What Tax Deductions Are You Missing as a Business Owner?
Running a business in Australia is no small feat. From managing clients and employees to staying compliant with the ATO’s ever-evolving rules, business owners wear many hats. One area where even the most diligent entrepreneurs can fall short is tax deductions. With a myriad of tax breaks available, it’s surprisingly easy to overlook deductions that could significantly reduce your tax bill.
Whether you’re a sole trader, partnership, or running a company, understanding all the deductions available to you is crucial. Unfortunately, many deductions remain underutilised simply because business owners aren’t aware they exist. That’s why working with experienced brisbane accountants or tax professionals can make a substantial difference in what you retain at the end of the financial year.
This guide explores the most commonly missed tax deductions for Australian business owners, helps clarify what you can (and can’t) claim, and equips you with actionable insights to maximise your return.
Key Points
- Many Australian business owners miss out on valuable tax deductions due to lack of awareness or incorrect record-keeping.
- Understanding both common and lesser-known deductions can significantly improve your end-of-year tax position.
- Accurate documentation, professional advice, and proactive planning are key to maximising your tax benefits.
Commonly Missed Tax Deductions
1. Home Office Expenses
If you run your business from home or even work from home part of the time, you’re entitled to claim a portion of your home running costs as business expenses. This includes:
- Electricity and gas
- Internet and phone usage
- Office equipment depreciation
- Cleaning costs of your work area
It’s essential to keep a logbook or diary for at least four weeks to establish your work-from-home pattern. This will help you determine the percentage of home expenses you can claim.
2. Motor Vehicle Expenses
If you use your personal car for business-related travel, you can claim deductions for fuel, maintenance, insurance, and depreciation. There are two main methods for claiming these expenses:
- Cents per kilometre method: Up to 5,000 business kilometres per car, per year.
- Logbook method: Requires detailed records but provides a higher claim potential if you use your vehicle extensively.
Don’t forget to include tolls, parking fees, and lease payments (if applicable). However, you cannot claim trips between your home and your regular place of business.
3. Prepaid Expenses
Paying expenses in advance before 30 June can bring forward deductions into the current financial year. Prepaid expenses eligible for deduction include:
- Rent
- Insurance premiums
- Subscriptions to trade or professional associations
These are particularly useful for businesses that expect higher income in the current year and want to reduce their taxable income.
4. Business Technology and Software
Digital tools are essential for modern business operations, from accounting platforms to communication tools. The ATO allows deductions for software subscriptions and digital platforms such as:
- Xero or MYOB for bookkeeping
- Project management tools like Asana or Trello
- Microsoft 365 or Google Workspace
- Online security software
If the software is used over multiple years, you may need to claim the cost over time via depreciation.
Lesser-Known Deductions You Shouldn’t Overlook
1. Bad Debts
If you’ve issued invoices that are unlikely to be paid, you might be able to claim them as bad debts. To qualify:
- The debt must have been previously included as income
- You must have taken reasonable steps to recover the amount
- The debt must be written off in the same income year that the deduction is claimed
2. Professional Development and Training
If you or your staff attend workshops, courses, or seminars that are directly related to your business operations, these expenses are generally deductible. Examples include:
- Courses on marketing, finance, or management
- Webinars from industry experts
- Conferences and trade expos
However, the training must directly relate to current business activities — not future diversification or unrelated fields.
3. Tax and Accounting Services
The costs of preparing and lodging your tax returns, BAS statements, and other financial reports are fully deductible. This includes fees paid to:
- Registered tax agents
- Accountants or bookkeepers
- Business advisory services
4. Bank Fees and Interest
You can claim fees and interest paid on business loans and overdrafts, as long as they are related to business activities. This includes:
- Loan establishment fees
- Monthly account keeping fees
- Interest charges on business credit cards
Capital Works and Depreciation
Under Australian tax rules, you can claim deductions for the decline in value of capital assets over time. The Instant Asset Write-Off and Temporary Full Expensing schemes introduced by the government have made it easier to immediately deduct the full cost of eligible assets.
Eligible Assets Include:
- Computers and laptops
- Office furniture
- Machinery and tools
- Vehicles used for business
Check the current thresholds and eligibility rules each financial year as they may change depending on government policy.
Employee-Related Deductions
1. Superannuation Contributions
Employer contributions to superannuation are deductible, provided they are made before the year’s tax deadline. Consider making additional contributions before 30 June to optimise your tax benefits.
2. Salaries and Wages
All payments made to staff are deductible, including:
- Base wages
- Bonuses and commissions
- Leave entitlements
- Allowances and fringe benefits
3. Employee Training and Development
Investing in your team’s skills can be claimed as a business expense, provided the training is directly related to their current role.
Marketing and Promotion
Marketing activities are essential for growth, and the good news is most of these expenses are fully deductible. This includes:
- Website development and hosting
- Social media ads
- Printed marketing materials
- Graphic design services
- Public relations expenses
Even sponsorships and branded merchandise may be deductible if they promote your business to potential clients.
Record-Keeping Essentials
To claim deductions, the ATO requires substantiation. This means keeping proper records such as:
- Receipts and invoices
- Bank statements
- Logbooks
- Contracts and written agreements
Records must be kept for at least five years and should be easily accessible in case of an audit. Cloud-based accounting systems can help automate and organise your record-keeping efforts.
When to Seek Professional Advice
Tax laws can be complex and change frequently. While it’s possible to manage your own tax affairs, there’s a strong case for engaging professionals to ensure you don’t miss out on valuable deductions. Qualified brisbane accountants are well-versed in local tax law and can help structure your finances to be more tax-effective across the year.
FAQs: Common Questions About Business Tax Deductions
Can I claim my personal phone bill as a deduction?
Yes, but only the business-use portion. You’ll need to calculate the percentage of your phone usage related to work and apply that percentage to your total bill.
Are client gifts and entertainment deductible?
Gifts to clients may be deductible if they are not considered entertainment (e.g., a bottle of wine or a gift card). Meals and entertainment are generally not deductible unless directly related to business promotion and under specific conditions.
What about travel expenses?
Business travel expenses such as accommodation, meals, and transport can be claimed if they are incurred while performing business activities. Keep detailed records, including travel diaries for trips lasting more than six nights.
Can I claim clothing expenses?
Only specific clothing counts — such as uniforms with company logos, protective clothing, and industry-specific items. Everyday business attire is not deductible.
How do I know if an expense is deductible?
The general rule is that an expense is deductible if it is incurred in gaining or producing assessable income and is not of a capital, private, or domestic nature. When in doubt, consult a registered tax professional.
What if I run multiple businesses?
You must keep separate records for each business and can only claim expenses directly related to each venture. Structuring your businesses properly can help streamline your tax reporting.
Is it better to lease or buy business equipment?
Each option has different tax implications. Buying may allow you to claim depreciation or instant asset write-off, whereas leasing spreads costs over time. A tax advisor can help determine the best approach for your financial situation.