Baby items, meal deliveries: ATO warns taxpayers to stop 'unusual' claims

The tax office is warning Australians to stop claiming private expenses on their tax returns, with some attempting to claim baby expenses, personal gifts and meal deliveries as work-related.

More than 10 million Australians have claimed about $31 billion worth of work-related expenses in their 2024-25 tax returns so far, many relating to working from home.

The Australian Taxation Office (ATO) is using data matching, analytics and artificial intelligence to understand taxpayer behaviour and identify red flags.

ATO assistant commissioner Anita Challen said each year the agency got unusual claims that they had to reject.

Ms Challen said the smaller inappropriate claims included people working from home claiming food delivery for a virtual morning tea they were having with their team.

"We've also seen [claims for] the Christmas shirt and novelty T-shirts and things like that for the Christmas party. They are all private expenses and not to be put in your tax return."

Ms Challen said each year, the same common errors were made by taxpayers.

"That includes incorrectly claiming work-related expenses, working from home deductions, and another one is under-declaring the income that you've earned," she said.

She reminded taxpayers that income is not always cash and money.

"It can come in kind, it can come [in] gifts, and you need to ensure that all of that is covered and included in your tax return," she said.

Anita Challen says common mistakes are made at tax time. (ABC News: Darryl Torpy)

Ms Challen reminded taxpayers that when it comes to claims for working from home, "that excludes things like just checking a few emails in the morning or late at night".

Financial counsellors say small businesses struggling to pay debts owed to the tax office are driving calls to Australia's Small Business Debt Helpline higher.

"Make sure that you incurred additional expenses as a result of working from home," she said.

She said bills for items like internet, phone usage or electricity needed to be properly apportioned.

Taxpayers need to exclude personal uses, such as streaming for leisure, from work-related internet claims. (Unsplash: Glenn Carstens-Peter)

There are two methods for claiming expenses related to working from home — the "fixed cost" or "actual cost" method.

The fixed rate method is simpler and covers multiple expenses, while the actual cost method requires more detailed record-keeping but can potentially yield higher deductions for some people. It is best to check with an accountant or tax adviser on what would suit your individual circumstances.