Knowing what tax deductions your small business can claim can make a big difference at tax time. From everyday operating costs to larger capital purchases, the Australian Taxation Office (ATO) allows a wide range of deductions for expenses directly related to running your business – but if you don’t know what you can claim, you could be leaving money on the table.
One of the most effective ways to reduce taxable income and improve cash flow is by taking full advantage of these deductions. Whether you’re a sole trader, freelancer, or a growing business with employees, understanding what you can legally claim is key.
Many deductions are overlooked or misunderstood – especially when you’re trying to navigate small business accounting without professional support. As experienced accountants and financial advisers working with small businesses across the Central Coast and Sydney’s North Shore, the team at FMS Group is here to simplify the process, minimise your tax bill, and ensure nothing slips through the cracks.
So, what can you actually claim at tax time? Let’s take a closer look.
5 Common Small Business Tax Deductions
1. Operating Expenses
These are the day-to-day costs that keep your business running – office supplies, utility bills, professional memberships, marketing costs, accounting fees, software subscriptions, and insurance premiums.
As long as the expense is directly tied to earning your assessable income, it’s generally deductible. Keep detailed records and receipts, and speak with your accountant if you’re unsure whether an item is claimable.
2. Business Vehicle Expenses
If you use a vehicle for business purposes, you can typically claim expenses such as fuel, servicing, repairs, insurance, lease payments, and depreciation.
Sole traders and partnerships often choose between two methods:
• Logbook method: Claim a percentage of actual expenses based on business use.
• Cents-per-kilometre method: Claim a set rate per kilometre (up to a capped limit).
Using the right method – and maintaining proper records – can significantly impact your deduction.
3. Home Office Costs
With more businesses operating remotely, home office deductions are increasingly relevant.
You may be able to claim a portion of:
• Electricity and internet bills
• Phone expenses
• Home office furniture and equipment depreciation
The ATO currently offers a fixed rate method (covering running costs) or the actual cost method, which may yield a higher deduction if tracked properly. The rules around these methods have changed in recent years, so it’s worth checking in with your accountant to get it right.
4. Employee Wages & Superannuation
If you employ staff, you may be eligible to claim deductions for wages, bonuses, allowances, and compulsory superannuation contributions.
Payments to contractors may also be deductible; however, it’s important to note that some contractors may be deemed employees for tax and superannuation purposes.
In these cases, superannuation contributions would also be payable, and PAYG withholding obligations may apply.
All employee and contractor payments must be reported through Single Touch Payroll (STP).
Maintaining an accurate and efficient payroll system helps ensure compliance while allowing you to claim the full range of eligible deductions.
5. Depreciation on Business Assets
Larger purchases like computers, tools, equipment, and office furniture may be claimed over time through depreciation.
In some cases, you may be able to instantly write off the full cost (depending on the current ATO thresholds and eligibility).
Keeping an up-to-date asset register makes it easier to track and claim depreciation correctly year-on-year.
Bonus Tip: Keep Clean Records
No matter what you’re claiming, good recordkeeping is essential. Use accounting software, keep digital copies of receipts, and separate your personal and business spending. That way, you’ll have everything you need to back up your claims, and to avoid headaches at tax time.
Need help navigating your tax deductions?
Every business is different, and so are your tax opportunities. Our team will help you identify the right tax deductions for your small business, stay compliant, and make the most of your return.
Call 1300 982 499 to book your free consultation with FMS Group today.
Disclaimer: This blog is general in nature and does not constitute personal financial advice. Please consult a qualified financial planner before making decisions based on your individual circumstances.
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