The ATO has flagged work from home claims as a priority audit area for 2026. Mark Chapman looks at the most common mistakes small business owners make.
As the end of financial year approaches, many Australians turn their attention to tax returns with a mix of anticipation and uncertainty. While some hope for a sizeable refund, others simply want to ensure they meet their obligations without drawing unwanted scrutiny.
Yet, year after year, a common pattern emerges: individuals unintentionally short-change themselves—or worse, expose themselves to compliance risks—due to incorrect assumptions and poor record-keeping habits.
Understanding where things commonly go wrong is critical, not just for maximising legitimate deductions, but also for avoiding costly mistakes that can linger well beyond tax time.
The Danger of “Common Knowledge” Tax Assumptions
Tax is an area where myths and half-truths spread easily. Advice passed between colleagues, shared on social media, or based on outdated rules can result in claims that are either overstated or overlooked entirely.
1. “If I bought it for work, it’s automatically deductible”
This is one of the most persistent misconceptions. The reality is more nuanced. For an expense to be deductible, it must be directly related to earning assessable income, and there must be a clear connection between the expense and the individual’s work duties.
For example, a professional might purchase a high-end laptop believing it is fully deductible. However, if that laptop is also used significantly for personal purposes, only the work-related portion can be claimed. Without a reasonable basis for apportionment, the claim may be reduced or denied.
The financial impact can be twofold: overclaiming can trigger adjustments or penalties, while underclaiming (out of caution or confusion) means missing out on legitimate deductions.
2. “I don’t need receipts for small expenses”
Another risky assumption is that minor expenses don’t require documentation. While there are limited exceptions for small claims, broadly speaking, the expectation is that taxpayers can substantiate their deductions.
Even seemingly insignificant costs—like work-related parking, tolls, or small tools—can add up over a financial year. Without records, these amounts are often omitted entirely, reducing the overall refund.
On the flip side, attempting to estimate or reconstruct expenses without evidence can raise red flags, particularly if the figures appear inconsistent with industry norms.
3. “Working from home means I can claim everything”
The shift toward remote and hybrid work has introduced new complexities. Many individuals assume that working from home entitles them to claim a wide range of household expenses in full.
In reality, only the work-related portion of expenses such as electricity, internet, and office supplies can be claimed. Additionally, different calculation methods (such as fixed rate versus actual cost) come with their own eligibility requirements and record-keeping obligations.
A common mistake is double-dipping—claiming expenses separately when they are already included in a fixed rate method. This can lead to amended assessments and potential penalties.
4. “My accountant will fix everything”
While professional advice is invaluable, it is not a substitute for accurate information. Tax agents rely on the data provided by their clients, and incomplete or incorrect records can lead to suboptimal outcomes.
For instance, failing to mention a work-related course, professional membership, or business expense means it cannot be claimed—even if it is fully deductible. Conversely, providing vague or unsupported figures may result in conservative treatment to avoid compliance risks.
Ultimately, the responsibility for the accuracy of a tax return rests with the individual, not the adviser.
5. “If I didn’t get audited, it must be fine”
A lack of immediate scrutiny does not mean a tax position is correct. Data matching and review processes can occur years after a return is lodged. Incorrect claims may still be identified and adjusted, sometimes with interest and penalties applied.
This assumption can be particularly costly where individuals have consistently applied the same incorrect treatment over multiple years, compounding the financial impact.
How Poor Record-Keeping Directly Impacts Refunds
If assumptions are the first pitfall, record-keeping is the second—and arguably more damaging over time. Even where individuals understand the rules, inadequate documentation can prevent them from substantiating claims.
1. Lost deductions due to missing evidence
One of the most immediate consequences of poor record-keeping is the inability to claim legitimate expenses. Without receipts, invoices, or usage logs, many taxpayers simply leave money on the table.
Consider a professional who incurs $2,000 in work-related expenses over the year but fails to retain receipts for half of them. At a marginal tax rate of 32.5%, that’s a potential $325 reduction in their refund—lost purely due to missing documentation.
2. Inaccurate apportionment of mixed-use expenses
Many expenses have both work and private components. Without clear records—such as diaries, usage logs, or itemised bills—apportioning these costs becomes guesswork.
This often leads to conservative estimates, reducing the claim, or overly aggressive claims that may not withstand scrutiny. Either way, the absence of structured records creates uncertainty and financial risk.
For example, tracking internet usage for work versus personal purposes over a representative period can significantly improve the accuracy—and defensibility—of a claim.
3. Missed opportunities for depreciation claims
Assets such as laptops, tools, and office furniture may be deductible over time through depreciation. However, without purchase records, including dates and costs, these claims may be overlooked entirely.
This is particularly relevant for individuals who frequently upgrade equipment or incur capital expenses as part of their work. Poor documentation can result in fragmented or missed claims, reducing long-term tax benefits.
4. Increased reliance on estimates
When records are incomplete, individuals often resort to estimates. While some level of estimation is acceptable in limited circumstances, it should always be based on a reasonable methodology.
Excessive reliance on estimates can lead to inconsistent claims from year to year, increasing the likelihood of review. It also undermines confidence in the overall accuracy of the return.
5. Stress and inefficiency at tax time
Beyond the financial implications, poor record-keeping creates unnecessary stress. Scrambling to locate receipts, reconstruct expenses, or respond to queries can turn a straightforward process into a time-consuming exercise.
In contrast, maintaining organised records throughout the year allows for a smoother, more efficient tax return process—and often a more accurate outcome.
Building Better Habits: Practical Steps That Make a Difference
Improving tax outcomes doesn’t require complex strategies—just consistent habits.
1. Capture expenses in real time
Waiting until the end of the financial year to organise records is a recipe for omissions. Using apps, cloud storage, or even a simple folder system to capture receipts as they arise can significantly improve accuracy.
Digital copies are generally acceptable, provided they are clear and legible.
2. Maintain a work-related diary
For expenses that require apportionment—such as vehicle use or working from home—a diary or logbook can provide critical evidence.
Even a representative sample over a defined period can support a reasonable claim, provided it reflects typical usage patterns.
3. Separate personal and work expenses
Where possible, using separate accounts or cards for work-related expenses can simplify tracking and reduce the risk of missing deductions.
This is particularly useful for individuals with side businesses or freelance income streams.
4. Review records before lodging
Taking the time to review expenses before submitting a return can uncover overlooked deductions or inconsistencies. This is also an opportunity to ensure all claims are supported by appropriate documentation.
5. Seek advice early, not late
Engaging with a tax professional (like Tax Return & Tax Accountants in Australia | H&R Block Australia) before the end of the financial year can help identify opportunities and address potential issues while there is still time to act.
This might include bringing forward deductible expenses, reviewing record-keeping practices, or clarifying eligibility for specific claims.
Tax outcomes are not just determined by income levels or headline deduction categories—they are shaped by everyday behaviours and assumptions.
Believing that “common knowledge” is accurate, or treating record-keeping as an afterthought, can quietly erode refunds and increase compliance risks. On the other hand, informed decision-making and disciplined documentation can make a tangible difference.
For individuals and business owners alike, the message is clear: getting the basics right isn’t just about compliance—it’s about ensuring you don’t pay more tax than you need to.
In a system where every dollar counts, the cost of getting it wrong can be higher than many realise.
Keep up to date with our stories on LinkedIn, Twitter, Facebook and Instagram.
