The 3 Things the ATO Is Watching on Your 2026 Tax Return
Tax time is open and the ATO has named three focus areas: work expenses, rental properties and undeclared income. Here's how to claim right and stay off the radar.
Tax time is officially open, and the Australian Taxation Office has done what it does every July — told everyone exactly where it'll be looking. For the 2025-26 return (the one you're lodging now), the ATO flagged three key focus areas: work-related expenses, rental property income and deductions, and making sure you've declared all your income.
This isn't a reason to claim less than you're entitled to. It's a reason to claim it properly, with the records to back it up. Here's the plain-English version of all three — and the traps that quietly trip people up.
1. Work-related expenses (especially working from home)
This is the big one for ordinary PAYG earners. More than 10 million Australians claim work-related deductions each year, and it's where the ATO finds the most errors — inflated claims, private costs sneaking in, and deductions with no records behind them.
Working from home is the headline sub-topic. If you regularly do your job from home, the simplest way to claim is the fixed rate method: 70 cents for every hour you work from home. That 70c rate applies for the 2025-26 income year (it's been 70c since 1 July 2024), and it bundles together electricity, gas, phone, internet, stationery and computer consumables into one number.
The catch that catches everyone: since 1 March 2023, you must keep a record of the actual hours you worked from home across the whole year — a timesheet, roster, diary or app log. A rough estimate or a single "typical" week no longer cuts it, and the ATO will disallow the claim if you can't show the hours.
💡Worked example
Say you work from home 3 days a week, a standard 7.6-hour day, for about 45 weeks after leave: 3 × 7.6 × 45 = 1,026 hours. At 70c, that's a $718 deduction. A deduction lowers the income you're taxed on, not your tax bill dollar-for-dollar — at a 30% marginal rate, $718 means roughly $215 less tax. Track the hours and it's genuinely yours.
The double-dip trap
Because the 70c rate already covers your phone and internet, you can't also claim your phone and internet bills separately on top. Doing so is one of the fastest ways to get a please-explain, because the ATO can see it's a double-up.
You can still claim the depreciation of bigger items the rate doesn't cover — an office desk, chair or monitor — as a separate deduction. Just not the running costs that are already inside the 70c.
🚨Don't claim it twice
Using the 70c fixed rate? Then your phone and internet are already in it — no separate claim for those bills. You can separately claim furniture and equipment (like a $500 chair), but not the electricity, gas, phone or internet the rate already covers.
2. Rental properties
If you own an investment property, expect scrutiny. The ATO says roughly 9 in 10 rental owners get something wrong on their return, so this area draws some of the highest audit-adjustment rates of all.
The classic mistakes: claiming interest on a loan that was partly used for something private, treating a capital improvement (like a new kitchen) as an immediate repair, and claiming a property as "available for rent" when it was really being used by family or sitting idle. For 2026 the ATO has sharpened its focus on holiday homes and mixed-use properties — if it wasn't genuinely available to rent, the deductions for that period can be cut back or denied.
The fix is boring but bulletproof: apportion honestly, keep loan statements that show what the borrowed money was actually for, and hang on to the paperwork that proves each fact you're relying on.
3. Declaring all your income
The third focus area is the one people forget rather than fudge: income they didn't include. Bank interest, share dividends, a side hustle, gig or delivery work, crypto gains, capital gains from selling shares or a property — it all belongs on the return.
Here's the reality in 2026: the ATO already knows about most of it. It data-matches directly with banks, employers, private health funds, share registries, crypto exchanges and gig-economy platforms. Leaving income off doesn't hide it — it just flags a mismatch that can slow your refund or trigger a review.
⏳A tip on timing
Most pre-fill data — your income statement, bank interest, dividends, private health details — isn't finalised until late July. Lodge too early and you risk leaving something off. Waiting a couple of weeks until pre-fill is marked "tax ready" is the easiest way to nail focus area three.
The golden rule (and the deadline)
Across all three areas, the ATO's own rule of thumb is simple: if a deduction depends on a fact, keep the document that proves the fact. To claim any work-related deduction you generally need three things — you paid for it yourself and weren't reimbursed, it directly relates to earning your income, and you have a record such as a receipt or invoice. Keep those records for five years from the date you lodge.
If you're lodging your own return, the deadline is 31 October 2026. Miss it and the failure-to-lodge penalty is $330 for each 28 days you're late, up to a maximum of $1,650. If you use a registered tax agent, get on their books before 31 October and your due date can stretch well into 2027 — but you have to be a client by the October cut-off to get that extension.
FAQ
What are the ATO's focus areas for the 2026 tax return?
Three: work-related expenses (especially working-from-home, car and phone claims), rental property income and deductions, and declaring all of your income. These are the areas where the ATO finds the most errors and does the most checking.
What is the working-from-home rate for 2025-26?
70 cents per hour worked from home under the fixed rate method. It covers electricity, gas, phone, internet, stationery and computer consumables, and you must keep a record of the actual hours you worked from home across the whole year.
Can I claim my phone and internet on top of the 70c rate?
No. The 70c fixed rate already includes phone and internet, so claiming those bills separately would be double-dipping. You can, however, separately claim depreciation on work-related furniture and equipment the rate doesn't cover, like a desk or chair.
When is my 2026 tax return due?
31 October 2026 if you lodge yourself. Lodging late risks a failure-to-lodge penalty of $330 per 28 days (up to $1,650). Using a registered tax agent can extend the deadline, but you generally need to be their client before 31 October.
Run your own numbers