Running a small business involves many costs, from software and equipment to advertising, travel and professional services. Some of these expenses may be tax deductible, but not every business expense can automatically be claimed.
Understanding small business tax deductions in Australia can help you prepare your records correctly and avoid unsupported claims.
What Is a Business Tax Deduction?
A business tax deduction is an eligible expense that can reduce your taxable income. Generally, an expense must be related to earning your business income and supported by appropriate records. If an expense has both business and private use, you can generally claim only the business-related portion.
See the Australian Government’s guidance on business tax deductions
Common Small Business Expenses You May Be Able to Claim
Depending on your business and circumstances, potentially deductible expenses can include:
- Advertising and marketing: Website costs, advertising and other eligible promotional expenses.
- Professional services: Accounting, bookkeeping and certain legal or professional fees.
- Business software: Eligible digital tools, subscriptions and cloud services used for business.
- Office expenses: Business stationery, supplies and other operating costs.
- Travel: Eligible business travel expenses.
- Motor vehicle costs: Certain business-related vehicle expenses, subject to applicable rules and record-keeping requirements.
- Home-based business expenses: Certain additional costs of running a business from home may be deductible.
Not every expense is immediately deductible. Some assets and capital expenses may need to be claimed over time or under applicable depreciation or tax concession rules.
What Records Should You Keep?
Good record keeping is essential. Keep invoices, receipts and other documents that show what you purchased, when you purchased it and how the expense relates to your business.
The ATO generally requires business records supporting deductions to be retained for at least five years.
Read ATO guidance on claiming business expenses
Common Mistakes to Avoid
Avoid assuming that an expense is deductible simply because you paid for it using a business bank account. You should also avoid claiming the private portion of mixed-use expenses or claiming costs without sufficient records.
Need Help With Your Business Tax?
Every business has different expenses, tax obligations and record-keeping requirements. D & B Accountants can assist with business taxation, bookkeeping and tax compliance.
Speak with D & B Accountants to discuss your business tax requirements and eligible deductions.