No one enjoys the idea of an Australian Taxation Office (ATO) audit, but it’s a reality that both individuals and businesses should be prepared for.

The good news is that most audits are triggered for specific reasons — and staying honest and transparent with your accountant can make all the difference if the ATO ever comes knocking.

How Often Does The ATO Conduct Audits?

While not every taxpayer will face an audit, the ATO regularly reviews data and conducts targeted compliance activities across Australia. Thousands of reviews and audits are performed each year, particularly in industries or areas where discrepancies are more common — such as cash-heavy businesses, high-value property transactions, or unusually large deductions.

With data-matching technology improving every year, the ATO now automatically cross-checks information from banks, employers, super funds, and even online platforms like Airbnb and Uber. This means inconsistencies in reported income, deductions, or business activity are far easier to spot than in the past.

Who Might Be Audited?

The ATO uses data analytics to identify potential red flags, such as:

• Income that doesn’t match third-party data (like employer-reported earnings).
  
• Unusually high deductions compared to others in your occupation or industry.
  
• Sudden or unexplained changes in business income or expenses.
  
• Failure to lodge returns or BAS statements on time.
  
• Participation in schemes or arrangements that appear to artificially reduce tax.
  

Even if your records are accurate, you can still be randomly selected for review — so it pays to keep everything above board.

Why Full Disclosure To Your Accountant Matters

Your accountant’s advice and reporting are only as accurate as the information you provide. If you withhold or misrepresent income, expenses, or assets — even unintentionally — you may face serious consequences if an audit reveals discrepancies.

Importantly, your accountant cannot be held liable for errors or penalties resulting from incomplete or false information supplied by the client. When you disclose openly, you give your accountant the best chance to prepare accurate returns and ensure compliance with tax law — and to protect you in the event of an ATO review.

The real cost of an audit

An audit isn’t just stressful — it can also be costly. Depending on the scope and duration, professional fees, time spent gathering records, and potential penalties can add up quickly. If the ATO finds that you’ve underpaid tax, you could face interest charges, penalties, and repayment obligations stretching back several years.

Some businesses choose to protect themselves with audit insurance, which covers the professional fees incurred during an ATO review or audit. It’s worth discussing whether this option suits your circumstances.

Staying on the safe side

The best way to avoid audit trouble is simple — keep thorough records, stay compliant, and communicate openly with your accountant. Double-check your information before lodging, seek professional advice before making unusual claims, and never ignore ATO correspondence.

By maintaining transparency and good record-keeping, you can face any ATO scrutiny with confidence — and stay focused on running your business, not defending your books.

Negative gearing is one of those terms that is frequently mentioned in discussions about property investment and taxation in Australia. For some, it’s a smart wealth-building strategy. For others, it’s a source of confusion. Let’s break it down so you can understand what it means and how it works.

What is gearing?

“Gearing” simply refers to borrowing money to invest. This could be in property, shares, or other income-producing assets.

• Positive gearing happens when the income you earn from the investment (like rent) is more than the expenses of owning it (like loan interest, rates, and maintenance).
• Negative gearing is the opposite: your expenses are greater than the income from the investment, leaving you with a net loss.

How does negative gearing work?

Let’s use a property example. Imagine you buy an investment property and rent it out. You receive $25,000 a year in rent. But the costs of owning the property add up to $35,000 (loan interest, rates, insurance, repairs, etc.).

That means you’ve made a $10,000 loss for the year.

Because the property is income-producing, the Australian Tax Office (ATO) allows you to offset that $10,000 loss against your other income, such as your salary. If you earn $80,000 in wages, your taxable income is reduced to $70,000.

This reduces the amount of tax you pay and can make a significant difference at tax time.

Why do people use it?

On the surface, it may sound odd that people would deliberately take on a money-losing investment. The strategy makes sense when investors are banking on two key factors:

1. Tax benefits – the immediate relief of reducing taxable income.
2. Capital growth – the expectation that the value of the property (or other investment) will rise over time.

In other words, investors are often willing to accept short-term losses if they believe the property will appreciate sufficiently in value to generate long-term profits.

The risks of negative gearing

While negative gearing can be beneficial in certain circumstances, it’s not without its risks:

• Cash flow strain – you still need to cover the shortfall between rent and expenses. If your financial situation changes, this can become difficult.
• Interest rate changes – rising interest rates can increase your losses, making it harder to sustain the strategy.
• No guarantee of capital growth – if property values stagnate or fall, you could end up with both a loss on paper and no growth in value to offset it.

Who does it suit?

Negative gearing is generally more attractive to higher-income earners. That’s because the tax benefits are greater when you’re in a higher tax bracket. For lower-income earners, the benefit may not outweigh the cash flow pressure of covering losses.

Negative gearing is a legal and commonly used tax strategy in Australia. At its core, it allows investors to reduce their taxable income by offsetting investment losses. However, it comes with real financial risks and isn’t suitable for everyone.

If you’re considering negative gearing, it’s essential to look beyond the tax savings and assess whether the investment stacks up overall. Speaking with an accountant or financial adviser can help you determine whether it’s the right approach for your situation.

One of the most common points of confusion we see among clients is whether their vehicle is treated as a car or as a work vehicle for tax purposes.

On the surface, it seems like a small distinction, but the difference can have a big impact on what expenses you can legitimately claim.

Unfortunately, this misconception has caught a number of people out, with a notable example of one individual even having to sell a recently purchased vehicle and replace it with another after learning the hard way that not every ute qualifies as a “work vehicle.”

Let’s unpack the difference so you don’t end up in the same situation.

What The ATO Means By “Car”

The Australian Taxation Office (ATO) has a very specific definition of a car. For tax purposes, a car is a motor vehicle that:

• is designed to carry less than one tonne of load, and
  
• is designed to carry fewer than 9 passengers.
  

This definition captures most sedans, hatchbacks, station wagons, SUVs, and — importantly — many popular dual-cab utes.

If your vehicle falls into this category, it doesn’t matter if you use it primarily for work or business — it is still treated as a car under the rules. That means your claims are limited, and FBT (Fringe Benefits Tax) rules can apply if the car is provided to employees.

What Counts As A “Work Vehicle”

On the other hand, a vehicle that doesn’t meet the above definition falls into a different category. Work vehicles are generally those that are:

• designed to carry more than one tonne, or
• designed to carry 10 or more passengers.
  

This group includes larger commercial utes, vans, trucks, and minibuses. These vehicles are not considered “cars” under the ATO definition, so they are treated differently when it comes to FBT and deductions.

The Ute Misconception

Here’s where many people get caught out: just because you buy a ute doesn’t mean you automatically get to treat it as a work vehicle with all expenses written off.

If the ute is rated to carry less than one tonne, it’s still classified as a car. That means your claims are restricted, and you can’t simply deduct 100% of costs like fuel, servicing, or finance without proper substantiation.

One of our clients discovered this after purchasing a dual-cab ute, assuming it was a work vehicle. When the truth came out at tax time, they were left with fewer deductions than expected — and ultimately chose to sell the ute and purchase a vehicle that met the correct classification.

The Importance Of Logbooks

Even when your vehicle does qualify as a work vehicle, the ATO requires proof of business usage. This is where the logbook method comes in.

A logbook must record:

• the date of each trip,
• the odometer reading at the start and end,
• the purpose of the trip (business or private), and
• the total kilometres travelled.

It’s not enough to estimate or reconstruct later — the ATO places a high priority on accurate, contemporaneous records. We’ve seen multiple cases where legitimate business mileage claims were knocked back simply because the logbook was incomplete, inconsistent, or not kept for the required period (usually 12 continuous weeks).

Key Takeaways For Vehicle Deductions

1. Check before you buy – don’t assume a ute is a work vehicle. Look at the manufacturer’s load capacity and passenger capacity.
2. Understand the rules – cars and work vehicles are treated differently for tax and FBT.
3. Keep accurate records – a proper logbook is essential if you want your claims to stand up under scrutiny.

A vehicle can be one of the biggest business expenses you make, so it pays to get the classification right from the start. 

If you’re considering purchasing a new vehicle, it’s always worth checking with us first so we can confirm how the ATO will treat it. A quick conversation upfront can save you from an expensive mistake later.

If you run your business from home, you’re not alone—and you may be entitled to valuable tax deductions. 

The ATO allows deductions for the portion of your home expenses that relate directly to your business. 

Let’s break down the essentials so that you know what you might be able to claim on your tax return.

1. What Counts as a Home-Based Business?

A home-based business is one where a part of your home is used for business—whether that’s a dedicated study or even a corner in your living space. 

The key rule is: only the business-use portion of expenses is deductible.

2. Two Types of Expenses

• Running expenses cover day-to-day costs like electricity, internet, phone, cleaning, and repairs. You can claim these even if your workspace isn’t a distinct “office” room.
• Occupancy expenses include rent, mortgage interest, council rates, and insurance. These are only deductible if your workspace acts like a true “place of business”—for example, it’s used exclusively, clearly separate from your personal living space, or used by clients.

3. How to Calculate Your Expenses

The ATO offers a few easy-to-use methods—choose whichever best suits your situation:

• Fixed-rate method: Claim 70 cents per hour worked from home. This covers energy, phone, internet, stationery, and computer consumables. Just keep a record of your working hours.
• Actual cost method: Claim your actual expenses (but only the business portion), provided you have the receipts to back it up.
• Floor area method: If you have a designated workspace, apportion occupancy costs based on the floor area used for business and the time it’s used.

4. Other Important Considerations

• Depreciation: You can separately claim depreciation for business-use items like laptops, phones, or office furniture—regardless of whether you use the fixed-rate method.
• Capital Gains Tax (CGT): If you sell your home and have claimed occupancy expenses, a portion may not be covered by the main residence exemption.
• Records: Keep detailed records—including diaries of hours worked (if using fixed-rate), receipts, and calculations—for at least five years.
  

Understanding and claiming the right home-based business deductions can mean real savings—if you do it the right way. Keep it simple: choose the method that works best for your business, track everything, and only claim your fair share of the expenses.

Your accountant can help you choose the best method for your situation and ensure you’re both compliant and maximising your entitlements. Why not speak with one of our trusted team, and find out how we can help you and your business today?