharing economy providers gives us insight to common investment property mistakes.

We’ve been helping Australians with property tax for 50+ years, and the shift toward data-driven compliance has been dramatic. The old days of casual record-keeping and hoping for the best are over.

Quick Summary: Critical Compliance Points for 2024-25 and beyond

The rental property compliance landscape has fundamentally changed. Here’s what every property investor needs to know:

Biggest compliance triggers for 2024-25:

Why the ATO’s Rental Property Focus Has Intensified

For the 2019-2020 financial year, the ATO estimates there is net tax gap of 5.6% or $9 billion for individuals not in business. Rental property risks contribute 14% of this net tax gap. This represents approximately $1.26 billion in incorrect claims and missed revenue annually.

Rather than conducting random audits, the ATO now runs systematic, technology-driven compliance checks on virtually every rental property return lodged. Their sophisticated data-matching capabilities mean that inconsistencies between your claimed deductions and third-party reported information are flagged automatically.

“We’re seeing far more detailed rental property reviews than ever before,” explains senior ITP tax advisor Michelle Chen.” Clients who previously had straightforward rental claims are now being asked to substantiate every expense with comprehensive documentation and detailed explanations.”

This shift reflects the ATO’s broader strategy of using technology to identify compliance risks before they become larger problems. For property investors, this means even honest mistakes can result in amended assessments, penalties, and interest charges.

Understanding the ATO’s Data-Matching Capabilities

The ATO undertakes the property management data-matching program to allow identification and addressing of a number of taxation risks in the investment property market. Here’s what they can see:

Financial institution data includes loan balances, repayment amounts, interest charges, and any drawdowns or refinancing activities. This allows verification of interest deduction claims and identification when loan proceeds may have been used for non-investment purposes.

Property management records provide details of rent collected, expenses paid on behalf of landlords, tenant details, and vacancy periods. This information helps verify both rental income declarations and expense claims.

Insurance company data covers landlord insurance policies, premium payments, and any claims paid for property damage or lost rental income. Missing insurance payouts from tax returns are easily identified through this matching.

Rental bond authority information includes tenancy details, bond amounts, and any retained bond money for damage or unpaid rent. Bond money you become entitled to retain must be declared as income.

Short-term rental platform data from Airbnb, Stayz, Booking.com and similar services provides comprehensive income records. The ATO receives data from digital platforms operating in Australia to identify people who earn income through the sharing economy.

When your tax return doesn’t match the information the ATO receives from these sources, you can expect follow-up correspondence asking for explanations and supporting documentation.

Common Mistakes That Guarantee ATO Attention

Certain errors in rental property returns are virtually guaranteed to trigger ATO review processes. Understanding these common pitfalls can help you avoid unnecessary scrutiny:

Double-claiming expenses occur when instead of reporting gross rental income and claiming expenses, net rent (after expenses) is reported and the same expenses are claimed a second time. The ATO’s systems easily identify this pattern through property management data matching.

Incorrect co-ownership reporting happens when properties owned by multiple stakeholders only have one owner reporting the property when both are required to report. Both owners must report their actual share according to legal ownership percentages.

Omitted short-term rental income from platforms like Airbnb or Stayz is increasingly common as property owners test different rental strategies. You need to include all income earned from renting your property through a digital platform in your tax return, including all income before fees and commissions.

Claiming improvements as repairs remains one of the most frequent errors. Renovations, extensions, and significant upgrades must be treated as capital improvements and depreciated over time, not claimed as immediate deductions.

Interest deduction errors often stem from refinancing or redrawing on investment loans for personal purposes. Interest is only deductible for the portion of borrowings used to generate rental income.

Meeting Current Compliance Standards for 2024-25

Proper compliance with rental property tax obligations requires accurate reporting of all income sources and legitimate expense claims supported by appropriate documentation.

Income you must declare includes:

Immediately deductible expenses include:

  • Advertising costs for finding tenants
  • Council rates and water charges
  • Body corporate fees and strata levies
  • Cleaning and maintenance expenses
  • Pest control treatments
  • Insurance premiums for landlord coverage
  • Property management fees and letting commissions
  • Interest on loans used to purchase or improve the rental property
  • Genuine repairs that restore the property to its original condition

You can claim most expenses relating to your rental property but only for the period your property was rented or genuinely available for rent. For properties that weren’t rented for the entire year or weren’t genuinely available for rent during certain periods, you must apportion your expense claims accordingly.

Getting Interest Deductions Right

Interest deductions represent one of the largest expense claims for most property investors and are consequently subject to intense ATO scrutiny. The fundamental rule is that interest is only deductible for the portion of borrowings used to earn rental income.

Many property investors create problems for themselves by refinancing their investment loans or using redraw facilities for personal expenses. When loan proceeds are used for purposes other than generating rental income, the interest on that portion becomes non-deductible.

“One of the most common mistakes we encounter is property investors who refinance to pay for personal expenses like home renovations or family holidays, then continue claiming the full interest amount,” notes ITP business tax specialist David Park. “The ATO’s comprehensive loan data matching identifies these situations immediately, often leading to significant adjustments and penalties.”

The safest approach is maintaining completely separate borrowing arrangements for investment and personal purposes. This clear separation makes it much easier to substantiate your interest deduction claims and avoid compliance issues.

Depreciation Rules for Rental Properties

The depreciation landscape for rental properties changed significantly in 2017, and many property investors still don’t fully understand the current rules. From 1 July 2017, you reduce your deduction by the extent you installed or used the asset in your residential rental property to derive rental income and the asset was a second-hand depreciating asset (unless an exception applies).

For residential rental properties purchased after 9 May 2017, you cannot claim depreciation on second-hand plant and equipment items like furniture, appliances, or fixtures that were already installed when you bought the property.

However, you can still claim depreciation on new items you purchase after settlement and on the building structure itself through capital works deductions. You can claim capital works deductions for certain construction costs for your rental property at 2.5% per year for 40 years for most residential properties.

Record-Keeping Requirements That Actually Protect You

Effective record-keeping might seem like just another admin burden to you, but it’s all about protecting yourself from unnecessary ATO reviews and having the documentation needed to support legitimate claims. You must keep all rental property records for five years from the date you lodge your tax return. So, although keeping good records takes some time upfront, it can save you a world of hurt down the track.

Essential financial records include:

  • All rental income statements showing gross amounts received
  • Bank statements demonstrating actual receipt of rental payments
  • Loan statements showing interest charges and principal repayments
  • Receipts for all claimed expenses with clear descriptions

Property-specific documentation should include:

  • Settlement statements and contracts showing purchase price and associated costs
  • Depreciation schedules prepared by qualified quantity surveyors
  • Insurance policies and premium payment records
  • Body corporate statements showing fees and any special levies

Tenancy and availability records must demonstrate genuine availability for rent during claimed periods, including:

  • Tenancy agreements with start and end dates
  • Evidence of advertising when properties are vacant
  • Maintenance logs showing repairs and improvements

For short-term rentals, maintain detailed booking records from platforms like Airbnb, including gross income received and any fees deducted by the platform.

Professional Compliance Strategy Checklist

Staying compliant with current rental property tax requirements involves systematic attention to multiple areas, and we know it can seem overwhelming. So we’ve created a checklist for yo:

Income reporting accuracy:

  • Report gross rental income from all sources
  • Include short-term rental earnings from platforms like Airbnb
  • Declare retained bond money and insurance payouts
  • Ensure co-owners correctly split income according to ownership percentages

Expense claim legitimacy:

  • Separate investment and personal loan interest carefully
  • Distinguish between immediately deductible repairs and depreciable improvements
  • Apportion expenses for properties with mixed personal and investment use
  • Maintain detailed receipts with clear business purpose explanations

Documentation standards:

  • Store all financial records for minimum five years
  • Keep evidence of genuine availability for rent during vacant periods
  • Maintain loan documentation showing purpose of borrowings
  • Document any changes in property use or ownership arrangements

Ongoing compliance monitoring:

  • Review depreciation schedules annually for accuracy
  • Update records promptly when circumstances change
  • Reconcile rental income against bank deposits regularly
  • Ensure all family trust distributions are properly documented

When Professional Help Becomes Essential

Some rental property situations are too complex to handle alone, especially with the ATO’s increased scrutiny and data-matching capabilities.

You need professional help if you:

  • Own multiple properties with complex structures
  • Have refinanced investment loans or used redraw facilities
  • Run short-term rentals through Airbnb or similar platforms
  • Own properties through trusts or companies
  • Have received ATO correspondence about your claims
  • Are unsure about depreciation schedules or capital works deductions

Our property tax specialists understand the current compliance environment and can review your position to keep you out of trouble. We handle depreciation schedules, loan structure reviews, record-keeping systems, and any ATO correspondence.

Consider booking a consultation with one of our experienced tax professionals, or visit one of our offices across Australia to discuss your rental property tax situation.

The Bottom Line for 2025

The rental property tax compliance landscape has changed permanently. The ATO’s sophisticated data-matching programs provide all the clues needed to track down taxpayers with incorrect information in their tax return, and their zero-tolerance approach to errors means that casual record-keeping and aggressive claims are no longer viable strategies.

Success in this environment requires accurate income reporting, conservative expense claims supported by comprehensive documentation, and professional guidance when situations become complex. The investment in proper compliance systems and professional advice typically pays for itself many times over through avoided penalties, reduced ATO attention, and legitimate tax savings identified through proper planning.

Property investment remains one of Australia’s most effective wealth-building strategies, but success now depends as much on tax compliance as it does on property selection and financing strategies.

Your Rental Property Compliance Questions Answered

How extensive is the ATO’s rental property data matching in 2024-25?

The ATO collects information from property managers, financial institutions, landlord insurers, rental bond authorities, and sharing economy platforms. This allows them to cross-check virtually every aspect of your rental property activities against your tax return.

What happens if the ATO identifies errors in my rental property return?

The ATO may amend your assessment to correct errors, apply penalties for incorrect claims, and charge interest on any additional tax owed. In serious cases, they may conduct a comprehensive audit of your affairs.

Can I still claim depreciation on rental property assets?

For residential properties purchased after 9 May 2017, you cannot claim depreciation on second-hand plant and equipment items, but you can depreciate new items you purchase and claim capital works deductions on the building structure.

Do I need to declare income from short-term rentals like Airbnb?

Yes, all income from short-term rental activities must be declared, regardless of the platform used or the amount earned. The ATO receives data from digital platforms to identify this income.

How should I handle expenses for a property I co-own?

Each owner must report their share of rental income and can only claim their corresponding share of expenses. The split must reflect actual ownership percentages, not arbitrary arrangements between owners.

What’s the difference between repairs and improvements for tax purposes?

Repairs restore something to its original condition and are immediately deductible, while improvements enhance the property beyond its original state and must be depreciated over time as capital works.

How long do I need to keep rental property records?

You must maintain all rental property records for five years from the date you lodge your tax return, including income statements, expense receipts, loan documentation, and evidence of genuine availability for rent.

Can I claim expenses if my property wasn’t rented for part of the year?

You can only claim expenses for periods when the property was genuinely available for rent and genuinely seeking tenants. Personal use periods or times when the property wasn’t actively being offered for rent don’t qualify for expense deductions.

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Disclaimer: This information is general and does not constitute personal tax advice. Tax laws are complex and change regularly. Always seek advice from a qualified tax professional about your specific circumstances.

Working From Home Tax Claims 2025: Are You at Risk of an ATO Review?

Working from home has become the new normal for millions of Australians, but here’s the thing: the ATO’s crackdown on home office deductions means your claims could trigger an audit faster than you can say “tax refund.” The simplified COVID-19 claiming methods are gone, and the ATO now requires detailed records for every dollar claimed under either the actual cost method or fixed rate method.

We’ve helped thousands of Australians through ATO reviews over our 50+ years in the tax game, and we’re seeing more work from home audits than ever before. The key is understanding what triggers reviews and keeping bulletproof records that would make a forensic accountant weep with joy.

Quick Summary: What Puts You at Risk?

The ATO is watching for these red flags like a hawk eyeing a field mouse:

  • Claims without proper substantiation or record keeping
  • Using outdated shortcut methods from the COVID-19 period
  • Claiming expenses without proper work-related apportionment
  • Round number claims that appear estimated rather than calculated
  • Missing work diaries for the fixed rate method
  • Inadequate records for the actual cost method

Key rules for 2024-25:

  • Two methods available: fixed rate method (70 cents per hour) or actual cost method with detailed substantiation
  • Records required showing additional running expenses incurred as a direct result of working from home
  • Work diary documenting actual home working hours for fixed rate method
  • Clear separation between work and private use portions

Why the ATO is Cracking Down on Working From Home

Work from home claims must now show you’re actually working from home to fulfil employment duties, not just carrying out minimal tasks like occasionally checking emails. Think of it this way: if you’re just answering the odd phone call from your couch while watching Netflix, that doesn’t count as working from home.

“We’re seeing review letters for work from home claims that would have sailed through five years ago,” says ITP tax advisor Bruce Gannon. “The ATO now cross-checks your claims against employment records, bank data, and spending patterns like a digital detective.”

The ATO employs sophisticated data-matching technology to compare information from different sources and identify potential compliance issues. If your claims don’t match your actual work patterns, you’ll definitely hear about it.

Red Flags That Trigger Reviews

Certain claiming patterns are like sending up flares to the ATO. Here’s what gets their attention:

Maximum amount claims happen when people always claim the highest allowable amounts regardless of actual expenses. It looks suspicious because real life isn’t that neat and tidy.

Round number claims are another giveaway. Neat figures like exactly $1,000 or $500 suggest estimates rather than actual calculations. 

Employment inconsistencies raise immediate red flags when you’re claiming significant home office expenses while your employer reports you as office-based. The numbers just don’t add up.

Missing records are the biggest problem of all. Claims without supporting work diaries, receipts, or calculation worksheets face automatic disallowance under substantiation rules.

“The biggest audit trigger is inadequate record keeping,” notes Bruce. “Clients who can’t produce detailed records face penalties on top of claim disallowance.”

What You Can Actually Claim (And How)

For 2024-25, you must use either the fixed rate method or actual cost method for all work from home claims. The simplified COVID-19 methods are permanently discontinued.

Fixed Rate Method (70 cents per hour)

The fixed rate for 2024-25 is 70 cents per hour worked from home. This rate covers these expenses:

  • Electricity and gas for heating, cooling and lighting
  • Internet and phone expenses
  • Stationery and computer consumables

What you need for this method:

  • A record of actual hours worked from home for the entire income year (estimates are not accepted)
  • Evidence you paid for the expenses covered by the rate
  • You can claim separate deductions for decline in value of assets like computers and office furniture

The beauty of this method is that you don’t need a dedicated home office space. Working from your kitchen table? No worries. Just make sure you’re actually working, not just scrolling through social media.

Actual Cost Method

Using the actual cost method, you calculate the actual additional expenses you incur when working from home. This method requires more detailed records but can be more beneficial if your actual costs are higher than the fixed rate.

Running expenses you can claim (work portion only):

  • Electricity for lighting, heating, cooling your work area
  • Gas for heating your workspace
  • Internet and phone costs for work purposes
  • Stationery and office supplies used for work

Equipment and furniture (work-related portion):

  • Computers, laptops, tablets used for work
  • Office furniture used primarily for work
  • Work-required software subscriptions
  • Printers and office equipment for work

What you cannot claim:

  • Occupancy expenses like rent, mortgage interest, house insurance, council rates unless you have a dedicated area set aside as a ‘place of business’
  • Entire utility bills without proper apportionment
  • Equipment used mainly for personal purposes

Where you incur running expenses for both private and work purposes, you need to apportion your deduction on a fair and reasonable basis. If you work from home 20% of your total work hours and use your study 50% for work purposes, you can claim 10% of relevant expenses (20% × 50% = 10%).

Record Keeping That Actually Protects You

Here’s where most people go wrong: they think they can wing it with record keeping. You can’t. The ATO requires you to keep your written evidence for 5 years from the date you lodge your tax return. Here’s what you absolutely need:

Work Diary Requirements (Fixed Rate Method):

Start a work diary today and record these details every time you work from home:

  • Daily record of actual hours worked from home for the entire income year
  • Start and finish times each time you work from home
  • Nature of work performed at home
  • Regular office attendance patterns

Expense Documentation:

Keep these records like your financial life depends on it (because it does):

  • Original receipts for all equipment purchases
  • Utility bills for apportionment calculations
  • Internet and phone bills with work usage identified
  • Evidence of what your employer provides

Calculation Worksheets:

Show your working like you’re back in maths class:

  • Detailed work-related percentage calculations
  • Apportionment methods for shared expenses
  • Annual summaries by expense category

“Clients who sail through ATO reviews maintain comprehensive records from day one,” explains ITP senior advisor Jennifer Harris. “It’s easier to keep good records than reconstruct them during an audit.”

Safe Claiming Strategies

Based on our experience with ATO reviews, these approaches minimise audit risk while maximising your legitimate claims:

Conservative calculations work in your favour. When uncertain about work percentages, use defensible conservative estimates rather than aggressive maximums. It’s better to claim $800 confidently than $1,200 nervously.

Focus on obvious work expenses because computer equipment and work-specific software are easier to defend than general household costs. The ATO rarely questions a genuine work laptop purchase.

Professional equipment priority helps because claims for clearly work-related items rarely face challenge compared to utility apportionments. A printer used 80% for work is easier to defend than 80% of your electricity bill.

Regular documentation updates save you headaches later. Keep records current as work arrangements change throughout the year. Don’t rely on your memory come tax time.

Professional Compliance Checklist

Before you lodge your return, tick off these essentials:

  • Work diary with daily hours and locations documented
  • Original receipts for all claimed equipment and expenses
  • Accurate work-related percentages calculated and documented
  • Employer policies on equipment provision clearly understood
  • Work and private use properly separated in all calculations
  • Digital records stored with secure backup systems
  • Annual review of claiming calculations when arrangements change
  • Professional advice for complex situations or significant claims

You can use the ATO’s home office expenses calculator to help calculate your deduction under either method.

When Professional Help Becomes Essential

Work from home compliance has become complex enough to warrant professional guidance in many situations. Don’t try to be a hero if you’re out of your depth.

You definitely need help if you have multiple work locations with varying schedules, have received any ATO correspondence about your claims, make significant work from home claims worth professional review, or find record keeping requirements overwhelming.

Our tax return specialists understand the ATO’s current focus and can structure your claims to minimise review risk while maximising legitimate deductions. Our bookkeeping services handle complex employment and contractor arrangements that affect home office claims.

Visit one of our office locations across Australia or use our online tax return service to discuss your work from home tax situation.

The Bottom Line for 2025

The ATO’s work from home compliance focus isn’t temporary. It’s the new normal, like remote meetings and awkward video call backgrounds. Sophisticated data matching and systematic reviews mean casual record keeping and estimated claims will cost you more than a decent coffee machine.

Your protection is meticulous records, conservative claims, and professional guidance when needed. The goal isn’t maximising your refund at all costs. It’s ensuring every dollar claimed can be defended confidently if the ATO comes knocking.

Success in this environment means treating work from home claims with the same seriousness as any significant tax deduction. Done right, you’ll sleep well knowing your claims are bulletproof. Done wrong, and you might find yourself explaining your Netflix viewing habits to an ATO auditor.

Your Work From Home Claims Questions Answered

Can the ATO audit my work from home claims?

Yes, the ATO conducts audits where they consider a more in-depth examination is required, using data matching programs that cross-reference tax claims with employment records and spending patterns. They’re particularly focused on work from home claims right now.

What triggers an ATO review of home office deductions?

Common triggers include reporting discrepancies, high-risk industries or transactions, and non-compliance with record-keeping requirements. Round number estimates, inconsistent work patterns, and inadequate records also raise red flags.

How much can I claim without detailed records?

If an expense is subject to substantiation, it must be supported by written evidence. If not, your claim is not deductible. All work from home claims now require proper substantiation regardless of amount.

What happens if I can’t prove my claims?

If you don’t have evidence to support claims for a deduction during a review, your claims can be disallowed. You’ll pay back any refund received plus interest and potential penalty amounts.

Can I claim my entire internet bill as work expense?

No, where you incur running expenses for both private and work purposes, you need to apportion your deduction on a fair and reasonable basis. You can only claim the work-related portion.

What if I work from home some days and office others?

You need to keep a record of actual hours worked from home for the entire income year and only claim expenses for genuine work from home days, properly apportioned for actual work use.

How long should I keep work from home records?

You must keep your written evidence for 5 years from the date you lodge your tax return. The ATO can review claims within this period and you need comprehensive records to defend questioned claims.

Do I need records if my employer provides equipment?

Yes, you need records to prove additional work-related expenses claimed. You cannot claim employer-provided items and must prove what you personally purchased for work use.

For more detailed information about working from home expenses, see the ATO’s comprehensive guide on working from home expenses.

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Disclaimer: This information is general and does not constitute personal tax advice. Tax laws are complex and change regularly. Always seek advice from a qualified tax professional about your specific circumstances.

Small Business Tax Rate

Small Business Tax Changes 2025-26: Complete Guide to Rates, Concessions & Deductions

Remember when managing your small business taxes felt straightforward? Pick your structure, claim your deductions, and lodge your return. Those days are long gone. Between changes to instant asset write-offs, evolving work-from-home rules, shifting company tax thresholds, and new compliance requirements, staying on top of small business tax obligations has become a full-time job in itself.

If you’re a small business owner wondering “What’s changed for 2025-26?” or “Am I missing out on concessions I should be claiming?” — you’re asking the right questions. The tax landscape for Australian small businesses continues to evolve, with some generous concessions expiring, others being extended, and new compliance requirements coming into effect.

Here’s what might surprise you: while some headline concessions are being wound back, there are actually more small business tax opportunities available in 2025-26 than many business owners realise. The key is understanding which thresholds apply to your business, when to time major purchases, and how to structure your affairs to maximise available concessions.

Quick Summary: Small Business Tax Changes 2025-26

Australian small businesses face significant changes in 2025-26, with the instant asset write-off dropping from $20,000 to $1,000 unless extended, but numerous other concessions remaining available. Understanding your business’s aggregated turnover determines access to different tiers of benefits across multiple thresholds.

Key changes and thresholds for 2025-26:

  • Instant asset write-off: Now at $1,000 threshold (reduced from $20,000 in 2024-25. (Extension has not yet passed Parliament)
  • Company tax rates: 25% for base rate entities vs 30% for others
  • Working from home: Fixed rate increased to 70 cents per hour
  • Small business thresholds: $10M, $50M, and $500M for different concessions
  • GST cash accounting: Available for businesses under $10M turnover
  • Simplified depreciation: 15% first year, 30% ongoing for eligible assets

The critical insight: Small business tax planning now requires understanding multiple turnover thresholds rather than a single “small business” definition. Getting your aggregated turnover calculation right determines access to concessions worth thousands of dollars annually.

The New Small Business Tax Landscape: Multiple Thresholds, Multiple Opportunities

Let’s face it — the idea of a single “small business” threshold is dead. In 2025-26, your business’s tax treatment depends on where you sit across multiple turnover bands, each unlocking different concessions and obligations.

The modern small business reality: Australian businesses now navigate at least four major turnover thresholds, each determining access to different tax concessions and compliance requirements.

“We’ve moved from a simple small vs large business model to a sophisticated tier system,” explains Patricia Wong, an ITP senior business tax advisor with 18 years of experience. “Many business owners don’t realise they’re missing out on concessions because they’re only looking at the $10 million threshold when their business might qualify for benefits up to $50 million.”

The critical thresholds for 2025-26:

  • Under $10 million: Maximum small business concessions including simplified depreciation
  • $10-50 million: Company tax rate benefits and some concessions
  • $50-500 million: Limited concessions but specific compliance requirements
  • Over $500 million: Large business rules and monthly PAYG requirements

What this means for your business: Success in small business tax planning now requires understanding which concessions apply at your turnover level and timing business decisions to optimise your position across multiple thresholds.

The Great Asset Write-Off Reality Check: From $20,000 to $1,000

Here’s the change that’s got every small business owner and tax professional talking (and not in a good way). The instant asset write-off, which has been a cornerstone of small business tax planning for years, has faced its biggest reduction ever in 2025-26.

What’s Changed with Asset Write-Offs

The stark reality for 2025-26: The instant asset write-off threshold has dropped from $20,000 to just $1,000 for eligible small businesses.

The transition:

  • 2024-25: $20,000 threshold (expired June 30, 2025)
  • 2025-26: $1,000 threshold (current position)
  • Eligibility: Businesses with aggregated turnover under $10 million

“The Labor Government promised to extend this excellent deduction opportunity for small businesses again for this next financial year,” says ITP business tax pro, Jennifer Liu. “But then we heard not a peep from them since winning the election. Unfortunately, businesses that missed the June 30, 2025 deadline now face a dramatically different tax treatment for equipment purchases.”

Strategic Response: Working Within the New Reality

The new landscape: With the $20,000 threshold now expired, businesses must adapt their equipment purchasing strategies.

Current planning strategies:

  • Multiple small purchases: Break larger equipment needs into items under $1,000 where practical
  • Timing within financial year: Spread purchases across the financial year for cash flow management
  • Depreciation planning: Understand that items over $1,000 must use simplified depreciation
  • Business portion focus: Ensure accurate business use percentages for mixed-use items

Example: Sarah’s consulting business now needs equipment in 2025-26:

  • Laptop ($3,000): Only $1,000 immediately deductible, remainder goes to depreciation pool
  • Desk chair ($800): Fully deductible immediately
  • Software ($1,200): Only $1,000 immediately deductible, remainder depreciated

Alternative Depreciation Options

When assets exceed the $1,000 threshold: Businesses can still access accelerated depreciation through the simplified depreciation pool.

Simplified depreciation benefits:

  • 15% deduction in the first year
  • 30% deduction each subsequent year
  • Available for businesses under $10 million aggregated turnover
  • Pooling of assets simplifies record-keeping

Company Tax Rates: The 25% vs 30% Decision

While company tax rates themselves aren’t changing for 2025-26, understanding base rate entity eligibility remains crucial for small business tax planning, especially as businesses grow.

Base Rate Entity Eligibility

To qualify for the 25% company tax rate in 2025-26:

  • Aggregated turnover under $50 million
  • 80% or less passive income (base rate entity passive income test)

The aggregated turnover trap: Many business owners forget to include connected entities and affiliates in their turnover calculation.

“We regularly see businesses that think they qualify for the 25% rate because their individual company turnover is under $50 million,” notes Michael Chen, an ITP company tax specialist. “But when you add related entities, trusts, and family companies, they exceed the threshold and face the 30% rate.”

Planning Around the Thresholds

For businesses approaching $50 million: Consider whether structure changes could maintain base rate entity status while supporting business growth.

Passive income considerations: Investment returns, rental income, and interest can push businesses over the 80% passive income threshold, triggering the higher 30% rate even with low turnover.

Working From Home: The 70 Cent Reality

Small business owners and their employees benefit from updated working from home rules that recognise the permanent shift to flexible work arrangements.

Updated Rates for 2025-26

Fixed rate method increases to 70 cents per hour for the 2024-25 and subsequent years, up from the previous 67 cents.

What the 70 cents covers:

  • Electricity and gas for heating, cooling, lighting
  • Phone and internet expenses
  • Computer consumables and stationery
  • Depreciation of home office equipment

Record-keeping requirements: Businesses and employees must maintain detailed records of work-from-home hours — estimates are no longer acceptable.

Business Implications

For small business owners: Working from home expenses can be claimed as business deductions when working from a home office.

For businesses with employees: Consider whether to provide work-from-home allowances and understand the FBT implications.

The increase to 70 cents reflects the ATO’s recognition that working from home costs have genuinely increased, along with the cost of living (think electricity, gas, and water bills).. For businesses with significant home-based operations, this can result in meaningful tax savings, so be sure you’re not missing out on these. .

Small Business Concessions: Your Tier-by-Tier Guide

Understanding which concessions apply to your business requires knowing exactly where you sit in the small business hierarchy.

Under $10 Million: Maximum Concessions

Businesses with aggregated turnover under $10 million access the full range of small business concessions:

Tax concessions available:

  • Instant asset write-off ($1,000 threshold for 2025-26)
  • Simplified depreciation rules (15% first year, 30% ongoing)
  • Small business income tax offset (up to $1,000)
  • Immediate deduction for prepaid expenses (12-month rule)
  • Small business CGT concessions (subject to separate $2 million test)
  • GST cash accounting and annual BAS options
  • PAYG instalments based on GDP-adjusted notional tax

Administrative benefits:

  • Simplified trading stock rules
  • Two-year amendment period (instead of four years)
  • Access to small business advisory services

$10-50 Million: Selective Benefits

Businesses in this range maintain access to key concessions while losing others:

Still available:

  • 25% company tax rate (if base rate entity eligible)
  • Small business restructure rollover
  • Some depreciation benefits
  • Certain administrative simplifications

No longer available:

  • Instant asset write-off
  • Simplified depreciation pool
  • Small business income tax offset
  • Most cash flow concessions

$50-500 Million: Limited Concessions

Larger small businesses face increased compliance but retain some benefits:

Compliance requirements:

  • Monthly PAYG instalments (for companies over $20 million)
  • Enhanced reporting obligations
  • Limited access to small business concessions

Remaining benefits:

  • Access to certain industry-specific concessions
  • R&D tax incentives (different thresholds apply)
  • Some depreciation options

GST and Cash Flow: Simplified Systems for Small Business

Small businesses with under $10 million in aggregated turnover can access simplified GST treatment that significantly reduces administrative burden.

GST Cash Accounting

Cash accounting benefits:

  • GST payable only when payment received
  • GST credits claimed only when expenses paid
  • Improved cash flow management
  • Reduced compliance complexity

Annual BAS option: Businesses under $20 million can lodge BAS annually instead of quarterly, further reducing administrative burden.

GST Registration Thresholds

Voluntary registration considerations: Businesses under the $75,000 threshold should consider voluntary GST registration if:

  • Purchasing significant equipment or assets
  • Expecting rapid growth
  • Wanting to appear more established to customers

“Many small businesses miss the cash flow benefits of GST cash accounting,” notes Rachel Wong, an ITP GST specialist. “The ability to defer GST payments until you’ve actually received customer payments can make a real difference to cash flow.”

Superannuation Guarantee: Small Business Obligations

Small businesses face ongoing increases in superannuation guarantee rates and enhanced compliance monitoring.

Current and Future Rates

Superannuation guarantee rates:

  • 2024-25: 11.5% of ordinary time earnings
  • 2025-26: 12% of ordinary time earnings (final increase)
  • From 2025-26: Rate remains at 12% ongoing

Small Business Compliance Focus

ATO enforcement priorities for small business:

  • Superannuation guarantee compliance
  • Single Touch Payroll reporting
  • Correct classification of workers (employee vs contractor)
  • On-time superannuation payments

Penalties for non-compliance: The ATO has increased focus on superannuation guarantee non-compliance, with penalties including:

  • Superannuation guarantee charge (non-deductible)
  • Administrative penalties
  • Interest charges
  • Director penalty notices

FBT Considerations for Small Business

Fringe Benefits Tax applies to benefits provided to employees, but small businesses can access certain exemptions and concessions.

Common FBT Issues

Small business FBT scenarios:

  • Company cars provided to employees
  • Car parking benefits in CBDs
  • Entertainment and meal expenses
  • Work-from-home equipment and allowances
  • Staff amenities and benefits

FBT Exemptions and Concessions

Available exemptions:

  • Minor benefits (under $300 value)
  • Work-related equipment and tools
  • Car parking (outside CBD areas)
  • Certain entertainment in business premises

Planning opportunities: Structure employee benefits to maximise exemptions and minimise FBT liability while providing valuable staff benefits.

Record Keeping and Compliance: Modern Requirements

Small business record-keeping requirements have evolved significantly, with digital systems becoming essential for compliance.

Digital Record Keeping

ATO requirements for 2025-26:

  • Digital records acceptable (no paper requirement)
  • Cloud storage and backup systems recommended
  • Integration with accounting software beneficial
  • Mobile apps for expense tracking

Single Touch Payroll

Expanded STP requirements:

  • All employers (including small business) must use STP
  • Real-time reporting of payroll information
  • Enhanced compliance monitoring
  • Integration with superannuation guarantee reporting

“Modern small business compliance is about systems, not paperwork,” explains Anthony Martinez, an ITP compliance director. “Businesses with good digital systems find compliance much easier and often discover tax planning opportunities they would otherwise miss.”

FAQs: Your Small Business Tax Questions Answered

How do I know which small business concessions apply to my business?

Calculate your aggregated turnover (including connected entities and affiliates) to determine which threshold band applies. Under $10M gets maximum concessions, $10-50M gets selective benefits, and over $50M faces large business rules.

Should I have brought forward equipment purchases before the instant asset write-off dropped?

If you missed the June 30, 2025 deadline for the $20,000 threshold, focus on maximising the current $1,000 threshold and using simplified depreciation for larger items. Consider whether breaking larger purchases into smaller components might help.

How does the 25% company tax rate work with other small business concessions?

The 25% company tax rate applies to base rate entities (under $50M turnover with ≤80% passive income), while other small business concessions mainly apply to businesses under $10M turnover. You can qualify for both if eligible.

What happens if my business grows beyond the small business thresholds?

You lose access to concessions prospectively but don’t need to reverse past benefits. Plan for the transition by understanding which concessions you’ll lose and implementing systems for enhanced compliance requirements.

Can I claim both work-from-home expenses and business office expenses?

Yes, if you genuinely use both. You can claim home office expenses for time worked from home and business premises expenses for time worked in the office, provided you don’t double-claim the same expenses.

Do I need to use the simplified depreciation pool if my turnover is under $10M?

It’s optional but often beneficial. You can choose to use simplified depreciation or regular depreciation rules, but once you start using simplified depreciation, you must continue unless you opt out (and then face a five-year lock-out period).

Small Business Tax Planning Checklist for 2025-26

Here’s a checklist to keep handy and make the tax planning for your small business more simple and less stressful: 

Before you submit your tax return for 2024-25:

  • Review planned equipment purchases for instant asset write-off opportunities
  • Calculate aggregated turnover including all connected entities and affiliates
  • Assess whether business structure changes could optimise tax position
  • Ensure superannuation guarantee compliance and STP reporting
  • Review work-from-home arrangements and record-keeping systems

For the 2025-26 financial year:

  • Implement new $1,000 instant asset write-off threshold planning
  • Update working from home records for 70 cent per hour rate
  • Monitor aggregated turnover throughout year for threshold management
  • Review GST cash accounting and BAS frequency options
  • Plan timing of income and expenses around small business thresholds

Ongoing compliance focus:

  • Maintain digital record-keeping systems
  • Monitor superannuation guarantee rate increases
  • Track work-from-home hours and expenses
  • Document business use percentages for mixed-use assets
  • Keep evidence of instant asset write-off eligibility and timing

Strategic planning considerations:

  • Structure purchases to maximise available concessions
  • Time income recognition to optimise threshold positions
  • Consider entity restructuring for growing businesses
  • Plan for FBT implications of employee benefits
  • Integrate tax planning with broader business strategy

Professional Support for Small Business Tax Complexity

Small business tax has evolved beyond DIY territory for most business owners. With multiple thresholds, changing concessions, and enhanced compliance requirements, professional guidance ensures you maximise benefits while meeting all obligations.

Small business tax planning now requires expertise across company law, trust structures, employment obligations, and digital compliance systems. Professional guidance ensures you access all available concessions while avoiding costly mistakes.

At ITP, our experienced small business tax specialists have helped thousands of Australian small businesses navigate the evolving tax landscape over our 50+ years in practice. We understand how to optimise your position across multiple thresholds and concessions.

Our small business tax services include:

  • Aggregated turnover calculations and threshold planning
  • Business structure reviews and optimisation
  • Instant asset write-off and depreciation strategies
  • Work-from-home and FBT compliance
  • Digital record-keeping system implementation
  • Ongoing compliance and strategic tax planning

Consider professional help when:

  • Your aggregated turnover is approaching any major threshold
  • You’re planning significant equipment or asset purchases
  • Your business structure includes multiple entities or family arrangements
  • You need help implementing compliant digital systems
  • You want to ensure you’re accessing all available small business concessions

“Small business tax planning is about understanding the full ecosystem of concessions and obligations,” says Rebecca Foster, an ITP small business advisory specialist. “We help clients navigate the complexity while ensuring they never miss an opportunity to legitimately reduce their tax burden.”

Ready to optimise your small business tax position for 2025-26? Contact your nearest ITP office to speak with a qualified small business tax specialist who can assess your specific situation and develop a comprehensive strategy.

If you need help with specific aspects like individual tax returns for business owners or company tax compliance, our integrated approach ensures all elements of your tax position work together optimally.

The Bottom Line: Complexity Creates Opportunity

Small business tax in 2025-26 is undeniably more complex than it was five years ago. Multiple thresholds, evolving concessions, and enhanced compliance requirements mean the days of set-and-forget tax planning are over.

But here’s the opportunity: businesses that understand and actively manage their tax position can access significantly more benefits than those using outdated strategies. The key is treating tax planning as an integral part of business strategy, not an annual afterthought.

Your 2025-26 action plan:

  1. Calculate your true aggregated turnover including all connected entities
  2. Map your concessions based on your threshold band
  3. Time major purchases to maximise write-off benefits
  4. Implement systems for ongoing compliance and monitoring
  5. Plan strategically for business growth and threshold management

Whether your business is a startup accessing maximum small business concessions or a growing operation navigating multiple thresholds, success in 2025-26 requires understanding the full landscape of opportunities and obligations.

The businesses that thrive will be those that view tax compliance not as a cost centre, but as a strategic advantage in building a more profitable, sustainable operation.

Other Helpful Articles

Company Tax Rates Australia 2025: Complete Guide

Tax Deadlines Australia 2025: Key Dates for Your Tax Return

$20,000 Instant Asset Write-Off Ends 30 June 2025 — Or Does It?

EOFY 2024–25 Tax Tips for Small Business: How to Maximise Your Deductions and Minimise Your Tax Payable

Disclaimer: This article provides general information about small business tax changes and should not be considered personal tax advice. Tax laws are complex and individual business circumstances vary significantly. Small business concession eligibility depends on specific calculations including aggregated turnover and business structure. Always consult with a qualified tax professional who can assess your specific situation and provide advice tailored to your business needs. ITP Tax Professionals disclaims any liability for decisions made based solely on the general information provided in this article.

Remote Work Tax Deductions 2025: Complete Guide for Australian Employees

Remember March 2020 when your boss sent everyone home “for just a couple of weeks”? Fast forward to 2025, and that makeshift dining table office has become your permanent workspace. You’ve probably spent thousands on a proper desk, ergonomic chair, better internet, and let’s not forget the skyrocketing electricity bills from running the air con all day.

Here’s the thing that might surprise you: most of those costs are tax deductible. But here’s what might frustrate you: the rules have changed since those early COVID days, and many people are either claiming too little (missing out on money) or claiming incorrectly (hello, ATO audit risk).

If you’re working from home in 2025 — whether full-time, part-time, or in a hybrid arrangement — the tax landscape has evolved significantly since the pandemic began. The temporary “shortcut” methods are gone, but the permanent rules are actually more generous than many people realise. You just need to know how to navigate them properly.

Quick Summary: Working From Home Tax Deductions 2025-26

Australian employees can claim work-from-home expenses using two methods for 2025-26. The fixed rate method allows 70 cents per hour for running costs, while the actual cost method lets you claim the business portion of your real expenses. Equipment purchases can be immediately deducted up to $300 per item.

Key methods and rates for 2025-26:

  • Fixed rate method: 70 cents per hour worked from home
  • Actual cost method: Claim business percentage of actual expenses
  • Equipment immediate deduction: Up to $300 per item
  • Record keeping requirement: Diary or timesheet showing hours worked
  • Occupancy expenses: Generally not claimable for employees

Understanding which method suits your situation can make the difference between claiming hundreds versus thousands of dollars in legitimate deductions. Getting your record-keeping right from the start of the financial year ensures you can maximise your tax refund without ATO compliance issues.

The Remote Work Revolution: How COVID Changed Everything Forever

Let’s face it — the workplace will never go back to what it was before 2020. What started as a temporary health measure has fundamentally transformed how and where Australians work.

The numbers tell the story: According to the Australian Bureau of Statistics, before COVID only 4 – 8% of employed Australians worked from home regularly (2016 Census data), and by 2021 this peaked at 40% during pandemic restrictions. By 2024, this has stabilised at around 36% of employed Australians working from home regularly — representing a dramatic and permanent shift in how Australians work.

“In our 50+ years helping Australians with their taxes, we’ve never seen such a dramatic shift in how people work,” explains Sarah Chen, an ITP senior tax specialist with 15 years of experience. “The challenge is that many people are still using outdated information about what they can and can’t claim.”

What this means for your tax return:

  • Home office expenses are now mainstream deductions, not exceptions
  • The ATO has permanent (not temporary) guidance for remote work claims
  • Technology and equipment purchases have become significant deductible expenses
  • Hybrid work arrangements create unique calculation challenges

The opportunity most people miss: Many employees working from home are under-claiming because they don’t realise how generous the current rules actually are, or they’re using outdated methods that expired years ago.

Current ATO Methods for 2025-26: Your Two Options

Here’s where things get interesting (and where many people get confused). The ATO gives you two distinct ways to claim your working from home expenses, and choosing the right one can make a huge difference to your refund.

Fixed Rate Method: 70 Cents Per Hour

This is the “easy button” option that most people should seriously consider. You can claim 70 cents for every hour you work from home, and this covers most of your running expenses in one simple calculation.

What the 70 cents covers:

  • Phone and internet expenses
  • Computer consumables (paper, ink, stationery)
  • Home office equipment depreciation (computers, printers, furniture)
  • Electricity and gas for heating, cooling, and lighting

What you can claim separately:

  • The decline in value of equipment costing more than $300
  • Repairs and maintenance of home office equipment
  • Cleaning costs for your dedicated home office area

Example calculation: Jennifer works from home 3 days per week (24 hours) for 48 weeks:

  • Total hours: 24 × 48 = 1,152 hours
  • Deduction: 1,152 × $0.70 = $806

“The fixed rate method is perfect for people who want simplicity and don’t have huge setup costs,” notes Michael Rodriguez, an ITP work-from-home specialist with 12 years of experience. “But if you’ve invested heavily in equipment or have high electricity costs, the actual cost method might give you a bigger deduction.”

Actual Cost Method: Claim Your Real Expenses

This method requires more record-keeping but can deliver much larger deductions if you have significant home office expenses.

You can claim the work-related portion of:

  • Electricity, gas, and water bills (business use percentage)
  • Phone and internet costs (work-related portion)
  • Computer consumables and stationery
  • Equipment depreciation or immediate deduction
  • Repairs and maintenance of office equipment
  • Cleaning expenses for dedicated office areas

How to calculate business use percentage:

  • Floor area method: Office area ÷ total home area
  • Time-based method: Hours worked from home ÷ total hours in period

Example calculation: David’s home office is 10% of his house area, and he works from home 40% of the time:

  • Electricity bill: $2,000 × 10% × 40% = $80
  • Internet: $1,200 × 100% (work use) = $1,200
  • Equipment depreciation: $800
  • Total deduction: $2,080

Home Office Equipment: What You Can Claim and How

This is where remote workers can really maximise their tax benefits, especially if you’ve had to kit out a proper home office since the pandemic began.

Immediate Deductions: Items Under $300

You can immediately deduct the full cost of any work-related item costing $300 or less in the year you buy it. This is a fantastic benefit that many people don’t fully utilise.

Common immediate deductions:

  • Desk chairs (even expensive ergonomic ones under $300)
  • Monitors and small electronics
  • Desk accessories and storage
  • Software subscriptions and apps
  • Professional development books and courses
  • Webcams, headsets, and video call equipment

“I had a client who bought a $280 ergonomic chair, a $150 monitor stand, and $200 worth of office accessories in one year,” shares ITP tax professional, Jennifer Park. “That’s $630 in immediate deductions that many people would overlook.”

Depreciating Assets: Items Over $300

For equipment costing more than $300, you need to claim the decline in value over several years. But here’s the good news — you can often claim a significant portion in the first year.

Typical depreciation periods:

  • Computers and laptops: 2-3 years
  • Office furniture: 10-13 years
  • Printers and equipment: 5 years
  • Air conditioning units: 10 years

Example: $2,000 laptop purchased in July 2025:

  • Year 1 (2025-26): Claim approximately $800-1,000
  • Year 2 (2026-27): Claim remaining balance over depreciation period

The Equipment Strategy Most People Miss

Timing your purchases strategically can maximise your tax benefits. If you’re planning to upgrade your home office setup, consider the tax implications of when you buy.

Smart timing tips:

  • Buy items under $300 near the end of the financial year for immediate deduction
  • Purchase major equipment early in the financial year to maximise first-year depreciation
  • Spread larger purchases across financial years to optimise your tax position

Ongoing Expenses: Utilities, Internet, and Phone Costs

Here’s where the day-to-day costs of working from home really add up — and where you can claim some substantial deductions if you track things properly. Understanding the working from home expenses you’re entitled to claim is essential for maximising your tax position.

Electricity and Gas: The Hidden Goldmine

Your electricity bill probably increased significantly when you started working from home full-time. Running computers, monitors, air conditioning, and lighting all day adds up faster than most people realise.

What you can claim:

  • Additional electricity for running office equipment
  • Heating and cooling costs for your work hours
  • Lighting costs for your office area
  • Gas heating if you use gas appliances

Calculation methods:

  • Actual cost method: Calculate business use percentage of total bills
  • Fixed rate method: Included in the 70 cents per hour

Real-world example: Lisa’s quarterly electricity bill increased from $400 to $650 after working from home:

  • Additional cost: $250 per quarter = $1,000 per year
  • If her office is 15% of home area and she works 50% of time from home:
  • Claimable amount: $1,000 × 15% × 50% = $75

Internet and Phone: Essential Work Tools

These are often 100% deductible if you can demonstrate the expense is primarily for work purposes.

What’s typically claimable:

  • Unlimited internet plans required for video calls
  • Mobile phone plans used for work
  • Landline costs for work calls
  • Additional data charges for work use

For detailed guidance on claiming these expenses, refer to our blogs on How to Reduce Your Taxable Income in Australia (2025 Guide) and What Can I Claim on Tax Without Receipts? Here’s What the ATO Actually Allows.

“We see many clients who are too conservative with internet and phone claims,” explains David Kim, an ITP technology deduction specialist. “If you upgraded to a faster internet plan specifically for working from home, or if you’re using your phone primarily for work, you can often claim a much higher percentage than people think.”

Record Keeping in 2025: Modern Tracking Methods

Gone are the days of keeping shoeboxes full of receipts (thankfully). Modern record-keeping for work-from-home expenses can be streamlined and automated — but you still need to do it properly. The ATO provides clear guidance on record keeping for tax that applies to all deduction claims.

Essential Records You Must Keep

For any method you choose, you’ll need:

  • Diary or timesheet showing hours worked from home
  • Records of expenses (receipts, bills, bank statements)
  • Evidence of the work-related purpose of expenses
  • Documentation of your home office setup

Modern tracking tools:

  • Smartphone apps for expense tracking and photo receipts
  • Digital calendars to track work-from-home days
  • Banking apps that categorise expenses automatically
  • Cloud storage for receipt photos and documentation

The Diary Dilemma: How Detailed Do You Need to Be?

The ATO requires a record of when you worked from home, but it doesn’t need to be as detailed as many people think.

Minimum requirements:

  • Dates you worked from home
  • Number of hours worked each day
  • Nature of work activities (if not obvious)

Acceptable formats:

  • Electronic calendar entries
  • Smartphone apps with work tracking
  • Simple spreadsheet or diary
  • Employer’s timesheet system

What does that mean? A simple calendar entry that says ‘WFH 8 hours — client calls and report writing’ is perfectly adequate. You don’t need to document every phone call or email, for example.

Hybrid Work: The New Challenge

Here’s where things get a bit tricky. If you’re working partly from home and partly in the office (like millions of Australians now do), your calculations become more complex — but the potential deductions are still significant.

Calculating Hybrid Work Deductions

You can only claim expenses for the time you actually work from home, not for days when you’re in the office.

Example hybrid calculation: Tom works 3 days from home, 2 days in office:

  • Home days per week: 3 days × 8 hours = 24 hours
  • Annual hours (48 weeks): 24 × 48 = 1,152 hours
  • Fixed rate deduction: 1,152 × $0.70 = $806

Mixed-Use Equipment Challenges

When you use the same equipment for both home and office work, you need to apportion the deduction accordingly.

Smart approaches:

  • Separate laptops/equipment for home vs office use
  • Clear documentation of work-related vs personal use
  • Time-based apportionment for shared equipment

FAQs: Your Working From Home Tax Questions Answered

Can I claim my entire electricity bill when working from home?

No, you can only claim the business portion. This is typically calculated using floor area (office space ÷ total home area) multiplied by time worked from home (work hours ÷ total hours in billing period).

What’s the difference between the fixed rate and actual cost methods?

The fixed rate method (70 cents per hour) covers most running expenses simply. The actual cost method requires detailed records but can result in higher deductions if you have significant expenses or equipment purchases.

Do I need a separate room to claim home office expenses?

No, you don’t need a dedicated room. You can claim expenses for any area of your home used primarily for work, even if it’s the dining table or a corner of the bedroom.

How do I track my working from home hours?

Keep a simple diary, calendar, or timesheet showing dates and hours worked from home. Electronic records are fine — it doesn’t need to be on paper.

Can I claim my internet and phone bills?

Yes, you can claim the work-related portion. If your internet plan was upgraded specifically for work or your phone is used primarily for work, you may be able to claim a high percentage or even 100%.

What equipment purchases can I write off immediately?

Any work-related item costing $300 or less can be immediately deducted in full. Items over $300 must be depreciated over their effective life (usually 2-10 years depending on the item).

Working From Home Deductions Checklist

We’ve created an easy-to-use checklist to help you with work from home deductions. But with every great checklist comes a caveat: Always consult your income tax professional, they’ll help you submit your tax return properly, claim all appropriate deductions, and avoid getting caught out claiming things you’re not actually entitled to (like many people unwittingly do). 

Before claiming work-from-home expenses:

  • Determine which method (fixed rate vs actual cost) provides the bigger deduction
  • Set up a system to track your work-from-home hours
  • Keep receipts for all equipment and setup costs
  • Document your home office arrangement with photos
  • Calculate the business use percentage of your home

For the fixed rate method:

  • Track hours worked from home with a diary or timesheet
  • Keep records of equipment purchases over $300 for separate claims
  • Maintain receipts for office cleaning and equipment repairs
  • Document any dedicated office space for additional claims

For the actual cost method:

  • Calculate your home office area as percentage of total home
  • Keep all utility bills and calculate business use portions
  • Track internet, phone, and technology expenses
  • Maintain detailed records of all office-related purchases
  • Calculate depreciation for equipment over $300

Year-round record keeping:

  • Set up digital folders for different expense categories
  • Use smartphone apps to photograph receipts immediately
  • Update your work-from-home diary weekly, not at tax time
  • Review and reconcile expenses quarterly
  • Keep backup copies of all digital records

Professional Support for Complex Work-From-Home Situations

Let’s be honest — while the basic concept of claiming work-from-home expenses is straightforward, the details can get complicated fast. Especially if you’re juggling hybrid work arrangements, multiple income sources, or significant equipment investments.

Working from home tax deductions involve nuanced rules where mistakes can cost you money — either through missed deductions or ATO penalties for overclaiming. Professional guidance ensures you maximise legitimate claims while maintaining full compliance.

At ITP, our experienced individual tax specialists have helped thousands of Australians navigate work-from-home deductions since the remote work revolution began. We understand the evolving ATO guidelines and can optimise your claims for your specific work arrangement.

Our work-from-home services include:

  • Deduction method analysis to maximise your refund
  • Individual tax return preparation with WFH optimisation
  • Record-keeping system setup and training
  • ATO compliance reviews and audit support
  • Strategic advice for equipment purchases and timing

Consider professional help when:

  • You have significant home office setup costs
  • Your work arrangement is complex (multiple employers, contracting)
  • You’re unsure which deduction method provides better results
  • You need help establishing proper record-keeping systems
  • The ATO has questioned your work-from-home claims

“The investment in proper work-from-home tax advice typically pays for itself in the first year,” says Emma Thompson, an ITP senior personal tax advisor with 18 years of experience. “We regularly help clients discover deductions they didn’t know they could claim, often worth thousands of dollars annually.”

Ready to maximise your work-from-home tax deductions for 2025-26? Contact your nearest ITP office to speak with a qualified tax specialist who understands the complexities of remote work taxation and can develop a strategy tailored to your work arrangement.

If you’re a business owner providing work-from-home allowances to employees, our business tax specialists can also help you understand the FBT implications and optimise your employee benefits strategy.

Making Remote Work Pay: Your 2025-26 Action Plan

The remote work revolution isn’t going anywhere — if anything, it’s becoming more entrenched as both employers and employees recognise the benefits. This means your work-from-home tax strategy needs to be just as permanent and well-planned as your office setup.

Your 2025-26 action steps:

  1. Choose your method early: Decide between fixed rate and actual cost methods based on your setup
  2. Set up tracking systems: Implement record-keeping from July 1, not at tax time
  3. Plan equipment purchases: Time major purchases for maximum tax benefit
  4. Review quarterly: Assess whether your chosen method is still optimal
  5. Seek professional advice: Get expert guidance for complex situations

The bottom line: Working from home shouldn’t cost you money — it should save you money through legitimate tax deductions. The key is understanding the rules, keeping proper records, and claiming everything you’re entitled to claim.

Whether you’re a remote work veteran or new to the home office game, staying on top of your deductions ensures that your tax refund helps offset the real costs of maintaining a productive home workspace. And in 2025, with remote work firmly established as a permanent feature of the Australian workplace, those deductions are more valuable than ever.

For more insights on maximising your tax position, check out our comprehensive guide to tax deductions and strategies that complements your work-from-home claims.

Other Helpful Articles

ATO Hit List 2025: Top Audit Targets This EOFY & How to Stay Compliant

Work Travel Expenses 2025 Tax Return: Complete ATO Guide

Tax Deadlines Australia 2025: Key Dates for Your Tax Return

Disclaimer: This article provides general information about working from home tax deductions and should not be considered personal tax advice. Tax laws are complex and individual circumstances vary significantly. Deduction eligibility depends on your specific work arrangements and the genuine work-related nature of expenses. Always consult with a qualified tax professional who can assess your specific situation and provide advice tailored to your individual circumstances. ITP Tax Professionals disclaims any liability for decisions made based solely on the general information provided in this article.

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