Tax Deductions for Small Business in Australia: The Complete Claim Guide
A Verus AA Chartered Accountant reviewing small business tax deductions with a Sydney-based client.
What Tax Deductions Can a Small Business Claim in Australia?
Under section 8-1 of the Income Tax Assessment Act 1997, you can deduct any loss or outgoing to the extent it is incurred in gaining or producing assessable income, provided it is not private, capital, or prohibited by law. In plain English: if you spent money to run your business, you can probably claim it.
The key categories of tax deductions for small business in Australia are:
Rent for business premises is fully deductible. Utilities (electricity, gas, water) that relate to your business operations are deductible. If the premises are used exclusively for business, you can claim 100%. If you work from a shared home, a proportional claim applies. Office supplies, phone plans, internet, and subscriptions (Xero, Microsoft 365, Adobe, etc.) are all deductible when used for business purposes.
Employee Wages and Super
Wages, salaries, allowances, and bonuses paid to employees are fully deductible in the year paid. Superannuation Guarantee contributions are deductible when paid. Note that contributions must be received by the fund before 30 June to be deductible in that financial year. Late payments to super (even by one day after 30 June) cannot be claimed until the following year.
Professional Fees
Accounting fees, bookkeeping costs, legal fees for business matters, and consulting fees are all deductible provided they relate to your business income. This includes the cost of preparing your tax return and BAS. Your accountant’s fees are themselves a tax-deductible expense.
Understanding which vehicle and travel expenses you can claim is one of the most audited areas by the ATO.
Vehicle and Travel Deductions for Small Business
This is one of the most frequently audited areas by the ATO and one of the most commonly overclaimed. The rules differ for employees and business owners. The ATO’s official guidance on vehicle and travel deductions outlines both methods in detail.
Method
How It Works
Best For
Record Required
Logbook Method
Business % of all car costs (fuel, insurance, rego, depreciation)
High business use vehicles
12-week logbook + all receipts
Cents Per Km
$0.88/km for FY2026, up to 5,000 km/year
Low-moderate business use
Record of business km travelled
For travel (flights, accommodation, meals), you can claim expenses when the purpose is directly related to earning business income. Mixed personal/business travel requires apportionment. You can only claim the business component.
Home Office Deductions: ATO Methods for FY2026
If you work from home as a business owner or self-employed contractor, you can claim home office expenses. There are two methods:
Fixed Rate Method
67c / hour
From 1 July 2022, the ATO’s revised fixed rate method allows 67 cents per hour worked from home. This covers electricity, gas, internet, phone, stationery, and computer consumables. You must keep a diary or log of actual hours worked. The ATO no longer accepts a representative four-week period.
Actual Cost Method
Real % of costs
Claim actual costs for the work-related proportion of home expenses: a percentage of rent/mortgage interest, electricity, gas, internet, and depreciation of home office furniture. Requires floor area calculation and detailed records.
Instant Asset Write-Off for Small Business (FY2026)
FY2025–26 Threshold
$20,000
Per eligible depreciating asset for businesses with aggregated turnover under $10 million. The temporary full expensing measure has ended. Always confirm the current threshold with your accountant before EOFY purchases — the amount has changed multiple times and may be subject to further legislative change.
The instant asset write-off allows eligible small businesses to immediately deduct the full cost of eligible depreciating assets in the year of purchase rather than depreciating over years. For the latest legislative position, refer to the ATO’s official instant asset write-off guidance.
Marketing expenses including Google Ads, social media, and SEO services are fully deductible for Australian small businesses.
Marketing and Advertising Deductions
Google Ads, Facebook/Meta Ads, SEO services, website costs, social media management, printing, signage, and trade show expenses are all deductible. Domain registration and web hosting costs are deductible annually.
If you build a new website, the cost may need to be depreciated depending on whether it is treated as a capital or revenue expense. A qualified tax accountant should advise on the correct treatment for your situation.
What You Cannot Claim: Common ATO Red Flags
The ATO uses data matching and AI to identify anomalous claims. These are the most common overclaims that trigger audits:
Claim
ATO Position
100% of a car used for work and personal
Must apportion — private use is not deductible
Meals and entertainment
Deductible only when FBT applies or strictly business purpose
Clothing (general)
Only deductible if protective, occupationally specific, or has compulsory employer logo
Gym membership
Not deductible unless you are a professional athlete or fitness instructor
Mortgage repayments (home office)
Interest component may be claimable, not the principal
Travel to/from work
Not deductible — this is a private expense
Fines and penalties
Not deductible under any circumstances
Good record-keeping is the foundation of every legitimate deduction claim. Keep receipts, invoices, and logs organised throughout the year — not just at tax time.
Deductions by Business Structure: What Changes
Your business structure affects how some deductions are claimed. If you are uncertain which structure is right for you, our team has put together a detailed guide: how much does a small business tax accountant cost?
S
Sole Trader
All deductions are claimed in your individual tax return. Home office deductions are straightforward. You and the business are the same legal entity.
C
Company
All legitimate business expenses are deductible at the company level. Wages paid to working directors are deductible; drawings are not.
T
Trust
Expenses are claimed at the trust level before income is distributed to beneficiaries. Income splitting opportunities may also reduce overall family tax.
Most business owners we onboard have been leaving money on the table — not claiming deductions they are entitled to, or claiming them incorrectly in ways that could attract ATO attention. Our Chartered Accountants review your full expense picture at EOFY and ensure every legitimate deduction is captured, correctly categorised, and properly documented.
Chartered Accountants ANZ ATO Registered Tax Agents EOFY Tax Planning Sydney Based
What expenses can a small business claim as tax deductions in Australia? +
Small businesses can claim deductions for operating expenses (rent, utilities, subscriptions), employee wages and super, vehicle and travel expenses, home office costs, marketing and advertising, professional fees, insurance, training, and asset depreciation. The general rule is that the expense must be incurred in earning your business income and must not be private or capital in nature.
Can I claim home office expenses as a business owner? +
Yes. From 1 July 2022, the ATO’s revised fixed rate method allows 67 cents per hour for each hour worked from home. Alternatively, you can claim the actual cost method based on the work-related proportion of home expenses. You must keep a record of actual hours worked from home. The ATO no longer accepts a representative period estimate.
Can I claim my vehicle as a business tax deduction? +
Yes, but only the business-use portion. You can use the logbook method (business % of all car expenses) or the cents-per-kilometre method ($0.88/km up to 5,000 business km in FY2026). The ATO scrutinises vehicle claims closely. You need records to support your claimed business use percentage. A 100% claim on a car used for both personal and business travel will be questioned.
Are accounting fees tax deductible for small business? +
Yes. Accounting fees, bookkeeping costs, BAS agent fees, and tax return preparation costs are fully deductible as business expenses. This applies to all business structures — sole traders, companies, and trusts. The deduction applies in the year the fee is paid, not when it is invoiced.
What is the instant asset write-off threshold for FY2025–26? +
As of FY2025–26, the temporary full expensing measure has ended. The standard small business instant asset write-off threshold as legislated is $20,000 per asset for businesses with aggregated turnover under $10 million. Confirm the current position with your accountant before making EOFY purchases. The threshold is subject to legislative change.
Are superannuation contributions tax deductible for small business? +
Yes. Employer Superannuation Guarantee contributions are deductible when paid. Personal deductible contributions (for self-employed individuals) are claimed as an individual deduction, not a business expense, but the tax benefit is the same. Super contributions must be received by the fund before 30 June to be deductible in that financial year.
Can I deduct meals and entertainment expenses? +
Meals and entertainment are generally not deductible unless they are provided to employees and subject to FBT, or are strictly part of a business function. Taking clients to lunch is typically not deductible. Providing a meal to employees while they work overtime may be deductible. This area is frequently misunderstood. When in doubt, ask your accountant before claiming.
What are the key tax reduction strategies for small business? +
The key strategies include: claiming all eligible deductions, making pre-EOFY super contributions, timing income and expenses around the financial year, reviewing your business structure for tax efficiency, using the instant asset write-off for eligible purchases, and engaging an accountant for proactive EOFY tax planning. For related tips also read our guide on tax tips for small business.
Stop Leaving Deductions on the Table
Talk to our Chartered Accountants about a full tax review for your business. We find the deductions, apply them correctly, and ensure you are audit-ready.
