Every financial year, small business owners across Australia look for ways to reduce their taxable income and increase their tax refund. Yet, many miss out on valuable tax deductions simply because they’re not sure what they can actually claim on their tax return. The challenge is real-tax law can be complex and knowing which business expenses deductible are isn’t always straightforward. This article is here to help you identify 15 deductions you can claim, so you don’t leave money on the table at tax time.
Understanding How Tax Deductions Work for Small Business
Knowing what you can claim a deduction for is one of the most effective ways to reduce your taxable income. The Australian Taxation Office (ATO) sets out different rules for claiming tax deductions, but the basics are simple: most business expenses that are directly related to earning your assessable income can be claimed, as long as you keep the right records and only claim the business portion if there’s any private use involved.
For example, if you incur expenses that are both work related and personal, you can only claim the work related part. You’ll need to keep receipts or other evidence to show the cost and business use. This applies to everything from travel expenses to home office equipment, and even to investment income management costs.
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Commonly Overlooked Operating Expense Deductions
Many small business owners pay for operating expenses throughout the income year but forget to claim them on their tax return. These are often work-related deductions that can make a real difference to your tax refund.
1. Accounting and Bookkeeping Fees
You can claim a deduction for money paid to your accountant or registered tax agent for preparing and lodging your tax return, as well as for any tax advice or bookkeeping services you use during the year. Keeping accurate records of these costs will help you claim the full amount.
2. Business Subscriptions and Apps
Monthly or annual subscriptions to business-related software, industry publications, or online tools are expenses you can claim. These often get missed, but if they’re used for work duties, they’re tax deductible.
3. Professional Development and Education
If you pay for education, training, or seminars that are directly related to your business or work duties, you can claim a deduction for these costs. Just be sure the training is relevant to your current business activities.
4. Business Insurance Premiums
Most business expenses for insurance, such as public liability, professional indemnity, or income protection insurance, are deductible. If you pay for insurance to protect your business or investment income, include these costs in your tax return.
Home-Based Business Deductions You Might Be Missing
Running your business from home opens up a range of home office expenses you can claim. The ATO allows you to claim the business portion of costs like electricity, internet, and even some occupancy expenses, depending on your setup.
If you use a dedicated space for work, you may be able to claim a portion of your rent or mortgage interest charged, as well as other running expenses. Always keep records of how you calculate your claims, and remember you can only claim the business use portion.
5. Home Office Running Expenses
You can claim a deduction for the cost of heating, cooling, lighting, and cleaning your home office. The ATO provides several methods to help you calculate these expenses, so choose the one that best fits your situation.
6. Home Office Furniture and Equipment
Immediate deduction is available for most home office equipment and furniture if it costs less than the current threshold. Larger purchases can be depreciated over time. Make sure you only claim items used for work related purposes.
7. Internet and Phone Costs
If you use your home internet or phone for business, you can claim the business portion of these costs. Keep records showing how you work out the percentage you use for work compared to private use.
Asset and Equipment Deductions That Add Up
Claiming deductions for business assets and equipment is another way to reduce your taxable income. The rules for claiming these deductions depend on the cost and how the asset is used.
8. Instant Asset Write-Off
For eligible small businesses, the instant asset write-off allows you to claim an immediate deduction for assets costing less than the set threshold. This includes things like computers, tools, and office equipment used for work related activities.
9. Small Business Simplified Depreciation
If your assets cost more than the instant asset write-off threshold, you can pool them and claim depreciation each income year. This helps you spread the cost of larger purchases over several years.
10. Motor Vehicle Expenses
Car expenses for business use, such as travel to client meetings or deliveries, can be claimed using either the cents-per-kilometre method or the logbook method. Only claim the business use portion, and keep detailed records to support your claim.
Other Tax Benefits and Deductions You Can Claim
There are several other tax deductions and offsets available to small business owners that are often overlooked. These can help you pay less tax and improve your cash flow.
11. Small Business Income Tax Offset
If you’re a sole trader or receive small business income through a partnership or trust, you may get the small business tax offset. The ATO works this out automatically using your income.
12. Small Business Skills and Training Boost
Eligible small businesses can claim an additional deduction for external training courses provided to employees by registered training providers. This is a great way to invest in your team and claim a deduction at the same time.
13. Startup Costs
Expenses you incur before your business starts operating, such as legal or accounting fees, can be claimed over time. Make sure to keep records of these costs, as they can reduce your taxable income in future years.
14. Business Meal Expenses
You can claim a deduction for meals if they’re directly related to earning your business income, such as client meetings. Just remember, you can’t double dip by claiming both a meal and entertainment deduction for the same expense.
15. Union Fees and Professional Memberships
Union fees, professional association memberships, and subscriptions to industry bodies are all work related deductions you can claim. These expenses help you stay connected and up to date in your field.
Need help figuring out what you can claim? Our Tax Deduction Checklist has you covered — hosted by ACT Tax Group, our accounting division.
We’re more than bookkeeping experts
As part of ACT Tax Group, we offer complete accounting and business advisory services tailored to your needs.
Maximising Your Tax Deductions with Good Record Keeping
Claiming all the deductions you’re entitled to starts with keeping good records. The ATO may ask for evidence during audits, so hold on to receipts, invoices, and any calculations you use to work out your claims. This applies to everything from travel expenses to laundry expenses for protective clothing or dry cleaning.
If you donate to deductible gift recipients, keep your receipts so you can claim a deduction for your donations. Remember, you can only claim expenses that relate to earning your income, and you need to apportion costs if there’s any private use.
Conclusion
Knowing what you can actually claim on tax helps you keep more money in your business and reduces the amount you pay tax on. By understanding the deductions you can claim-from work related expenses and home office costs to car expenses and business insurance-you can make the most of your tax return each financial year.
If you’re unsure about any claims or need tailored tax advice, our team of accountants and registered tax agents is here to help. We’re committed to making tax time less stressful and helping you claim every deduction you’re entitled to under Australian tax law.
Review your expenses, keep thorough records, and don’t hesitate to reach out for support. With the right approach, you can feel confident you’re claiming all the deductions you deserve-and that’s money you can reinvest in your business or enjoy as a well-earned tax refund.
