For many individuals, sole traders and small business owners, the first instinct after 1 July is to lodge quickly and wait for a refund. That can be tempting, but it is not always the best approach.
This year, a safer approach is to slow down, check your records, confirm pre-filled information is complete, and make sure any deductions are supported before lodging. The Australian Taxation Office has access to more data than many people realise. It can compare your tax return with information from employers, banks, share registries, crypto exchanges, digital platforms, property managers and other third-party sources.
Most tax issues do not arise because clients are trying to do the wrong thing. They often arise because income is forgotten, expenses are estimated, business and private costs are mixed, or records are not available when the ATO asks questions months later.
This post outlines the areas the ATO is likely to question and what you can do now, after 30 June, to prepare properly.
Why rushing after 1 July can create problems
Lodging early can be useful if your records are simple and complete. However, many tax returns are not complete in the first few days of July. Employers, banks, health funds, government agencies, share platforms and investment providers may still be finalising their reporting.
If you lodge before all information is available, you may miss income or claim deductions against incomplete data. That can lead to amendments, delays, ATO questions, interest charges or penalties.
A better post-30 June approach
Rather than filing immediately, take time to review the return carefully. A short pause now can prevent a much bigger problem later.
- Check that all income has been included.
- Compare your records with pre-filled ATO data.
- Make sure deductions are reasonable and supported.
- Separate private and business use where needed.
- Keep evidence ready in case the ATO asks questions later.
Work-from-home claims: evidence matters
Working from home remains one of the most common deduction areas. The ATO is likely to question claims that are rounded, unsupported or inconsistent with work patterns.
For 2025–26, many employees and home-based business operators may consider the fixed rate method or the actual cost method. The fixed rate method is simple, but it is not a “no records required” shortcut. You still need a record of the hours worked from home and evidence of relevant expenses.
Case study: Working-from-home claim
Maria is an employee who worked from home two days per week during the year. She worked 7.5 hours per day from home for 46 weeks.
Her total work-from-home hours are:
2 days × 7.5 hours × 46 weeks = 690 hours
If Maria uses a 70 cents per hour fixed rate method, her claim would be:
690 hours × $0.70 = $483
That may look modest compared with some large home-office claims. However, it is much easier to support if Maria has diary records, timesheets, rosters, employer emails, or calendar entries showing her work-from-home pattern.
If Maria also bought a $1,800 laptop used 80% for work, that may need to be considered separately under the depreciation rules. She should not simply deduct the full laptop cost without checking the correct treatment and business-use percentage.
Common ATO questions may include
- Did you actually work from home on those days?
- Were the hours recorded or estimated later?
- Was the expense already reimbursed by your employer?
- Is there a private component?
- Have you claimed the same cost twice?
Rental property deductions: repairs, improvements and private use
Rental property deductions remain a major area of review. The ATO is likely to question claims for interest, repairs, improvements, holiday homes, short-stay accommodation and periods where the property was not genuinely available for rent.
The key issue is whether the expense relates to earning rental income. If a property is partly used privately, rented below market rates to family, blocked out for personal use, or unavailable for rent, deductions may need to be reduced.
Case study: Repair or improvement?
Tom owns a rental property. During the year, he paid:
- $3,600 to repair a leaking hot water system
- $28,000 to renovate an old bathroom with new tiles, fittings and layout
The hot water repair may be deductible if it restores the existing item to working order and relates to the rental period.
The bathroom renovation is different. It improves the property and may be capital in nature. Instead of claiming $28,000 immediately, Tom may need to claim it over time under the capital works rules, if eligible.
The difference is important. If Tom claims the full $31,600 as repairs, the ATO may question the return. A more accurate approach is to separate repairs, maintenance, depreciating assets and capital works before lodging.
Side hustles and platform income: small amounts still count
Many clients now earn income outside their main job or business. This can include ride-share driving, food delivery, online marketplaces, Airtasker-style work, tutoring, content creation, short-stay accommodation, online sales, freelance services or weekend consulting.
A common mistake is assuming that a side hustle is too small to matter. If you are earning income from providing goods or services, it may need to be declared. If the activity has become a business, there may also be ABN, GST, record-keeping and superannuation issues to consider.
Case study: Weekend candle business
Amelia works full-time and sells handmade candles on weekends. During 2025–26, she received:
- Online sales: $18,500
- Market stall sales: $4,200
- Total income: $22,700
Her costs included:
- Materials: $7,200
- Market stall fees: $1,100
- Packaging: $900
- Website and payment fees: $650
- Total expenses: $9,850
Her net income before other adjustments is:
$22,700 − $9,850 = $12,850
Amelia cannot ignore this simply because it started as a hobby. She should discuss whether she is carrying on a business, whether she needs an ABN, how to treat stock, whether GST registration may become relevant in future, and what records she needs to keep.
If Amelia made a loss instead, she should not assume she can automatically offset that loss against her salary. Non-commercial loss rules may apply.
Crypto: every disposal can matter
Crypto is another area where the ATO receives data from third parties. Many investors understand that selling crypto for Australian dollars can trigger tax consequences. Fewer understand that swapping one crypto asset for another can also be a taxable event.
Common crypto records should include
- The date of each transaction
- The type and quantity of crypto acquired or disposed of
- The Australian dollar value at the time
- Exchange fees
- Wallet and exchange records
- The purpose of the transaction
Case study: Crypto gain
Daniel bought Bitcoin for $5,000. Later, he sold it for $8,200. His exchange fees were $80.
His capital proceeds after selling costs may be:
$8,200 − $80 = $8,120
If his cost base was $5,000, his capital gain before any discount is:
$8,120 − $5,000 = $3,120
If Daniel held the asset for at least 12 months and satisfies the relevant conditions, he may be eligible for the CGT discount. If he held it for less than 12 months, the full gain may be taxable.
The ATO may question returns where crypto activity appears in exchange data, but no capital gain, capital loss or income is reported.
Shares, dividends and capital gains: do not rely only on pre-fill
Share investors often rely on pre-filled dividend information. Pre-fill is useful, but it may not capture everything needed for a correct tax return.
If you sold shares, units or exchange-traded funds during the year, you may need to calculate a capital gain or loss. This requires purchase records, sale records, brokerage, dates and any corporate actions.
Case study: Share sale
Priya bought shares for $12,000 and paid $40 brokerage fees. Her cost base is:
$12,000 + $40 = $12,040
She later sold the shares for $16,500 and paid $40 in brokerage fees. Her capital proceeds are:
$16,500 − $40 = $16,460
Her capital gain before any discount is:
$16,460 − $12,040 = $4,420
If Priya held the shares for more than 12 months, she may be eligible for the 50% CGT discount as an individual. The taxable capital gain after the discount may be:
$4,420 × 50% = $2,210
If Priya only checks her dividend pre-fill and forgets the share sale, the return may be incomplete.
Business and private expenses: the ATO will expect a split
For small business owners and sole traders, one of the most important tax-time tasks is separating business expenses from private expenses. This applies to motor vehicles, phones, internet, home office costs, travel, meals, subscriptions, insurance, interest and equipment.
The basic principle is simple: if an expense is partly business and partly private, only the business portion should be claimed.
Case study: Motor vehicle costs
Sam runs a small electrical business. His vehicle expenses for the year are:
- Fuel: $6,800
- Registration and insurance: $2,900
- Repairs and servicing: $2,400
- Interest and other costs: $1,900
Total vehicle costs: $14,000
Sam’s logbook and records support 80% business use.
His deductible business portion is:
$14,000 × 80% = $11,200
The private portion is:
$14,000 × 20% = $2,800
Sam should not claim the full $14,000 simply because the vehicle is useful for work. The ATO may ask how the business percentage was calculated.
Non-commercial losses: a loss is not always deductible against salary
Many sole traders and individuals in partnerships assume that a business loss can be offset against wages, investment income or other personal income. That is not always correct.
The non-commercial loss rules can apply when an individual’s business activity results in a loss. Depending on the facts, the loss may need to be deferred rather than claimed immediately against other income.
Case study: Consulting side business
Liam is employed full-time and has also started a weekend consulting activity. For 2025–26, he had:
- Consulting income: $12,000
- Consulting expenses: $20,000
- Loss: $8,000
Liam wants to deduct the $8,000 loss from his salary. This may not be available automatically. He needs to check the non-commercial loss tests and whether the activity is genuinely commercial.
If the loss must be deferred, Liam may be able to use it against future income from that business activity, but not immediately against salary.
Small business concessions and CGT: eligibility must be proven
Small business CGT concessions can produce significant tax savings when selling a business, business premises or active business asset. However, the ATO is likely to question whether the eligibility requirements have been met.
This can include questions about:
- Whether the asset is active
- Who owns the asset
- The business turnover or net asset position
- Connected entities and affiliates
- The timing of the sale
- Whether the right concession has been applied
- Whether the structure matches the claim
Case study: Sale of a small business asset
Nina sells a business asset
