The ATO's 2026 Hit List: Data Matching, Side Hustles and Dodgy AI Advice

Mia: Welcome to the podcast, our newsletter made easy. Please note, this podcast features AI-generated voices for your hosts, Mia Taylor Leo: and Leo Baker, bringing you expert insights from the team at Aevum Accounting. Each week, we're here to help you confidently navigate the ins and outs of Australian tax, whether it's for your individual finances or the complexities of your business. Mia: We'll cut through the jargon to give you strategies for compliance, smart planning, and that ultimate peace of mind. Leo: So, if you're looking to understand your obligations, maximize your financial position, or simply gain clarity on your money matters, you're in the right place. Let's get started with our review of the week! Mia: This one comes from Kalypso, who says: the team has a great way of breaking down financial concepts so they are more straightforward and manageable. They're very approachable, and always happy to help with any questions. Leo: Thank you, Kalypso. And that is exactly the right review for today, because this whole episode is about what happens when people get their tax information from somewhere that can't answer a follow-up question. Mia: Ooh, ominous. So where are we going today? Leo: We're walking through the ATO's hit list for this tax time. What they're watching, how they're watching it, and the mistakes that are getting picked up before most people even realise they've made one. And we're recording this at the end of July on purpose, because that's when the pre-fill data has settled and everyone starts thinking about actually lodging. Mia: So what's actually changed this year? Because work-related deductions and rental properties have been on that list for as long as I can remember. Leo: The topics haven't changed. The scale has. The Tax Office has said plainly that it is no longer relying on taxpayers to get it right. It's using data matching, artificial intelligence and targeted compliance programs to find errors at scale, and the amount of information it holds is bigger than it's ever been. Mia: So what are they actually plugged into? Leo: Employers, banks, share registries, government agencies, crypto exchanges and the digital platforms. Income, investments, rental transactions, trust distributions and gig economy earnings all get cross-checked against third-party data. Which means the old logic of, it's only small, nobody will notice, doesn't really work anymore. Mia: Right. And they've named two headline focus areas this year, haven't they? Leo: They have. Work-related deductions, and omitted income. Let's take them one at a time. Mia: Work-related deductions first. More than ten million Australians claim them every year, and the ATO keeps finding errors right across the board. Although I gather most of it isn't people deliberately doing the wrong thing. Leo: It isn't. In most cases people just misunderstand what's deductible. But the ATO has also given a very direct warning to anyone tempted to round things up, and I'll give it to you almost word for word. Don't fall into the trap of thinking that if you intentionally claim a little more than you're entitled to, it'll fly under the radar and the ATO won't notice. Mia: Fair warning. So what's the test? Leo: The same three rules we come back to every single time on this show. One, the expense has to relate directly to earning your income. Two, you have to have spent the money yourself and not been reimbursed for it. And three, you have to be able to prove it with a record. All three, not two out of three. Mia: And the claims that are getting attention right now? Leo: Private costs dressed up as work costs. Everyday clothing. Meal deliveries. Gifts. Childcare. Things with only a loose connection to the actual job. People rarely get themselves into trouble through one big claim. It's usually a collection of small ones that don't pass those three tests. Mia: I want to flip that around, though, because there's a myth that the ATO only ever wants you to claim less. That's not right, is it? Leo: Not at all, and the Tax Office said so itself this year. A lot of people underclaim because they simply don't know what's available for their occupation. They gave some lovely examples. Guard dog costs for people working in security. Sun protection for fitness industry workers who train clients outdoors. Professional-grade tools for tradies and for beauty professionals. Mia: Which is exactly why we do an occupation guide on this show every few weeks. Alright, let's talk about the single most scrutinised deduction of the lot. Working from home. Leo: The fixed rate method. And it went up. For the financial year that just ended, the fixed rate is seventy cents for every hour you worked from home. It was sixty-seven cents before that. Mia: And what does the seventy cents actually cover? Leo: Electricity and gas. Home internet and mobile internet. Phone usage. Stationery and computer consumables. All bundled into the one rate. Which brings us straight to the mistake the ATO says it sees constantly. Mia: Double dipping. Claiming the fixed rate, and then claiming your phone bill and your internet bill separately on top of it. Leo: Exactly that. You can't. They're already inside the seventy cents. What you can still claim separately is the decline in value of your equipment, so your laptop, your desk, your office chair. Repairs and maintenance on those items. And cleaning, if you have a dedicated home office space. Mia: And the records? Because I suspect this is where most people come unstuck. Leo: This is the one. The ATO wants a record of your actual hours, kept as you go. A diary, a timesheet, a roster. Not a number you reverse-engineer in October on the night before you lodge. Mia: I feel personally attacked by that sentence. Leo: A lot of people will. And here's one more myth worth burying. If you're an employee working from home, you generally cannot claim occupancy costs. Your rent, your mortgage interest, your council rates. Those are not on the table just because your laptop lives on the kitchen bench. Mia: Good to know. Let's move to the other big one, then. Omitted income. Leo: And this is where the data matching really bites, because a huge number of Australians now have some kind of side hustle and genuinely don't think of it as income. Mia: So talk me through what's actually being reported. Leo: Under the sharing economy reporting regime, the platforms have to send your earnings straight to the ATO. Ride share and food delivery, so your Ubers, your DiDis, your Menulogs, your Deliveroos. Short-term accommodation, so Airbnb, Stayz and Booking dot com. Plus Airtasker and plenty of others. Mia: And what's the threshold before it gets reported? Leo: There isn't one. That's the part people miss. There is no minimum at all. If your Etsy store made three hundred dollars last year, that is still assessable income and it still needs to go in the return. Mia: Which means the ATO already has the number before you lodge. Leo: In most cases, yes. And that quietly turns your tax return into a matching exercise rather than a disclosure. If your figure doesn't line up with theirs, that's the discrepancy that gets flagged. Mia: Now, what about the classic defence? It's not a business, it's just a hobby. Leo: It's a real distinction and it genuinely matters. But there's no dollar amount that flips you from one to the other, which is what most people assume. Mia: So how does the ATO decide? Leo: They look at the whole picture. Are you intending to make a profit, not just cover your costs? Is it regular and repeated, or genuinely occasional? Are you operating in a business-like way, with pricing, invoices and records? Are you advertising or publicly listed? And what's the scale of the thing? Mia: And if it does tip over into being a business? Leo: Then you generally need an ABN, you declare the income, and you claim the genuine expenses against it. And there's a real sting if you don't have one. A business paying you without an ABN may have to withhold forty-seven per cent. Mia: Forty-seven per cent will focus the mind. Alright, let's do a couple of quick ones. Rental properties, and this is the statistic that stopped me in my tracks. Leo: Go on. Mia: The ATO's random enquiry program found that nine out of ten tax returns reporting rental income and deductions contained at least one error. And most of those people had used a registered tax agent. Leo: Nine out of ten. And the same three culprits come up over and over. Apportioning your interest correctly. Telling the difference between a repair and a capital improvement. And borrowing expenses. Mia: There's a new one on the list this year too, isn't there? Leo: Holiday homes and mixed-use properties. The ATO has updated its guidance and is looking much harder at places claimed as available for rent that the owner or the family also happens to use. You have to be able to show a genuine commercial intention to earn rental income. Mia: And a couple of little traps worth naming before we move on. Leo: Two good ones. Capital items like a dishwasher, curtains or a heater can only be written off immediately if they cost three hundred dollars or less. Otherwise you claim them over time. And don't double count expenses that your property manager has already included on the annual statement. Mia: Then there's crypto, which I suspect is the most misunderstood item on the entire list. Leo: It really is. The assumption is that nothing is taxable until you cash out into Australian dollars, and that is simply not how it works. Swapping one crypto for another is a disposal. That's a capital gains event, even though no dollars ever hit your bank account. Staking rewards are income. And a lot of decentralised finance activity has consequences too. Mia: And the ATO gets the exchange data. Leo: Extensively. So if you've been trading, it needs to be in the return. Mia: Okay. Now, this is the part of the episode I've been waiting for. The ATO has issued a specific warning this year about people getting their tax advice from artificial intelligence. Leo: They have. And they've put it right alongside finfluencers, social media tax tips, and advice from a mate at a barbecue. Mia: So what's the actual concern? Leo: The ATO's Assistant Commissioner put it well. AI can be helpful, but it often draws from a broad and inconsistent range of sources, which can lead to inaccurate advice. It might be pulling tax law from another country entirely, or from a rule that changed three years ago. And her line about it was perfect. Your tax return isn't the place for guesswork. Mia: Now, I do want to acknowledge the very obvious thing here. Leo: Please do. Mia: We are AI voices. We say so at the top of every single episode. So there is a certain irony in two AI hosts telling you not to get your tax advice from AI. Leo: There is. But the difference is worth being precise about, because it's actually the whole point. We're the delivery, not the source. Every fact in this episode was researched, written and checked by registered tax agents at Aevum Accounting against ATO guidance before a single word was recorded. That is a very different thing from typing a question into a chatbot and lodging whatever comes back. Mia: And that's the ATO's actual position too, isn't it? It's not that AI is banned. Leo: Not at all. It's that you stay accountable for what ends up on your return, no matter where the advice came from. A friend, a website, or an AI tool. The ATO's line is that the reliable sources are the ATO website, the ATO app, or a registered tax professional. Mia: Which is a very long way of saying, check it with a human who is on the hook for it. Leo: That's the one. Now let's finish with the thing everybody has been asking us about, because there is a lot of confusion out there. Mia: The one thousand dollar instant deduction. Leo: Yes. And here is the single most important sentence in this whole episode. It does not apply to the tax return you are lodging right now. Mia: Say that again, because I think that's exactly where people are getting caught. Leo: The one thousand dollar standard deduction starts from the 2026-27 income year. So it first shows up on the return you lodge from July 2027. It is not available on this year's return. Mia: Okay. So what is it, when it does finally arrive? Leo: A standard deduction of up to one thousand dollars for work-related expenses, without needing to have spent the money or kept any receipts. And you don't even have to claim it. If you're eligible, it gets applied automatically. Mia: And who's eligible? Leo: Australian residents earning what the ATO calls assessable labour income. Salary and wages, director fees, termination and retirement payments, parental leave pay, and a few others. It does not apply to business income or dividend income. So a sole trader misses out on this particular one. And if you earn less than one thousand dollars of that labour income, your deduction is capped at whatever you did earn. Mia: Now here's the bit I think will trip people up. Is it on top of your normal claims? Leo: No, and this is the important part. Your standard deduction is reduced by the work-related expenses you actually claim. So think of it as a floor, not a bonus. If your real work expenses come to more than one thousand dollars, you claim the real amount instead, and you need every record to back up the whole lot, not just the part above one thousand dollars. Mia: Are there any exceptions to that? Leo: Two. Union fees, and memberships of a trade, business or professional association. Those don't reduce your standard deduction, so you claim them separately. And everything outside of work expenses is untouched. Donations, rental and investment deductions, the cost of managing your tax affairs, personal super contributions, income protection premiums. All claimed exactly as normal. Mia: There's a rate cut in the mix as well, isn't there? Leo: There is. From the 1st of July, 2026, the lowest marginal rate dropped from sixteen per cent to fifteen per cent, on income between eighteen thousand, two hundred and one dollars and forty-five thousand dollars. And it steps down again to fourteen per cent from the 1st of July, 2027. Mia: So a little more in the pocket each payday, rather than a lump sum at the end. Alright, let's land this. What should people actually do? Leo: Four things. First, declare everything. Every job, every platform, every bit of bank interest, every dividend. Assume the ATO already has the number, because it very probably does. Mia: Second, claim what you're genuinely entitled to, and no more. Check the occupation guide for your line of work, because most people are leaving legitimate deductions on the table. Leo: Third, fix your records now, not next June. The ATO app has a myDeductions tool that lets you log expenses and hours as you go, and send them straight through to your accountant. Mia: And fourth, if you think you've overclaimed in a previous year, don't sit on it. The ATO's own advice is to lodge an amendment, or ask your tax professional to amend the prior year for you. Coming forward voluntarily is always the better position. Leo: And one date to keep in your head. If you're lodging your own return, it's due by the 31st of October. If you're with a registered tax agent you generally get much longer, often into the following May. But here's the catch. You need to be on that agent's books before the 31st of October to get the extension. Mia: So if you've been putting it off, that's the deadline that actually matters, and that's a very good reason to get in touch now rather than in the last week. Leo: It really is. Mia: If you'd like the team to take a look at yours, whether that's this year's return or going back and amending an earlier one, head to aevumaccounting.com.au and book in. Leo: And if there's a topic you'd like us to break down, we'd genuinely love to hear it. You can reach the team at Aevum Accounting at aevumaccounting.com.au. Mia: Before we go, a quick but important reminder. The information shared today is for general informational purposes only, and does not constitute specific tax or financial advice. Leo: Everyone's situation is unique, and tax laws are complex. For personalized advice tailored to your situation, we always recommend consulting with a qualified professional. Mia: Until next time, stay savvy, stay proactive... Leo: And don't let a chatbot do your tax return!