Tax time is an opportunity to make sure your income has been reported correctly and that you have claimed the deductions genuinely available to you. It is not simply about obtaining the largest possible refund.
For the 2025–26 income year, covering 1 July 2025 to 30 June 2026, individuals may need to report income from employment, investments, rental properties, business activities, cryptocurrency, foreign sources and other taxable payments.
The Australian Taxation Office receives information from employers, banks, government agencies, health funds, share registries, cryptocurrency platforms and other third parties. Before lodging, it is important to check that the information is complete and accurate rather than assuming that every amount has already been pre-filled.
What Income Must Be Included?
Most Australian residents must declare income received from all sources, including income earned outside Australia.
Depending on your circumstances, your 2025–26 tax return may include:
- Salary, wages, bonuses and commissions
- Allowances and overtime payments
- Termination payments
- Interest and dividend income
- Managed fund and trust distributions
- Rental and short-stay accommodation income
- Sole trader or contracting income
- Capital gains from property, shares or cryptocurrency
- Foreign employment or investment income
- Government payments and pensions
- Income-protection insurance payments
- Employee share scheme interests
An allowance shown on your income statement is generally assessable income. Receiving an allowance does not automatically entitle you to an equivalent deduction. Any related expense must independently meet the deduction requirements.
Similarly, a reimbursement is generally treated differently from an allowance. If your employer reimbursed an expense, you generally cannot claim that expense again in your tax return.
The Three Basic Rules for Individual Tax Deductions
To claim most work-related expenses in your individual tax return, you must generally satisfy three basic rules:
- You paid for the expense yourself and were not reimbursed.
- The expense directly related to earning your employment income.
- You have appropriate records to substantiate the claim.
Where an expense has both work and private use, only the work-related portion can be claimed. Private, domestic and capital expenses are generally not immediately deductible.
An employer requiring or encouraging an employee to incur an expense does not automatically make it deductible. There must be a sufficiently close connection between the expense and the employee’s actual income-producing duties.
Common Work-Related Deductions
The deductions available depend on your occupation and how you perform your work. Depending on your circumstances, common claims may include:
- Work-related car expenses
- Travel between workplaces
- Protective clothing and eligible uniforms
- Laundry of eligible work clothing
- Tools and equipment
- Computers, mobile phones and internet use
- Union and professional association fees
- Work-related subscriptions and journals
- Self-education connected with current employment
- Working-from-home expenses
- Tax agent fees from the previous year
- Income-protection insurance premiums
Only the work-related portion is deductible. For example, if a mobile phone is used 40% for employment duties and 60% privately, the claim must generally be limited to 40% and supported by a reasonable calculation.
Normal commuting between home and a regular workplace is usually private, even if you travel a long distance, work irregular hours or receive a travel allowance.
Car Expenses for 2025–26
For the 2025–26 income year, eligible taxpayers using the cents-per-kilometre method can claim 88 cents per work-related kilometre, up to a maximum of 5,000 work-related kilometres per car.
The alternative is the logbook method, which allows a taxpayer to claim the work-related percentage of eligible vehicle expenses. This generally requires a valid logbook, odometer records and evidence of costs such as fuel, registration, insurance, servicing, repairs and decline in value.
Travel directly between separate workplaces may be deductible. Normal travel from home to a regular workplace is generally not deductible, except in limited circumstances such as genuine itinerant work or transporting essential bulky equipment where no secure workplace storage is available.
Do not use the 91-cent rate when preparing the 2025–26 return. That rate begins on 1 July 2026 and applies to the 2026–27 income year.
Working-from-Home Expenses
Employees who worked from home may calculate their additional running expenses using the fixed-rate method or the actual-cost method.
For 2025–26, the fixed rate is 70 cents for each hour worked from home. The rate covers:
- Electricity and gas for heating, cooling and lighting
- Home and mobile internet or data
- Mobile and home telephone use
- Stationery and computer consumables
If you use the fixed-rate method, you cannot separately claim these same expenses again. You may still be able to claim the work-related decline in value of eligible computers, office furniture and other equipment because those items are not included in the hourly rate.
You must keep a record of all hours worked from home throughout the income year and evidence that you incurred the relevant additional expenses. Occasional minimal tasks, such as checking an email or answering a brief telephone call, may not be sufficient.
Employees generally cannot claim occupancy expenses such as rent, mortgage interest, council rates or home insurance merely because they work from home. Different considerations may apply where the home is genuinely a place of business.
Equipment, Computers and Other Work Items
An employee may generally claim an immediate deduction for an eligible work-related item costing $300 or less, provided it is used mainly to earn non-business income and is not part of a set costing more than $300 or substantially identical to other items that together exceed $300.
Items costing more than $300 are usually claimed over their effective life through depreciation, commonly referred to as decline in value. Any private use must be excluded.
A deduction is not available where the employer supplied the item or reimbursed its cost.
Self-Education and Professional Expenses
Self-education expenses may be deductible where the education maintains or improves the skills used in your current employment or is likely to increase income from that existing work.
Study undertaken to obtain new employment, enter a new profession or commence a substantially different income-producing activity is generally not deductible merely because it may lead to better earnings.
Eligible claims may include course fees personally paid, textbooks, stationery, internet costs and directly connected travel. Employer reimbursements, private components and non-deductible government-supported tuition must be excluded.
Annual union fees and professional association memberships connected with current employment may also be deductible.
Rental Property Income and Deductions
All rental and rental-related income must be declared, including income received from short-stay platforms and amounts relating to rental insurance or retained bonds in relevant circumstances.
Common rental deductions may include eligible loan interest, council rates, property-management fees, insurance, repairs and maintenance. Some costs, such as capital improvements, borrowing expenses, capital works and depreciating assets, may need to be claimed over several years rather than immediately.
The ATO issued updated guidance in 2026 concerning rental properties, mixed-use properties and holiday homes. Deductions may need to be apportioned where a property is used privately, rented to family below market rates or not genuinely available for rent. Certain ownership expenses for a holiday home may be denied where the property is not mainly used or held for producing assessable rental income.
The negative gearing and capital gains tax reforms announced in the 2026–27 Federal Budget do not change deductions in the 2025–26 individual tax return. Those property reforms generally begin from 1 July 2027.
Donations and Gifts
For 2025–26, the previous $2 minimum threshold for deductible gifts has been removed. This means eligible gifts to deductible gift recipients may be claimed regardless of the amount donated, provided the other requirements are satisfied.
You must have made a genuine gift to an eligible deductible gift recipient and generally keep suitable evidence. Payments where you receive a material benefit in return, such as raffle tickets, fundraising merchandise or event admission, may not qualify as ordinary deductible gifts. Special rules continue to apply to political donations and certain contributions.
ATO Interest Charges Are No Longer Deductible
General interest charge and shortfall interest charge incurred on or after 1 July 2025 are no longer income tax deductible.
This applies even where the related tax debt or amended assessment concerns an earlier income year. ATO interest incurred before 1 July 2025 may continue to receive the previous treatment, subject to the applicable rules.
The $1,000 Standard Deduction Does Not Apply Yet
The new standard deduction of up to $1,000 for eligible work-related expenses does not apply to the 2025–26 tax return.
It commences from 1 July 2026 and first applies to the 2026–27 individual tax return. For 2025–26, taxpayers must continue to claim their actual eligible work-related expenses and maintain the records required under the existing rules.
The future standard deduction is not a $1,000 refund or tax offset. It reduces assessable income for eligible taxpayers. It should not be included or anticipated when preparing the return for the year ended 30 June 2026.
Individual Tax Rates for 2025–26
For Australian residents entitled to the full tax-free threshold, the 2025–26 individual income tax rates are:
- $0 to $18,200: Nil
- $18,201 to $45,000: 16 cents for each $1 over $18,200
- $45,001 to $135,000: $4,288 plus 30 cents for each $1 over $45,000
- $135,001 to $190,000: $31,288 plus 37 cents for each $1 over $135,000
- Over $190,000: $51,638 plus 45 cents for each $1 over $190,000
These rates exclude the Medicare levy and any Medicare levy surcharge. For most taxpayers, the Medicare levy is 2% of taxable income, although reductions and exemptions may apply.
The 15% rate for taxable income between $18,201 and $45,000 starts from 1 July 2026. It does not apply when calculating tax for 2025–26.
What to Prepare for Your Tax Appointment
Before your appointment, gather information relevant to your circumstances, including:
- Income statements and allowance details
- Bank interest and dividend statements
- Managed fund annual tax statements
- Work-related expense receipts
- Vehicle logbooks and kilometre records
- Working-from-home hour records
- Professional membership and education costs
- Donation receipts
- Income-protection insurance statements
- Rental property statements and invoices
- Share and cryptocurrency transaction records
- Private health insurance information
- Foreign income and asset details
- Details of your spouse and dependants
- Your previous accountant’s records, where relevant
Avoid lodging too early if your employer, bank, health fund, managed fund or other reporting body has not finalised its information. Pre-filled information should always be reviewed rather than accepted without checking.
Frequently Asked Questions
Q1. When can I lodge my 2025–26 tax return?
The 2025–26 income year ended on 30 June 2026. Tax returns can be lodged after the income year ends, but it is often sensible to wait until employers, banks, health funds and investment providers have finalised their information.
Q2. Can I claim $1,000 without receipts in my 2025–26 tax return?
No. The new standard deduction of up to $1,000 starts from the 2026–27 income year. It does not apply to the tax return for the year ended 30 June 2026.
Q3. What is the car deduction rate for 2025–26?
The cents-per-kilometre rate is 88 cents for each eligible work-related kilometre, up to 5,000 kilometres per car. You must be able to show how the work-related kilometres were calculated.
Q4. What is the working-from-home rate for 2025–26?
The fixed rate is 70 cents for each hour worked from home. You must maintain a record of all hours worked from home and evidence that you incurred additional running expenses.
Q5. Can I claim travel from home to work?
Normal travel between your home and regular workplace is generally private and not deductible. Limited exceptions may apply to itinerant work, travel to an alternative workplace or the transport of essential bulky equipment.
Q6. Can I claim an expense if I received an allowance?
An allowance does not automatically make an expense deductible. The expense must meet the ordinary deduction rules, and appropriate records may still be required.
Q7. How long should I keep my tax records?
Individual taxpayers generally need to keep records supporting their claims for five years from the relevant time. Longer periods may apply to CGT assets, depreciating assets, carried-forward losses or where a dispute or review remains unresolved.
Q8. Does using a registered tax agent guarantee a refund?
No. The tax result depends on your income, deductions, tax withheld, offsets and other circumstances. A registered tax agent can help ensure your return is prepared accurately and eligible deductions are considered, but cannot guarantee a refund.
Individual Tax Return Support
Preparing an accurate tax return involves more than copying pre-filled figures and estimating deductions. Your employment, investments, rental properties, business income and capital gains should be reviewed together.
Kintax Accountants assists individuals, families, property investors and professionals with:
- Individual tax returns
- Work-related deduction reviews
- Rental property schedules
- Capital gains tax calculations
- Share and cryptocurrency transactions
- Sole trader and contractor income
- Foreign income reporting
- Prior-year and overdue tax returns
- ATO correspondence and amendments
Contact Kintax Accountants
Phone: 0399393692
Email: info@kintax.com.au
Office: Level 1, 287A Spring Street, Reservoir VIC 3073
Enquiries: Request a consultation
Based in Reservoir, Kintax Accountants supports individuals and businesses throughout Melbourne’s northern suburbs and greater Melbourne.
Important information: This article provides general tax and accounting information only. It does not constitute personal tax, financial or legal advice. Eligibility for deductions depends on your occupation, employment duties, expenditure, reimbursements, records and individual circumstances.
