Are you running your business as a sole trader and wondering where your money is going at tax time? You may have paid for software, fuel, insurance, equipment and other business costs throughout the year. The good news is that many of these costs can be claimed as tax deductions if they meet the ATO’s rules.
The catch is that you cannot simply claim every expense connected to your business. The expense generally needs to relate to earning your assessable business income, and you need records to support the claim. If an expense has both business and private use, you can usually claim only the business portion.
So, what can a sole trader claim on tax? Let’s look at the common deductions and the expenses that can cause problems if claimed incorrectly.
What can a sole trader claim on tax?
As a general rule, you can claim an expense when it has a direct connection with running your business and earning income. You also need evidence to show that you paid the expense and how you calculated the business portion.
Common deductions may include:
- Business supplies and stationery
- Advertising and marketing
- Business insurance
- Accounting and bookkeeping fees
- Business-related software and subscriptions
- Professional memberships
- Business travel
- Eligible motor vehicle expenses
- Home-based business expenses
- Equipment and tools
- Certain education and training costs
- Business loan interest and bank fees
- Employee wages and eligible employment costs
- Some personal superannuation contributions
The exact tax deduction depends on your circumstances and how the expense is used. That distinction matters because a business owner cannot turn a private expense into a deduction simply by paying for it from a business bank account.
What expenses can I claim as a sole trader?
Let’s look at some of the most common expenses you may encounter.
1. Business supplies and stationery
Do you regularly buy items to keep your business running?
Stationery, printing, postage, packaging and other business supplies may be deductible when they are used for your business.
For example, a graphic designer may buy printer paper and storage drives for client work. A tradesperson may purchase smaller consumables used during jobs.
If you also use an item privately, you need to separate the private portion from the business claim.
2. Advertising and marketing
Getting customers often costs money, and those costs may qualify as business deductions.
You may be able to claim expenses for activities such as:
- Online advertising
- Website hosting
- Business website costs
- Business signage
- Promotional materials
- Search engine advertising
- Marketing software
- Business photography
The expense needs to relate to promoting or operating your business.
For example, paying for an online advertising campaign for your plumbing business has a clear business connection. Paying for a personal social media subscription does not become deductible because you sometimes mention your business on it.
3. Accounting, bookkeeping and professional fees
Do you pay an accountant or bookkeeper to help manage your business?
Fees for accounting, bookkeeping and other professional services may be deductible when they relate to your business.
Legal and professional advice can also qualify when it relates to your existing business activities.
There is an important distinction here. Costs connected with establishing a new business or certain new structures can have different tax treatment. You should check the treatment before assuming the full amount is deductible.
4. Business insurance
Insurance can be a significant cost for sole traders.
Depending on the policy and your circumstances, you may be able to claim eligible business insurance premiums. Examples can include public liability insurance and professional indemnity insurance.
The policy needs to relate to your business activities.
Keep your insurance documents and receipts with your other business records. This gives you evidence if you need to explain the claim later.
5. Software, subscriptions and professional memberships
Many sole traders rely on software to run their businesses.
You may be able to claim business-related subscriptions for accounting software, design programs, project management tools, cloud storage and similar services.
Professional association memberships and industry publications may also qualify when they relate to your business.
What happens if you use the same software privately? You should work out the business portion rather than claiming the entire cost.
Can a sole trader claim home office expenses?
Yes, you may be able to claim certain costs when you run your business from home.
This can include additional running expenses associated with using your home for business. Depending on your circumstances, these may include electricity, gas, internet and other relevant costs.
The ATO provides methods for calculating home-based business expenses. You need records that support the calculation you use.
There is another point that many sole traders miss.
Running expenses and occupancy expenses are not treated in exactly the same way.
Occupancy expenses can include costs such as rent, mortgage interest, council rates and insurance. Whether you can claim these depends on whether part of your home qualifies as a place of business and your specific circumstances.
If you claim occupancy expenses, there may also be capital gains tax consequences when you eventually sell your home. That is worth checking before making a claim.
Can a sole trader claim car expenses?
Business owners often use the same vehicle for work and personal trips. That makes recordkeeping particularly important.
You may be able to claim eligible motor vehicle expenses for business travel. The claim can be calculated using an applicable method, such as the cents per kilometre method or the logbook method.
For the 2026-27 income year, the cents per kilometre rate is 91 cents per kilometre, with a maximum of 5,000 business kilometres under that method.
You cannot simply claim your entire fuel bill because you use your car for work.
Suppose you drive to visit clients, collect business supplies and attend business meetings. Those trips may have a business connection. Your weekend trip to the coast does not become deductible because you also own a business.
Keep the required records for whichever method you use. If you use the logbook method, the recordkeeping requirements are more detailed.
Can I claim travel expenses as a sole trader?
Business travel away from your usual place of work may produce deductible expenses.
Depending on the circumstances, this can include costs such as accommodation, transport and eligible meals.
The trip needs to have a genuine business purpose. You also need records that support the expense and explain the business reason for the travel.
This is where keeping a simple record can save you trouble later. Note where you travelled, why you travelled and what business activity took place.
A holiday does not become a business trip simply because you answer a few emails from your hotel room.
Can I claim tools, equipment and technology?
If you buy equipment for your business, the tax treatment depends on the type and cost of the asset.
Common examples include:
- Laptops
- Computers
- Printers
- Cameras
- Tools
- Office furniture
- Machinery
- Business equipment
Some assets may qualify for an immediate deduction under the applicable instant asset write-off rules. Other assets need to be depreciated over time.
Do not assume that an expensive asset can always be claimed in full in the year you buy it. The applicable depreciation and small business rules can change between income years.
For example, small businesses with an aggregated turnover under $10 million can immediately deduct the full business portion of eligible assets costing less than $20,000, provided the asset is first used or installed ready for use in the income year you’re claiming.
This threshold was previously renewed year to year, but from 1 July 2026 the $20,000 instant asset write-off has been made a permanent feature for small businesses, so it no longer resets or risks expiring each Budget cycle.
Assets costing $20,000 or more still need to be depreciated over time rather than claimed immediately, so check which category your purchase falls into before assuming it’s an instant deduction.
Can a sole trader claim education and training?
Education expenses can sometimes be deductible, but the course needs to have a sufficient connection with your existing business activities.
For example, a photographer may undertake training to improve existing photography skills. A bookkeeper may attend training on accounting software used in their current business.
The position can be different if the education prepares you for a new occupation or unrelated business activity.
Before claiming a course, ask yourself a simple question: does this expense relate to the business I currently run and earn income from?
If the answer is unclear, check the ATO rules or speak with a registered tax professional.
Can I claim bank fees and business loan interest?
Business banking costs can add up over a year.
Eligible fees connected with business bank accounts may be deductible. Interest on money borrowed for business purposes may also qualify, depending on how the borrowed funds are used.
You need to separate private borrowing from business borrowing.
For example, interest on a loan used to purchase business equipment may have a business connection. Interest on money borrowed for a private purchase does not become deductible simply because you operate as a sole trader.
Can a sole trader claim superannuation?
Sole traders do not have an employer paying superannuation for them in the same way as employees.
However, eligible personal superannuation contributions may be claimed as a personal tax deduction if you meet the relevant conditions.
You generally need to provide your super fund with a valid notice of intent to claim the deduction. Your fund must acknowledge the notice before you claim the deduction in your tax return.
There are also contribution caps and other rules to consider. It is worth checking these before making a large contribution purely for a tax deduction.
What can’t a sole trader claim?
Knowing what you cannot claim is just as important.
You generally cannot claim private expenses simply because they were paid from your business account.
Common examples include:
- Private household expenses
- Personal clothing that is suitable for everyday wear
- Private travel
- Traffic fines and penalties
- Private entertainment
- Personal purchases
- The private portion of mixed-use expenses
The rules around meals and entertainment can also be restrictive. A meal does not automatically become deductible because you discuss business during it.
The same principle applies to clothing. Ordinary clothes are generally private, even if you wear them to meet clients. Protective clothing and certain occupation-specific clothing can have different treatment.
What records does a sole trader need to keep?
You have a much stronger position when you can prove your deductions.
Keep invoices, receipts, bank records and other evidence supporting your business expenses. You should also keep records showing how you calculated business and private use.
Motor vehicle claims can require additional records, including kilometres travelled and information supporting your chosen calculation method.
Home-based business claims also require evidence of the expenses and how you calculated the business portion. The ATO generally requires relevant business records to be kept for at least five years.
Waiting until tax time to sort through a year’s worth of receipts can quickly become frustrating. Recording expenses throughout the year makes the process much easier.
What is the easiest way to avoid missing deductions?
The best approach is to keep business records as you go.
Use accounting software or another reliable system to record income and expenses. Keep digital copies of invoices and receipts. Separate private and business transactions where possible.
Then review your expenses before lodging your tax return.
Think about your year from the ground up. Did you buy equipment? Pay for software? Travel to clients? Work from home? Pay professional fees? Renew business insurance?
Small expenses can add up. Missing several legitimate deductions can increase your taxable income unnecessarily.
At the same time, claiming expenses that are not allowed can create a different problem. The goal is not to claim as much as possible. The goal is to claim what you are legally entitled to claim.
Need help with your sole trader tax return?
Working out which expenses you can claim can be confusing, especially when an expense has both business and private use. Clear Tax Accountants can help you identify eligible deductions, keep your records organised and prepare your tax return correctly.
If you are unsure whether an expense is deductible, speak with the Clear Tax team before lodging your return. Getting the right advice can help you avoid missed deductions and incorrect claims.
Final thoughts
Knowing what expenses can be claimed as a sole trader can make a real difference at tax time. The key is to understand the difference between a genuine business expense and a private cost.
Before claiming anything, ask whether the expense relates to earning your business income. Then check whether you have the records to support the claim.
If you are unsure about an expense, getting professional advice can be cheaper than correcting an incorrect claim later. A registered tax professional can also help identify legitimate deductions you may have overlooked.
For a sole trader, good recordkeeping is not something to think about once a year. It is part of running the business properly throughout the year.
FAQs
What can I claim as a sole trader?
You may be able to claim business-related expenses such as supplies, advertising, insurance, professional fees, software, travel, eligible vehicle expenses, home-based business costs and certain equipment. The expense must meet the relevant ATO requirements.
Can I claim personal expenses as a sole trader?
Generally, no. Private expenses are not deductible simply because you operate a business. For expenses used for both business and private purposes, you generally claim only the business portion.
Can I claim my phone and internet bills?
You may be able to claim the business-use portion of your phone and internet expenses. You need a reasonable method for working out the business percentage and records to support your calculation.
Can I claim expenses if I work from home?
Yes, eligible home-based business expenses may be deductible. The amount depends on your circumstances and the method used to calculate the claim. You need records to support the expense and your calculation.
Can I claim my car as a sole trader?
You may be able to claim eligible business motor vehicle expenses. The amount depends on your business use and the calculation method you use. Private travel cannot simply be included in the claim.
Do I need receipts for every business expense?
You need records that support your deductions. The type of evidence required can vary by expense. Keeping invoices, receipts, bank records and calculation records is a practical way to support your claims.
Can I claim my accountant’s fees?
Business-related accounting and tax agent fees may be deductible. The treatment depends on what the fee relates to, so keep the relevant invoice and supporting records.
Need help claiming the right sole trader deductions?
Clear Tax Accountants can help you identify eligible business expenses, organise your records and prepare your sole trader tax return correctly. Speak With a Clear Tax Accountant or call 1300 417 399.
