Work-Related Expense Deductions

Work-related deductions are the most commonly claimed — and most commonly audited — category of tax deductions in Australia. The golden rule: you can only claim a deduction if the expense directly relates to earning your income and you have a record to prove it.

Working From Home (WFH) Deductions

The ATO offers two methods for calculating WFH deductions:

Fixed Rate Method (70 cents per hour)

For the 2025-26 income year, the ATO's fixed rate is 70 cents per work hour. This covers electricity, gas, internet, phone, and stationery. You need a record of hours worked (timesheet or diary) covering a representative 4-week period.

Actual Cost Method

Claim the actual cost of running your home office based on receipts, apportioned by floor area and hours used. This can yield a higher deduction if you have a dedicated home office with significant energy use.

Uniforms and Clothing

• Compulsory uniform: Fully deductible if it's unique to your employer and in your award or policy
• Occupation-specific clothing: High-vis vests, steel-cap boots, chef pants — deductible if required for safety or identification
• Plain clothes: Not deductible, even if your employer requires a certain colour or style (e.g. "black pants and white shirt")
• Laundry: Claim up to $150 per year without receipts for washing eligible work clothing

Travel Expenses

You can claim car expenses if you use your personal vehicle for work purposes (not commuting). Two methods:

• Cents per km: 88 cents per km, up to 5,000 km (no logbook needed) for 2025-26
• Logbook method: Record all trips for 12 weeks. Claim the business-use percentage of actual car costs

Tools and Equipment

• Items under $300: Claim the full cost immediately
• Items $300 or more: Depreciate over their effective life
• Portable electronic devices (laptops, tablets, phones): Claim if used for work; apportion if mixed use

Self-Education

Deductible if the course maintains or improves skills required in your current job, or leads to a promotion in your current field. Not deductible if it qualifies you for a new career entirely.

Common ATO Audit Triggers

• Claiming exactly $300 in work deductions (no receipts needed under $300 — so this looks suspicious)
• Claiming 100% home internet or phone for work
• Claiming clothing that isn't occupation-specific
• Large deduction spikes compared to previous years

Bottom line: Keep receipts, log your hours, and be reasonable. The ATO's data-matching systems are sophisticated — don't claim what you can't substantiate.

How the ATO Checks Your Claims

The ATO does not review every return — it uses sophisticated data-matching and analytics to flag the ones that look unusual. It already receives data from banks, employers, share registries, property managers, ride-share and delivery platforms, and cryptocurrency exchanges. When you claim a deduction, the ATO compares your claim against benchmarks for your occupation and income level. A tradie claiming $4,000 of laundry, or an office worker claiming 100% of their phone bill, will stand out immediately.

The mechanism that protects you is the three golden rules: the expense must be directly related to earning your income, you must have actually paid it yourself, and you must have a record to prove it. Claims that fail any of these tests are simply disallowed — and if the ATO decides you were reckless, you may also face a penalty of 25% or more of the tax shortfall, plus interest.

How to Build an Audit-Proof Claim

Follow this checklist and your deductions will survive any review:

• Log your WFH hours contemporaneously — a timesheet, roster, or diary kept as you go. A diary written up at tax time is a red flag.
• Keep every receipt digitally — photograph paper receipts and store them in a folder, or use an app like the ATO's myDeductions tool, which feeds straight into your return.
• Apportion honestly — if you use your phone 40% for work, claim 40% of the bill, not the whole amount.
• Avoid claiming exactly $300 — the $300 no-receipt threshold is for small claims only; claiming precisely $300 looks engineered and invites a closer look.
• Don't double-dip — the 70 cents per hour fixed rate already covers electricity, internet, phone, and stationery, so you cannot also claim those bills separately. Depreciation on home office equipment is claimed on top.

If you are unsure whether an expense qualifies, the ATO's occupation-specific guides on its website are the best reference — and a registered tax agent can review your claim before you lodge for a relatively small fee.

Contractors and sole traders face the same tests on these expenses, but more of the burden falls on them: vehicle and home-office costs an employee can rarely claim are core business expenses, and the records have to satisfy an ATO review. The sole trader tax guide walks through how those claims interact with ABN, GST and BAS obligations.