ATO’s Watchlist 2025: What’s Hot, What’s Not, and What’ll Get You Audited

Think you can outsmart the ATO this tax season?
Think again.

From work-from-home claims that don’t stack up, to crypto “oopsies” and rental deductions more fictional than your Airbnb reviews — the ATO is sharpening its audit tools and has a fresh hit list for 2025.

Thanks to sophisticated data-matching and a budget injection aimed squarely at dodgy deductions and hidden income, it’s never been easier for the ATO to catch you out.

We’ve teamed up with insights from the Big 4 and the latest from the tax office itself to bring you the 5 red-hot areas the ATO is laser-focused on this year — and how to keep yourself squeaky clean (and audit-proof) while still maximising your return.

Are you ready?

The Tax Man Cometh!

At Atramentum, we understand that tax season can feel like navigating a minefield – one wrong step and the ATO could come knocking. But it doesn’t have to be that way.

Whether you’re an individual, sole trader, company, or trust, our experienced team can guide you through the complex rules, keep you compliant, and help you claim what you’re truly entitled to – no guesswork, no stress.

Here’s how to stay ahead of the ATO this year and keep your return clean, compliant, and optimised:

1. Work-From-Home (WFH) & Other Work-Related Expense Claims

The ATO’s biggest audit trigger remains inflated or unsupported work-related expenses.

With the fixed rate method of 70 c/hour for home office use, you now must maintain detailed contemporaneous records—such as digital timesheets or diaries—to justify your claim.

• What to do: Log hours daily, link them to your work patterns, and avoid claiming extra phone or internet costs if you're already using the fixed rate.

Claim WFH expenses only if you're truly working, not just checking emails.

2. Underreported Income from the Gig Economy & Crypto

Income from platforms like Uber, Airbnb, Airtasker and digital currency trades are now automatically reported to the ATO, who use AI and data‑matching to flag mismatches.

• Hint from ATO: Be sure every transaction—whether buying, selling, staking, or earning—is logged and included in your return.

• What to do: Use crypto tax software, reconcile platform statements, and append records even if no official summary exists.

3. Rental Property Deductions & Capital Gains

Rental properties remain under heavy surveillance—particularly regarding interest apportionment, repairs vs capital works, and personal use days.

• Key tip: Match your claimed deductions to legal ownership percentages and provide advertising logs, invoices, and occupancy records.

• CGT caution: If you claim small-business or main residence CGT concessions, ensure you pass all eligibility tests and keep documentation to support "active use" and asset status.

4. Business Deductions & Sole-Trader Losses

Sole traders and small businesses face intensified checks around claims of ongoing losses, hobby vs business status, director penalties, GST fraud, and cash transactions.

• Loss claim caution: Declaring losses year after year can trigger ATO questioning whether you’re in a genuine business. Maintain a business plan, marketing activities, and client records to demonstrate profit intent.

• GST and cash economy: Be vigilant in documenting all input tax credits and avoid using dubious invoices—especially in sectors like construction or hospitality.

• Director penalties: Company directors can be personally liable if PAYG/WHS or super obligations aren’t met. Stay on top of lodgments, payroll entitlements, and penalty notices .

5. Aggressive Tax Advice & Tax Agent Conduct

Following the PwC tax‑leak scandal, the ATO and Tax Practitioner Board (TPB) are watching closely for aggressive or ethically dubious tax schemes proposed by tax accountants.

Not all that glitters is tax gold

• What’s flagged: Structure-based advice under legal privilege may be scrutinized; firms must justify Limited Liability Partnership (LPP) claims.

• Watch your adviser: Ensure strategies using legal privilege are backed by solid evidence, not aggressive tax planning.

• TPB tightening: Unregistered tax preparers now face infringement notices or criminal action, and registered agents face tougher sanctions.

ATO Enforcement Ramp-Up

• Recent budget funding (~$999 million over four years) is boosting the ATO’s audit capacity, Tax Avoidance Taskforce, and shadow economy programs.

• Millions of reviews/audits (mostly data-matches) are underway, especially for salary-and-wage earners, sole traders and small businesses.

How to Ensure You’re Not Caught Out

At Atramentum, we understand that navigating tax season can feel like walking through a minefield. One wrong step, and the ATO could come knocking. But it doesn’t have to be that way. We're here to help you ensure you're not caught out with these essential tips:

1. Meticulous Record‑Keeping

   • Keep digital diaries, bank statements, timesheets, receipts, invoices, property logs, and platform earnings summaries.

2. Separation of Finances

   • Maintain separate bank accounts for business and personal expenses; use accounting systems that auto‑categorise.

3. Report All Income & CGT Events

   • Include every income stream—full or part-time, crypto gains, gig economy earnings—on your return. No exclusions.

4. Substantiate Every Deduction

   • Use contemporaneous evidence. For assets like property, track joint ownership apportionments and usage.

5. Vet Carefully Any Tax Advice

   • Engage registered agents, question aggressive schemes, verify the legal basis (not just commercial rationale), and beware of vague legal privilege claims.

At Atramentum, we're committed to making tax season less daunting and more manageable. Let's chat and ensure you're on the right track.

Final Take

Think you can outsmart the ATO this tax season? Think again.

The ATO’s 2024–25 focus reflects stronger data tools, more aggressive enforcement, and an intolerance for sloppy or aggressive tax behaviour.

From work-from-home claims that don’t stack up, to crypto “oopsies” and rental deductions more fictional than your Airbnb reviews — the ATO is sharpening its audit tools and has a fresh hit list for 2025.

Thanks to sophisticated data-matching and a budget injection aimed squarely at dodgy deductions and hidden income, it’s never been easier for the ATO to catch you out.

We’ve got the latest from the tax office itself to bring you the 5 red-hot areas the ATO is laser-focused on this year — and how to keep yourself squeaky clean (and audit-proof) while still maximizing your returns.

Ready to stay ahead of the game? Let's chat and ensure you're on the right track this tax season!