What Can I Claim as a Tax Deduction as a Sole Trader in Australia?
Reading time: 8 minutes | Topic: Tax Deductions, Sole Traders
If you're running a business as a sole trader in Australia, one of the most powerful tools at your disposal is the tax deduction. Yet thousands of Australian sole traders overpay the ATO every single year, not because they're doing anything wrong, but simply because they don't know what they're entitled to claim.
This guide breaks it down clearly, so you can keep more of what you earn.
The Golden Rule: What Makes a Deduction Legitimate?
The ATO's basic test is this: the expense must be directly related to earning your business income. It must not be private or personal in nature, and if it's partly business and partly personal, you can only claim the business portion.
You also need to be able to prove it, which means keeping records. More on that at the end.
What Can You Actually Claim?
1. Business expenses
These expenses are the general everyday business operating costs largely dependent of the type of business and industry you’re operating. It may include: rent for commercial premises, digital product subscriptions, postage and printing.
2. Home Office and Home-Based Business Expenses
If you work from home, you may be able to claim running expenses using either the fixed rate method of 70 cents per hour or the actual cost method. This may cover costs such as electricity, phone, internet, stationery and computer consumables. Keep a record of the hours you work from home.
If you have an area of your home that is clearly set aside exclusively as a place of business, you may also be able to claim a portion of occupancy costs such as rent, mortgage interest, council rates and home insurance.
Be aware that claiming, or being entitled to claim, occupancy costs may affect the full CGT main residence exemption when you sell your home.
3. Motor Vehicle Expenses
Using your car for business? You can claim it! But not the morning school run or the Friday night grocery trip. Only genuine business use counts.
Two methods apply:
Cents per kilometre: 88 cents per km (FY26) & 91 cents per km starting 1 July 2026 (FY27), up to 5,000 km per year. Simple, no written evidence required to show, however must be able to have reasonable record of your business trips.
Logbook method: Keep a logbook for 12 continuous weeks to establish your business use percentage. Then claim that percentage of all vehicle running costs such fuel, rego, insurance, servicing.
The logbook method generally delivers a larger deduction if you use your car heavily for work.
4. Equipment, Tools & Technology
Anything you buy to use in your business including office furniture, laptops, phones, power tools, cameras, printers is potentially deductible. Assets costing $300 or less used predominantly for business can be claimed immediately.
For assets above the threshold, you depreciate them over their effective life using ATO schedules. For 2025-26, the instant asset write-off threshold is $20,000, meaning you can claim the full cost of eligible assets in the year you buy them, rather than depreciating over time.
5. Professional Development & Education
Courses, workshops, industry conferences, online subscriptions for training is deductible, as long as the education directly relates to your current business activity.
The key word is current. You can claim a barista course if you run a café. You cannot claim it if you're a landscaper exploring a career change; that's considered a new qualification, not maintaining existing skills.
6. Professional memberships & subscriptions
You may be able to claim fees for memberships to recognised trade or professional associations, as well as subscriptions that are directly related to running your business. This may include industry publications, business software and other digital tools used for your work.
7. Accounting, Legal & Professional Fees
What you pay professionals to help run your business is fully deductible:
Accountant or bookkeeper fees
Tax return preparation fees (note: this year's tax prep fee is claimed in next year's return)
Legal advice related to your business
Financial planning costs directly related to your business income
8. Marketing & Advertising
Every dollar spent promoting your business is deductible:
Website hosting, domain registration, and design
Social media advertising (Meta, Google Ads, LinkedIn)
Business cards, signage, brochures
Graphic design and copywriting
Sponsorships directly tied to business promotion
9. Bank Fees & Business Finance Costs
Business bank account fees, merchant fees, and interest on business loans are all claimable. Keep your business and personal banking separate, it makes this much easier to track.
10. Insurance
Business insurance premiums are deductible, including:
Public liability insurance
Professional indemnity insurance
Business contents or equipment insurance
Note: Personal life insurance or private health cover is not deductible as a business expense.
11. Employees & Contractor Costs
If you employ staff or engage contractors, the following are deductible:
Employee wages and salaries
Staff training, work uniform and fridge benefits
Superannuation contributions you make on behalf of employees are deductible
Payments to contractors (with appropriate invoices/contracts) are deductible
12. Your Own Superannuation
Sole traders don't receive compulsory super but you can make voluntary concessional (pre-tax) contributions and claim them as a tax deduction. The concessional cap is $30,000 per year for 2025–26.
Important: You must lodge a Notice of Intent to Claim with your super fund before lodging your tax return.
13. Business Travel
Travel for business purposes is deductible such as flights, accommodation, transport, and meals while travelling for work. Keep your itinerary and supporting documents (conference registrations, client meeting records) to substantiate the trip.
Mixed travel (part business, part holiday) requires you to apportion costs. Only the genuine business portion is claimable.
What You Cannot Claim
Just as important as knowing what you can claim is knowing what the ATO will reject:
❌ Private or personal expenses
❌ Meals and entertainment (generally not deductible and may attract FBT if employees are involved)
❌ Traffic fines
❌ Personal health insurance or life insurance
❌ Clothing that isn't a uniform or protective workwear (your business casual wardrobe doesn't count)
❌ Education costs for a new career or qualification unrelated to your current work
Record-Keeping: Don't Let This Be Your Downfall
The ATO requires you to keep records for five years from the date you lodge your return. That includes:
Receipts and invoices
Bank statements
Logbooks (for vehicle claims)
Home office hours logs
Contracts with contractors or employees
Missing a receipt for a $2,000 piece of equipment can result in that deduction being disallowed and potentially a penalty. Use a bookkeeping software such as Xero, record expenses through the ATO app myDedudction or even just a dedicated folder to capture everything throughout the year.
Pro tip: Keep your business records in a digital format wherever possible. This keeps your documents organised in one place, allows you to create backups, avoids issues with faded or lost receipts and makes it faster to provide records to your accountant or the ATO if required.
Need help making sure you're claiming everything you should?
Our team works with sole traders across Australia to maximise deductions, stay ATO-compliant, and take the stress out of tax time.
📞 Book a free consultation | 📧 Get in touch
This article is intended as general information only and does not constitute tax advice. Tax rules change regularly, always consult a registered tax agent for advice specific to your circumstances.
