Ever found yourself staring at your receipts at tax time, wondering, “Can I claim this?” You’re not alone. Many Australian small business owners face the same confusion every year. Claiming the right expenses can make a real difference to your tax return, but getting it wrong could cost you more than you expect.
No one wants to pay more tax than they need to. But the key to getting it right isn’t about knowing every line of the tax law. It’s about understanding what you can claim, what you can’t, and how to prove it.
The golden rules of business expenses
Here’s the truth: most business expenses are deductible if they meet three simple rules set out by the Australian Taxation Office (ATO).
- The expense must be for business use, not personal use.
- If it’s for both business and private use, only claim the business portion.
- You must have records to back up your claim.
That’s it. It’s not as complicated as it sounds, but missing even one of these rules can lead to trouble.
Think about it this way: if you bought something purely to help you earn income for your business, it’s usually deductible. But if it’s mixed with personal use, you need to be fair and only claim the business part. And if you don’t have the records to prove it, you might as well not claim it at all.
What you can claim
Let’s make this real. Picture someone running their own small business from home, say, a graphic designer named Ben. He spends his days working on client projects, managing invoices, and promoting his services online.
For Ben, his business-related expenses might include:
- Design software subscriptions
- A portion of his internet and electricity bills
- Office supplies like a printer, paper, and ink
- Marketing costs such as website hosting and paid ads on social media
All these are directly tied to his work and help him earn income. Since Ben keeps proper invoices and digital receipts, he can confidently claim these as business expenses.
Now think about what doesn’t count. His Spotify subscription? Not claimable, even if it helps him focus while designing. The fuel from his weekend road trip? No. Even the café breakfasts with friends, where business topics come up, don’t make the cut.
These are personal or entertainment expenses, and the ATO is clear, they’re not deductible.
Common mistakes to avoid
Here’s where many business owners slip up. They assume that if something is “kind of” related to their work, it’s fine to claim. But that’s a risky move.
For example, if you use your phone for both personal and business calls, you can’t just claim the whole bill. You’ll need to work out the percentage used for business. The same goes for your car, home internet, and electricity. The ATO expects you to apportion costs accurately, and they’ll want to see how you calculated it if they ever check.
Why record keeping matters
Here’s a simple rule to remember: no records, no claim.
Keeping accurate records isn’t just about being organised. It’s your proof. Without receipts, invoices, or a clear log of business usage, your deductions can be denied. That’s not a position you want to be in when tax time rolls around.
The good news is that digital tools make record-keeping easier than ever. You can store receipts, track expenses, and even use accounting software to link everything directly to your tax return. It’s worth the effort because those records protect you and your business.
The cost of getting it wrong
Think it’s not a big deal if you accidentally claim something you shouldn’t? The ATO might think otherwise. Incorrect claims can trigger audits, lead to penalties, and create unnecessary stress. It’s not worth the risk.
Being cautious isn’t about missing out on deductions. It’s about making sure every claim you make stands up if questioned. That confidence is worth far more than a few extra dollars claimed the wrong way.
The smart way forward
If you’re unsure whether something is deductible, it’s better to check before you claim. The ATO website has clear guidance on business deductions, and a registered tax agent can help you work out what applies to your situation.
Getting professional advice isn’t just about ticking boxes. It’s about understanding how to claim correctly so you can make the most of your deductions and keep your business compliant.
Final thoughts
Running a business means wearing a lot of hats. You’re managing sales, customers, suppliers, and somewhere in between, trying to make sense of your taxes. Knowing what you can and can’t claim gives you control. It helps you avoid mistakes, save money, and lodge your return with confidence.
So, before you start gathering those receipts, ask yourself:
Are these expenses truly for my business?
Can I prove it with records?
And have I only claimed what’s fair?
If you can answer “yes” to all three, you’re on the right track.
For more information on business deductions, speak with a registered tax agent like Clear Tax for advice customised to your needs.
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