Tax deductions · 2025-26 financial year
Tax deductions for Australian individuals, 2025-26
The deductions most people miss, the ones that get audited, and the records the ATO actually wants. Each section cites the ruling or page it comes from. Current as at 17 May 2026.
★Key takeaways
- ✓Three rules: the expense must relate to earning your income, you must have spent the money yourself (not reimbursed) and you must have a record.
- ✓WFH (2025-26): 67c per hour fixed-rate method covering electricity, gas, internet, phone, stationery and consumables – with a contemporaneous diary. Or the actual-cost method with apportioned bills + receipts.
- ✓Motor vehicle (2025-26): cents-per-km rate is $0.88/km capped at 5,000 km/year. Logbook method has no kilometre cap but needs a valid 12-week logbook.
- ✓Self-education is deductible if it maintains or improves the skills used in your current job, or is likely to increase your income from your current employment. Not deductible if it lets you change careers.
- ✓Donations of $2+ to a Deductible Gift Recipient (DGR) are deductible. Buying raffle tickets or charity dinners is not – you received something of value.
- ✓Records: 5 years from lodgement. Photos of receipts are accepted. The $300 threshold for written-evidence requirement applies only to work-related expenses overall; motor vehicle and travel allowances have their own rules.
First principles
The three-rule deduction test
Section 8-1 of the Income Tax Assessment Act 1997 says you can deduct a loss or outgoing if it is incurred in gaining or producing assessable income. The ATO operationalises that as three tests:
1. Connection
The expense relates to earning your income
There must be a genuine link to producing assessable income. If you wouldn’t incur it if you didn’t have the job, you’re likely on the right side. Purely private expenses fail.
2. Out of pocket
You spent the money yourself
If your employer reimbursed you, you can’t claim. If they paid an allowance, the allowance is taxable income but you can claim the actual expense against it.
3. Records
You have evidence to back it up
Receipts, invoices, bank statements, diary entries, calendar invitations, a logbook. Photos of receipts are accepted. Keep for 5 years from lodgement date.
Working from home
WFH deductions – two methods
Fixed-rate method
67c per hour
Covers electricity, gas, home internet, phone (incl mobile), stationery and computer consumables. You need a contemporaneous record of actual hours worked from home – a diary, timesheet or roster – not an estimate.
You can still claim separately for: depreciation of office furniture and tech equipment, repairs and maintenance of work-related assets, and the work-use share of professional subscriptions.
Actual-cost method
Itemised
Claim the actual work-use proportion of every category. Requires apportioned utility bills, a kWh-based electricity calculation, separated internet and phone usage logs, and depreciation schedules for assets over $300.
More work to substantiate but often results in a higher claim if you have a dedicated home office, work full-time from home, or have material energy use (multiple monitors, server, EV charging).
Source: ato.gov.au – working from home expenses and PCG 2023/1. A more detailed comparison and worked example sits on our WFH deduction guide.
Motor vehicle
Two methods, both 2025-26
| Method | Rate / approach | Records required | Best for |
|---|---|---|---|
| Cents per km | $0.88/km, capped at 5,000 km | Reasonable basis to back the kilometre count (diary, calendar, appointment log) | Low-to-moderate work use, fuel-efficient car |
| Logbook | Apportion all running costs by business-use % | 12-week continuous logbook (every 5 years), all fuel + service receipts, registration, insurance | High work use, expensive vehicle, large annual kilometres |
Home-to-work travel is private. The deductible kilometres are the ones between workplaces, between work and a client, or to a second workplace held by the same employer. Carrying bulky tools is a narrow exception – the tools must be genuinely bulky and there must be no secure place to leave them at work.
Source: ato.gov.au – transport and travel expenses; cents-per-km rate published annually under Section 28-25 of the Income Tax Assessment Act 1997.
Self-education
When study is deductible
Deductible
- ✓Maintains or improves skills used in your current job
- ✓Likely to lead to a pay rise from your current employment
- ✓Course fees, textbooks, stationery, internet, course-related travel
- ✓HECS-HELP study taken purely for income-earning purposes (rare; most HELP debt is excluded)
Not deductible
- ×Designed to open up a new field of employment
- ×Study while unemployed (no current income to which it relates)
- ×HELP debt repayments (compulsory or voluntary)
- ×Course costs reimbursed by your employer
Source: TR 2024/3 self-education expenses, and the ATO self-education page. The previous $250 non-deductible threshold for the first $250 of self-education was abolished from 1 July 2022.
Tools, equipment + clothing
The depreciation $300 line
Tools and equipment used for work are deductible. The treatment depends on the cost:
- Items costing $300 or less (work-use portion): immediate deduction in the year of purchase.
- Items costing more than $300: depreciated over their effective life using either prime cost (straight-line) or diminishing value method.
- Sets of items (e.g. a set of spanners) bought together to function as one asset: combine the cost to test the $300 threshold.
- Compulsory uniforms with employer logo or distinctively branded: deductible. Laundry is deductible at $1 per load if 100% work clothing, 50c per load if mixed. Dry cleaning is deductible at actual cost.
- Occupation-specific clothing (chef whites, nurse scrubs, lawyer’s wig and gown): deductible.
- Protective clothing (steel-cap boots, hi-vis, sun protection for outdoor workers): deductible.
- Ordinary office clothing: not deductible even if your workplace has a dress code or you only wear them at work.
Source: ATO – tools, computers and equipment; TR 2003/16 work-related clothing, laundry and dry cleaning.
Other categories worth knowing
Donations, investments, ATO admin
Charitable donations
$2 or more to an endorsed Deductible Gift Recipient (DGR). Verify DGR status at abr.business.gov.au. You cannot deduct raffle tickets, charity dinner tickets, or items received in return for a donation – there’s no genuine gift if you got something of value back.
Investment property
Loan interest (on the investment, not on owner-occupier portion), property management fees, council rates, insurance, repairs (not improvements), pest control, advertising for tenants and depreciation (Division 40 + 43). Capital works for properties built after 17 July 1985 are deductible at 2.5%/year over 40 years.
Income protection insurance
Premiums for income protection are deductible if the policy pays a benefit to replace lost income (not to repay debt or provide a lump sum). Life insurance, trauma insurance and TPD (outside super) are generally not deductible.
Personal super contributions
Concessional (deductible) contributions are capped at $30,000 for 2025-26 including employer SG. You must lodge a Notice of Intent with your super fund before lodging your tax return. Carry-forward unused cap is available if your super balance is under $500,000.
Professional memberships + journals
Trade union fees, professional body memberships related to your job (CPA, CA, law society, AHPRA), professional journal subscriptions. Not deductible: general newspapers and magazines.
Tax agent fees + audit insurance
Fees paid to a registered tax agent or tax adviser are deductible in the year you pay them. Audit insurance premiums for ATO audit defence are also deductible. Use our TPB register check to verify your agent.
Records + audit risk
What the ATO actually wants to see
The ATO publishes its annual focus areas for individual return scrutiny. For 2024-25 and continuing into 2025-26, the three flagged categories are: WFH expenses, motor vehicle claims and rental property claims. Records to keep:
- WFH hours: timesheet, diary or calendar showing actual hours worked at home. Not a representative 4-week sample, not an estimate – the ATO ruling requires a full-year contemporaneous record.
- Motor vehicle: cents per km – diary or appointment calendar backing the kilometres. Logbook method – 12-week continuous logbook (renewed every 5 years), every fuel + service receipt for the year.
- Rental property: depreciation schedule from a qualified quantity surveyor, all receipts, the loan statement showing interest paid, body corporate notices, council rates, insurance.
- Self-education: enrolment letter showing the connection to current employment, receipts for fees, textbooks, course-related travel, course-related stationery.
- Donations: receipts showing the DGR-endorsed status of the recipient organisation.
If your circumstances are anything beyond simple PAYG, the value of a TPB-registered tax agent typically exceeds the fee in deductions they’ll legitimately find. The agent fee is itself deductible.
Common questions
Tax deductions – common questions
Do I need receipts for every deduction?
No, but you need a record. Written evidence is required for any work-related expense claim where your total work-related expenses exceed $300 in the year. The $300 threshold excludes motor vehicle, meal allowance, award transport payments and travel allowance claims, which have separate substantiation rules. Photos of receipts are accepted by the ATO.
Can I claim my work clothes?
You can claim compulsory uniforms (with employer logo or distinctively branded), occupation-specific clothing (chef whites, nurses’ scrubs) and protective gear (steel-cap boots, hi-vis, sun protection for outdoor workers). You cannot claim ordinary office clothing, even if your employer requires a dress code. Source: TR 2003/16.
Is my commute to work deductible?
No. Home-to-work travel is private regardless of distance or remote location. There are narrow exceptions: travel between two workplaces in the same day, transporting bulky tools that can’t be left at work, and travel to alternative work sites for the same employer. Source: ATO ID 2002/725 and TR 2021/1.
Can I claim my home internet and mobile?
Yes – the work-use percentage. Keep a 4-week representative diary or log of work-related usage, then apply that percentage to the full-year bill. If you use the WFH fixed-rate method (67c/hour), phone and internet are already included and cannot be double-claimed.
What is the cents-per-kilometre rate for 2025-26?
The ATO cents-per-kilometre rate for 2025-26 is $0.88 per kilometre, capped at 5,000 work-related kilometres per car per year. No logbook needed but you must be able to demonstrate the work-related kilometres through diary entries, calendar invitations, client appointment records or similar evidence. Source: ato.gov.au/individuals-and-families/income-deductions-offsets-and-records/deductions-you-can-claim/transport-and-travel-expenses.
Is the tax agent fee deductible?
Yes. Fees you pay to a registered tax agent or tax adviser for managing your tax affairs are deductible in the year you pay them. That includes the fee for the return itself, advice on tax structures and representing you in an ATO matter. Section 25-5 of the Income Tax Assessment Act 1997.
Can I deduct charitable donations?
Yes, donations of $2 or more to organisations endorsed as Deductible Gift Recipients (DGRs) are deductible. Keep the receipt or DGR-issued acknowledgement. Buying goods (chocolates, raffle tickets, dinner tickets) is not deductible – you’ve received something of value in return. Look up DGR status at abr.business.gov.au.
How long do I keep records for?
Five years from the date you lodge the return that the records support. Capital gains records: five years after the disposal of the asset. Property depreciation reports: keep for the entire ownership period. Records can be paper or digital; photos of receipts are accepted.