Tax time 2026 arrives at a moment when the Australian Taxation Office (ATO) has more visibility over taxpayer affairs than at any point in the agency's history. Through expanded data-matching programs and significant additional funding for compliance activity, the Tax Office is better equipped to detect errors and omissions before many taxpayers even realise they have made them.

Understanding where the ATO is focusing its attention this year is the best way to lodge a return with confidence - and to avoid the time-consuming correspondence that a compliance review can trigger.

The four declared focus areas for tax time 2026

The Australian Tax Office has publicly named four high-risk areas for the 2025-26 tax year returns being lodged now.

1. Work-from-home claims

Work-related deductions remain the single largest area of error in individual returns. More than ten million Australians claim work-related deductions each year, and the ATO continues to find significant inaccuracies.

For working from home, taxpayers can use either the fixed rate method (currently 70 cents per hour) or the actual cost method. Both require records. The fixed rate method requires a log of actual hours worked from home - not an estimate. The actual cost method requires receipts and a log showing the work-related proportion of each expense.

The ATO is particularly focused on claims where records are inconsistent with employment arrangements – for example, someone claiming a full year of home office deductions when they were required to attend an office most days. If your circumstances changed during the year, your claim should reflect that.

2. Rental property deductions

The ATO estimates that the rental property tax gap – the difference between what should be paid and what is actually reported – runs to hundreds of millions of dollars annually. Common errors include:

• Claiming interest on the full loan balance when part of the loan has been refinanced or redrawn for private purposes
• Claiming deductions for periods the property was vacant and not genuinely available for rent
• Misclassifying capital improvements as repairs – improvements must be depreciated, not immediately deducted
• Failing to declare rental income from short-term platforms such as Airbnb or Stayz
• Apportioning expenses incorrectly for mixed-use properties, including holiday homes used partly for personal purposes

The ATO now receives data directly from short-term rental platforms, enabling it to cross-check declared income against platform records. This data matching applies to income earned in the 2025-26 year being reported now.

3. Side hustle and sharing economy income

Income earned through gig economy platforms is taxable and must be declared, including income from food delivery, online freelancing, Airtasker, eBay, Etsy and similar services. The ATO receives data from these platforms directly and uses it to identify individuals who have not declared income

A common misconception is that small amounts fall below a reporting threshold. There is no such threshold for side hustle income. Every dollar must be declared. Expenses directly related to earning that income can be claimed as deductions but the income itself must appear in the return.

4. Capital gains on shares and cryptocurrency

The ATO receives data from Australian share registries, managed investment funds, and cryptocurrency exchanges. Every disposal of a share, unit or cryptocurrency holding potentially triggers a capital gain or capital loss, and these must be reported.

Common errors include:

• Forgetting to report cryptocurrency-to-cryptocurrency trades – swapping one coin for another is a disposal and may trigger a taxable gain
• Failing to report gains on the sale of shares held in a company or trust structure that were not included in investment statements
• Incorrectly calculating the cost base by forgetting to include brokerage fees and other acquisition costs
• Forgetting that managed fund distributions sometimes include a capital gains component that must be declared.
  
  

The broader data-matching picture

Beyond the four declared focus areas, the ATO's data-matching program now covers bank accounts, employer payroll, government agencies, share registries, cryptocurrency exchanges, digital platforms and rental property management software. Pre-filled tax return data has made the lodgement process faster but it has also made it easier for the ATO to identify when declared figures do not match what it already holds.

The tax office has emphasised that it is not looking to penalise honest mistakes. Voluntary disclosures, complete records and proactive contact when an error is identified all result in significantly better outcomes than errors discovered through audit.

Our recommendation

If you have any concerns about how an item should be reported in your 2025-26 tax return, please contact us before you lodge. Correcting a return before the ATO has initiated a review results in significantly reduced penalties compared to an amendment made after compliance activity has begun.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044.