10 Tax Deductions Every Australian Small Business Owner Should Know

Running a small business in Australia comes with many financial responsibilities, but one way to ease the burden is by taking advantage of tax deductions. Understanding what you can claim can make a significant difference in your taxable income, helping you save money and reinvest in your business. Here are 10 common tax deductions every Australian small business owner should know about.

1. Home Office Expenses

If you run your business from home, you may be eligible to claim home office expenses. This includes:

• A portion of your rent or mortgage interest
• Utility bills (electricity, gas, water)
• Internet and phone expenses
• Office furniture and equipment depreciation

The ATO provides two methods to calculate these deductions: the actual cost method and the fixed-rate method. Keeping accurate records is essential to ensure compliance.

2. Vehicle and Travel Expenses

If you use your vehicle for business purposes, you can claim deductions for:

• Fuel and maintenance costs
• Registration and insurance
• Depreciation
• Lease payments

You can calculate your deduction using the logbook method or the cents-per-kilometre method. However, personal travel and commuting to and from work are generally not deductible.

3. Superannuation Contributions

Superannuation contributions for employees are tax-deductible, and if you’re a sole trader or partner in a business, you may also be able to claim deductions on personal super contributions. Making timely contributions before the end of the financial year ensures you maximise your deductions and meet compliance obligations.

4. Work-Related Training and Education

If you undertake courses, workshops, or training that directly relate to your business or improve your skills, the expenses may be deductible. This includes:

• Course fees
• Books and study materials
• Travel expenses related to training

Keep in mind that courses must have a direct link to your current business activities to be eligible.

5. Business Insurance

Business insurance is a crucial expense, and many policies are tax-deductible, including:

• Public liability insurance
• Professional indemnity insurance
• Business vehicle insurance
• Workers' compensation insurance

Ensuring you have adequate coverage not only protects your business but also reduces your taxable income.

6. Marketing and Advertising

Promoting your business is essential for growth, and the good news is that marketing and advertising costs are tax-deductible. Eligible expenses include:

• Social media and digital marketing costs
• Website development and maintenance
• Printing business cards, flyers, and signage
• Sponsorships and paid promotions

7. Depreciation of Assets

If you purchase business assets such as computers, office furniture, machinery, or tools, you can claim depreciation. Under the temporary full expensing scheme, eligible businesses can deduct the full cost of assets purchased before 30 June 2023. The instant asset write-off threshold may also apply, depending on government updates.

8. Software and Subscriptions

Many small businesses rely on software for accounting, project management, and communication. Subscription costs for business-related software, including cloud-based accounting tools like Xero or MYOB, can be claimed as deductions.

9. Employee Salaries and Wages

If you employ staff, wages and salaries paid to employees are deductible. Other related expenses, such as employer superannuation contributions, payroll tax, and workers’ compensation insurance, may also be deductible. Make sure to comply with PAYG withholding and superannuation guarantee obligations.

10. Interest on Business Loans

If you’ve taken out a loan for business purposes, the interest portion of repayments is tax-deductible. This applies to business credit cards, overdrafts, and lines of credit used for operational expenses or investments in the business.

Final Thoughts

Maximising your tax deductions can significantly reduce your taxable income and help your business thrive. However, it’s important to maintain accurate records and seek professional advice to ensure compliance with ATO regulations. Whilst a BAS agent can assist with BAS and GST matters, it's essential to regularly speak with your accountant, who can provide expert advice on broader tax matters and ensure your business meets all tax obligations.