Based on the latest Australian Tax Office (ATO) guidance, the biggest ATO review and audit focus areas for 2026 income tax returns are some of the most common claims.
The ATO is paying particular attention to motor vehicle claims, work-related travel, working from home expenses, rental property deductions and undeclared income.
Work-Related Expenses are still #1
The ATO continues to identify work-related deductions as its primary compliance focus. Incorrectly claiming work related expenses is the most common mistake individuals make in preparing their tax return. Taxpayers should and must be able to demonstrate that:
- The expense was incurred personally
- It directly relates to earning assessable income
- They have appropriate records to substantiate the claim
Common problem areas may include:
- Motor vehicle claims
- Travel expenses
- Working from home expenses
- Self-education expenses
- Mobile phone and internet claims
- Tools and equipment purchases
It is essential to be fully informed regarding which work-related expenses are eligible for deduction.
Working From Home Claims
Deductions related to working from home have become increasingly complex, as many individuals fail to maintain comprehensive records or timesheets. The ATO is scrutinising these claims closely, and insufficient documentation often results in claims being reduced or denied. Focus points include:
- Hours claimed
- Double-dipping on deductions
- Lack of records
- Claims for occupancy expenses that are not deductible
Taxpayers should maintain clear records of hours worked from home and ensure any additional expenses are properly documented.
For more information about WFH expenses visit our Working From Home Deductions article
Motor Vehicle & Travel Claims
This is particularly relevant to many of our clients. It was recently noted that the ATO’s main audit focus this year includes:
- Motor vehicle deductions
- Work-related travel claims
- Logbook accuracy
- Travel diaries and substantiation requirements
Note: the ATO is actively comparing taxpayers’ claims against industry benchmarks and historical averages.
For more information visit the ATO website
Rental Property Deductions
The ATO has reviewed income tax returns from property investors and observed that up to 90 percent contain inaccuracies. The extent of these discrepancies, whether minimal or substantial, remains unclear. However, the ATO has indicated increased scrutiny on individuals who own rental properties.
To maintain compliance, accurate records must be retained for the rental period, all income received and associated expenses. Key focus areas include:
- Overclaimed interest
- Incorrect apportionment of expenses
- Holiday homes
- Repairs versus capital improvements
- Incorrect depreciation claims
Be Aware: the ATO’s data matching with property management programs, banks and land registries makes this one of the easiest areas for it to review.
Undeclared Income
The ATO is heavily targeting undeclared income this tax season, focusing on side hustles, gig economy earnings, shares & crypto and omitted investment or bank interest. The ATO has increasingly extensive data matching tools and receives information directly from:
- Employers
- Banks
- Share registries
- Digital platforms
- Government agencies
- Property platforms
Income frequently missed generally includes:
- Bank interest
- Dividends
- Capital gains
- Side hustles
- Cash jobs
- Gig economy income
- Rental income
Summary
With sophisticated data matching technology now in place, taxpayers should ensure all income is declared and every deduction is properly substantiated with supporting documentation. Good record keeping remains the key to a stress-free tax season. If a client can provide receipts, logbooks, travel diaries and clear explanations of how a claim relates to income-producing activities, they substantially reduce their risk of adjustment or audit.