What is the ATO watching this tax time? The three focus areas for your 2026 return

Every July the ATO publishes a short list of the things it will pay closest attention to that tax time — and every July, most people lodge without reading it. For 2026 the list is short and specific. If your return touches any of the three, knowing what the ATO is looking for is the difference between a clean lodgement and a letter in September.

The three areas flagged this year are work-related expenses, rental income, and record-keeping. None of them are new. All three are on the list because they are where the ATO keeps finding the same mistakes, year after year.

Work-related expenses — the three golden rules

Work-related deductions are the single biggest source of adjustments. More than ten million Australians claim them each year, and the ATO says the error rate across many occupations is still high. The test it applies is simple, and it hasn't changed: you must have spent the money yourself and not been reimbursed, the expense must directly relate to earning your income, and you must have a record to prove it. Miss any one of the three and the deduction doesn't hold.

Working from home is where this bites most often. For the 2025–26 year the fixed-rate method is 70 cents for every hour you actually worked from home, and that rate already bundles in electricity, gas, internet, home and mobile phone, and stationery and computer consumables. Two things trip people up. First, you cannot use the 70-cent rate and then claim your phone or internet separately on top — they are already inside the rate. Second, the ATO no longer accepts an estimate: you need a real record of your actual hours, kept as you go — a roster, a diary, calendar entries — not a figure you reconstruct the night before you lodge.

Rental income — declare all of it, deduct only what qualifies

Rental properties are the second focus, and the ATO's concern runs in both directions. On the income side, all of it has to be declared — not just the monthly rent, but short-stay platform income and any insurance or rent-default payouts you received. On the deduction side, a cost is only claimable to the extent the property was genuinely available for rent and the money was spent to produce that income. Interest, repairs and depreciation are all legitimate — but only against income-producing use, and only where you can show the paperwork.

The most common trap is treating a property that is really for personal use — a place the family stays over the holidays, or a room advertised at a rate no one would ever pay — as if it were fully on the rental market. The income the ATO can see through data-matching rarely lines up with the deductions people claim against it, and that mismatch is what gets pulled for review.

Record-keeping — the quiet one that decides the other two

Record-keeping is the third area, and it is really the foundation under the first two. End of financial year is exactly when the gaps show up: the receipt that was never kept, the logbook that stops in March, the bank statement that can't be found. The rule of thumb is five years — you keep records for five years from the date you lodge, because that is how long the ATO can come back and ask. A deduction you are genuinely entitled to but cannot substantiate is, in practice, a deduction you don't have.

None of this is a reason to claim less than you're owed. It is a reason to claim what you can prove. Before you lodge, three questions cover most of it: can I show I paid for this and wasn't reimbursed; does it genuinely relate to earning my income; and if the ATO asked tomorrow, could I produce the record? If the answer to all three is yes, claim it with confidence.

This is general information current as at July 2026, not advice for your situation — the rules that apply depend on your circumstances. If your return has a rental property, work-from-home hours you're unsure how to substantiate, or income from more than one source, that is exactly the year to have a registered agent look at it before you file, not after a letter arrives. That is what our individual tax return service is for.