Every year, as EOFY approaches, small business owners and sole traders consider the same questions: “What can I actually claim?” and “Will the ATO really care if I throw that in too?” The short single answer is ‘more than you think, and yes they care.

And if you’re working a side-hustle, this year their eyes are on you.

Some deductions are valid but overlooked. Others are wildly optimistic. This year, the ATO has been clear: if you’re stretching the definition of “business-related,” expect scrutiny. So what’s reasonable, what’s ridiculous, and what should you actually be doing as 30 June approaches?

The strange claims people try (and why they don’t work)

Let’s start with the no-go zone.

The ATO recently revealed some of the claims that didn’t quite land. One mechanic tried to deduct an air fryer, microwave, two vacuums, a TV, and a gaming console. A truck driver submitted swimwear as a “work necessity” for cooling off between stops. Another taxpayer in the fashion industry attempted to write off over $10,000 worth of designer clothes on the basis of ‘staying on brand’ for events and business meetings.

The ATO’s stance is consistent: if it’s for personal comfort, conventional clothing, or your own entertainment, it doesn’t qualify. No matter how you spin it.

But some odd claims do stand up

On the other hand, some deductions that sound strange on the surface are actually valid—if they relate directly to earning your income.

Not all screen time is wasted. If your job involves analysing media, a portion of your Netflix or Stan subscription might actually be tax-deductible. That could include journalists reviewing documentaries, sports coaches analysing game footage, or small business owners consuming professional development content via podcast.

The keyword here is “portion.” If you’re binge-watching Bridgerton, that’s on your own time. But if you’re genuinely using content to prepare for work or develop skills, keep a log and apply a reasonable percentage, and claim that share. The same goes for Spotify or Audible; if they’re used as part of your business (like playing music in a café, or listening to professional audiobooks while working), there’s a case to be made.

Working from home? Know your method—and stick to it

The ATO is also focusing on work-from-home claims this year, particularly “double dipping.” That’s when someone tries to claim both the fixed rate (now 70c/hour) and actual expenses like internet, phone, and electricity.

You have to choose one. If you go the fixed rate, it already covers those costs; you just need a record of your hours. If you use the actual cost method, you’ll need itemised bills and a way to calculate the work-related portion. It’s more admin, but it can work in your favour if you work from home a lot.

Whatever you choose, be consistent, and don’t try to claim both. The ATO is using data-matching tools and knows what to look for.

Don’t ignore your side hustle

Whether you’re driving Uber, running an Etsy store, or picking up contract work on weekends, that income is taxable, and platforms report it directly to the ATO. If you’re earning money on the side, you need to declare it.

That said, any expenses directly related to earning that income are also deductible. So if you’re buying tools, software, ingredients, fuel, you can claim those costs for whatever helps you do the work. Keep records, and make sure the expenses actually relate to the income.

The ATO is watching—especially for the big claims

Work-related expenses will be under the microscope this year, especially if your deductions are higher than expected for your industry. That doesn’t mean you can’t claim them, but it does mean you need evidence. If you can’t link the expense to earning your income, or you’re submitting vague or AI-generated receipts, you’re setting yourself up for trouble.

The ATO has also warned that mismatched income, duplicate claims, and aggressive deductions won’t just be flagged, they’ll be investigated, so don’t risk it.

Tax deductions aren’t a guessing game. If the expense is clearly connected to the work there’s usually a legitimate claim to be made. But if it sounds like a stretch (or sounds like something you’d tell your accountant with a wink and a nudge) it’s probably not worth the audit.

Tax time is a chance to get your books in order and keep more of what you’ve earned. But to do that properly, you need to know where the line is, and stay on the right side of it.

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