welcome to r j s & associates
In one of the more unusual cases the Australian Taxation Office (ATO) has seen, a taxpayer claimed a $20,000 deduction for feeding and desexing stray cats. Noble? Yes. Deductible? No.
The ATO rejected the claim because it wasn’t linked to the taxpayer’s employment or income. While the individual argued it was a community service, tax law requires deductions to have a direct connection to earning assessable income.
This isn’t an isolated case. Every year, the ATO reveals a long list of questionable and costly mistakes that Australians make when preparing their tax returns. Some are quirky, like claiming pet food. Others are common, such as over-claiming home office expenses
The bottom line? Tax mistakes can cost you thousands in denied deductions, penalties, or audits. In this article, we’ll explore:
Most people don’t deliberately set out to break tax rules. Mistakes often come from misunderstanding, assumption, or poor record-keeping. Common reasons include:
While some mistakes are harmless, others trigger penalties or audits. And once the ATO gets involved, fixing errors becomes far more stressful and costly than doing it right the first time.
Every year, the ATO releases examples of deductions that people have tried — and failed — to claim. While they might make you smile, they also highlight the risk of misunderstanding what the tax law actually allows.
A taxpayer claimed expenses for food and veterinary bills for stray cats. While charitable, there was no link to their income-earning activities. The ATO said no.
Unless your pet directly earns income (such as a security dog or performing animal), expenses like food, vet care, and grooming are personal and not deductible.
Only deductible if your job has a direct requirement to maintain physical fitness — for example, professional athletes or members of the defence force. Office workers can’t claim gym fees as “stress management.”
Buying coffee on the way to work or lunch at your desk isn’t deductible. These are considered private living costs. Only certain travel-related meals are claimable.
One taxpayer attempted to claim wedding reception costs under “client entertainment.” The ATO quickly disallowed the expense, noting the lack of income connection.
Parents sometimes try to claim private school fees or tutoring under “education expenses.” Unless directly related to earning income (for example, professional study), these are not deductible.
These examples may sound far-fetched, but they underline a serious point: deductions must always be linked to how you earn your income.
Not every mistake makes headlines. Most are far more ordinary — but equally damaging to your financial position if you get them wrong.
You can only claim occupation-specific clothing, protective wear, or uniforms with a logo. General work attire (like suits, black pants, or office shoes) is not deductible.
Claiming large car deductions without a valid logbook or using cents-per-kilometre incorrectly is a red flag. The ATO often checks for over-claims in this area.
If you work from home, you can only claim the work-related portion of internet and phone bills. Claiming 100% of your bill is almost always incorrect.
Trying to deduct personal holiday costs by adding a small work-related activity doesn’t pass the ATO test. Only the work-related portion is claimable.
Income from rideshare driving, online selling, or freelance work must be declared. The ATO matches data from banks and platforms to tax returns, so omissions are quickly detected.
Selling property, shares, or cryptocurrency often attracts capital gains tax. Many taxpayers overlook this, only to face penalties later.
Business owners face a different set of risks. Mistakes here can quickly snowball into large tax debts and compliance problems.
Claiming GST credits on purchases that don’t include GST, or forgetting to report GST on income, can lead to significant ATO adjustments and penalties.
Bank statements alone aren’t enough. The ATO requires invoices and receipts to substantiate claims. Without them, deductions can be denied.
Misclassifying workers can result in unpaid superannuation, payroll tax, and penalties. It’s one of the most common traps for small businesses.
Assets must be depreciated according to ATO rules. Failing to update depreciation schedules or applying incorrect methods can distort taxable income.
Putting personal expenses like family holidays or home renovations through the business account may seem convenient, but the ATO will reject them and may apply penalties.
Missing due dates attracts penalties and interest. Repeated late lodgements can also put a business on the ATO’s radar for further scrutiny.
Tax mistakes can be costly in more ways than one:
Even honest mistakes don’t excuse incorrect returns. The onus is on the taxpayer to ensure claims are accurate.
The good news is that avoiding mistakes is straightforward with the right approach:
What happens if I make a mistake on my tax return?
You can amend most returns online. If the ATO finds the mistake first, they may apply penalties or interest.
How far back can the ATO audit me?
Generally up to two years for individuals and four years for businesses, but there’s no limit if fraud or evasion is suspected.
Can I amend a return if I forgot a deduction?
Yes. You can lodge an amendment to include missed deductions or correct mistakes.
Are all donations deductible?
Only donations made to registered deductible gift recipients (DGRs) qualify. Receipts are required.
Can I claim personal expenses if I sometimes use them for work?
Yes, but only the work-related portion. For example, if you use your phone 30% for work, you can only claim 30% of the bill.
The stray cat case may be extreme, but it shows how quickly a good intention can become a costly tax mistake. More often, errors come from over-claiming, misunderstanding, or missing income and deductions.
The cost of getting it wrong isn’t just denied deductions — it’s penalties, audits, and stress.
With the right advice, you can get it right the first time.
Speak to your RJS accountant today to make sure your next tax return is accurate, compliant, and audit-proof.
This article is published by R J Sanderson and Associates Pty Ltd ABN 71 060 299 783. This article contains general information only and is not intended to represent specific personal advice (Accounting, taxation, financial or credit). No individual personal circumstances have been taken into consideration for the preparation of this material. It is recommended that you obtain your own personal professional advice before making any financial or business decision.