Small Business Tax Deductions: The Complete Australian List

You can claim a deduction for almost any cost you incur running your business to earn income, provided it isn't private, isn't capital (bigger purchases are deducted through the instant asset write-off or depreciation instead) and you have a record to prove it. That covers everything from your accountant's bill to the business share of your phone plan. This guide lists every category the ATO allows, the 2026-27 rates that apply, the things you can't claim and the records that make each deduction stick.

The three tests every deduction has to pass

The ATO applies the same logic to every business expense, whatever your structure:

1. It was incurred in running your business to earn assessable income. Not for a venture you might start one day (start-up costs have their own rule, below), and not for something you'd have bought anyway.
2. You only claim the business portion. A laptop you use 60% for work is a 60% deduction. Apportion on a reasonable basis and write down how you got there.
3. You can prove it. A receipt or tax invoice, a bank record, a logbook, a diary of hours: whatever the category calls for.

Two mechanics run through the whole list. If you're registered for GST, you claim the GST back as a credit on your BAS and deduct the GST-exclusive amount on your tax return; if you're not registered, the full GST-inclusive cost is your deduction (our BAS and GST guide covers the credit side). And timing follows your accounting method: on a cash basis you deduct when you pay, on accruals when the bill is incurred.

Sole traders have some extras, including the small business income tax offset and personal super, which we cover in the sole trader tax guide. Everything below applies to sole traders, partnerships, companies and trusts unless we say otherwise.

The full list at a glance

Category	Deductible	Watch out for
Operating expenses	Rent, utilities, stock, stationery, phone, internet, freight, bank fees	Private share of phone and internet
Home office	70c per hour fixed rate, or actual running costs	Occupancy costs only with a genuine place of business
Vehicle	91c per km (up to 5,000 km) or logbook percentage	Commuting; car limit of $69,883
Equipment and tools	Immediate write-off under $20,000 per asset; pool above	Must be installed ready for use by 30 June
Software and subscriptions	Monthly and annual subscriptions, domain, hosting	Purchased software is a depreciating asset
Insurance	Public liability, PI, contents, vehicle, workers comp, income protection	Life, TPD and trauma premiums
Professional fees	Accountant, bookkeeper, lawyer, tax agent, start-up advice	Fees for buying a business are capital
Super	Employee SG paid on time; your own contributions up to the cap	SGC for quarters before 1 July 2026 isn't deductible; Payday Super SGC is, but costs interest and an uplift
Training	Courses that maintain or improve skills for your current business	Study aimed at a new career
Marketing	Advertising, website running costs, signage, sponsorship	Entertainment dressed up as marketing
Travel	Flights, accommodation, meals when away overnight for business	Private days on a trip; diary if 6+ nights
Interest and finance	Interest on business loans and overdrafts, loan fees	ATO interest charges from 1 July 2025
Bad debts	Amounts invoiced, taxed and written off as unrecoverable	Cash-basis businesses can't claim them
Depreciation	Assets over the write-off threshold; buildings as capital works	Car limit; private use
Wages and contractors	Salaries, super, contractors, staff amenities	No deduction if you skipped PAYG withholding

The rest of this guide takes each row in turn.

Operating expenses

The everyday costs of trading are deductible in the year you pay or incur them: rent on business premises, electricity, gas and water, cleaning, stationery and printing, postage and freight, phone and internet, bank and merchant fees, business name and licence renewals, industry memberships, trade publications, safety gear, uniforms with a logo, repairs and maintenance, and the cost of stock you sell.

Phone and internet draw ATO attention because they're nearly always mixed. Work out a business percentage from a representative month of itemised bills and apply it consistently. If you have a separate business plan, claim it in full.

Home office

If you run the business from home, there are two ways to claim running costs:

• Fixed rate: 70c for every hour you work from home (the 2025-26 rate; the ATO hadn't announced a different figure for 2026-27 as at September 2026). It covers electricity and gas, internet, phone and stationery, so you can't claim those separately. You must keep a record of actual hours for the whole year, such as a diary, timesheet or calendar, not a four-week sample. Furniture and equipment are claimed on top as depreciating assets.
• Actual cost: work out the business share of each bill based on floor area and hours. More paperwork, but sometimes a bigger deduction if you have a large dedicated office.

Occupancy expenses (mortgage interest, rent, rates, home insurance) are different. You can claim a share only if part of your home is a genuine place of business, such as a consulting room clients visit or a workshop, not a spare room with a desk. Claiming them can also cost you part of the capital gains tax exemption on your home, so run the numbers with your accountant first.

Vehicle and travel

Sole traders and partners have two methods for a car:

• Cents per kilometre: 91c per business kilometre for 2026-27, capped at 5,000 km per car ($4,550). No receipts needed, but you must be able to show how you worked out the kilometres. A diary of trips is enough.
• Logbook: record every trip for a continuous 12-week period to set your business-use percentage, then claim that share of all running costs, including fuel, servicing, insurance, registration, interest and depreciation. Keep the odometer readings and every receipt. High-kilometre or expensive-car businesses almost always do better here.

Companies and trusts can't use cents per kilometre. They claim the actual costs of the vehicle, with any private use dealt with through fringe benefits tax.

Depreciation on a passenger car is capped at the car limit of $69,883 for 2026-27, and the GST credit at $6,353, however much you paid. Utes and vans with a payload of a tonne or more aren't "cars" for these rules, which is why the tradie ute is such a popular purchase.

Trips between home and your regular workplace are commuting and never deductible, even if you carry tools. Travel between job sites, to clients, to suppliers and to the bank is fine.

Overnight travel for business (flights, accommodation, meals, taxis) is deductible for the business portion. Tack a holiday onto a conference and you apportion. Sole traders and partners must keep a travel diary if they're away six or more consecutive nights; companies and trusts don't have to, but it's the easiest way to prove the split.

Equipment, tools and the instant asset write-off

This is the rule most small businesses lean on. If your aggregated turnover is under $10 million, you can immediately deduct the business portion of any depreciating asset costing less than $20,000: a laptop, a coffee machine, a trailer, a ride-on mower. The threshold is per asset, GST-exclusive if you're registered, and the asset must be first used or installed ready for use in the year you claim it. Something ordered in June and delivered in July belongs to the next year.

The threshold had been extended one year at a time since 2023. The 2026-27 Federal Budget on 12 May 2026 announced it becomes permanent from 1 July 2026. The change became law in the Treasury Laws Amendment (Tax Reform No. 2) Bill 2026, which passed the House of Representatives on 18 August 2026 and the Senate on 19 August 2026, and the ATO's guidance now lists the $20,000 limit for assets first used or installed on or after 1 July 2023 with no end date.

Assets at $20,000 or more go into the small business pool: you deduct 15% in the first year and 30% of the remaining balance each year after. If the pool balance drops below $20,000 at year end, you write off the lot.

Software, subscriptions and technology

Monthly or annual subscriptions, including accounting software, Microsoft 365, Adobe, your CRM, cloud storage and point-of-sale, are operating expenses and fully deductible. So are domain names, hosting, email services and app-store fees. Software you buy outright or have custom-built is a depreciating asset: under $20,000 it's an immediate write-off, above that it's depreciated. If you're weighing up platforms, our accounting software comparison lists current pricing.

Insurance

Premiums that protect your income-earning activity are deductible: public liability, professional indemnity, product liability, business contents and stock, business interruption, the business share of vehicle insurance, cyber cover and workers compensation. Income protection is deductible if you hold it outside super. Life, total and permanent disability and trauma cover are not, because the payout isn't taxable. Our business insurance guide explains what each policy actually does.

Professional fees and start-up costs

Your accountant, bookkeeper, BAS agent, tax agent, lawyer (for business matters), business coach and registered valuer are all deductible, as is the cost of managing your tax affairs generally. Small businesses also get an immediate deduction for start-up costs, including accounting and legal advice on structure, business plan development and government fees such as ASIC incorporation, rather than spreading them over five years. The cost of buying a business or its goodwill is capital and forms part of your CGT cost base instead.

Superannuation

For employees: super guarantee contributions (12% of qualifying earnings) are deductible in the year the fund receives them. From 1 July 2026 super is paid every payday and must reach the fund within seven business days. Miss that and the ATO assesses you for the super guarantee charge: the shortfall, interest at the general interest charge rate and an administrative uplift of up to 60%. One Payday Super change to note: the charge for paydays from 1 July 2026 is tax deductible (apart from any interest or penalty for paying the charge itself late), whereas the old quarterly charge for periods before 1 July 2026 remains non-deductible. See the payday super guide for the mechanics.

For yourself: if you're a sole trader or partner, personal contributions are deductible up to the concessional cap of $32,500 for 2026-27, provided you lodge a notice of intent with your fund and receive its acknowledgement before you claim. Company directors paid a wage get super from the company like any other employee.

Training and education

Courses, conferences, seminars, webinars, books and journals are deductible where they maintain or improve skills you use in your current business: a bookkeeping course for a cafe owner who does their own BAS, a first-aid refresher for a personal trainer. Study aimed at moving into a different business or job isn't. Travel to attend is claimable on the same basis.

Marketing and advertising

Google and Meta ads, directory listings, printed flyers, signage and vehicle wraps, sponsoring the local footy club, website design and maintenance, photography, branded merchandise and the cost of running promotions are all deductible. Entertainment isn't: taking clients to lunch, drinks or the cricket is excluded however much business gets discussed. Light refreshments at a meeting on your own premises are the narrow exception.

Interest, bank fees and finance costs

Interest on money borrowed for the business (a term loan, overdraft, equipment finance, the business share of a car loan, even a personal loan you can show was used for the business) is deductible, along with establishment fees, account-keeping fees and merchant fees. Lease payments on business equipment are deductible as you pay them.

One change catches people out: interest the ATO charges on late or underpaid tax (the general interest charge and shortfall interest charge) is no longer deductible for charges incurred from 1 July 2025. An ATO payment plan is now materially more expensive than it used to be, and a bank loan to clear a tax debt may be the cheaper option, because that interest is still deductible.

Bad debts

A customer who never pays leaves you with a deduction, but only if three things are true: the amount was included in your assessable income (so you account on an accruals basis and have already been taxed on the invoice), you've made genuine attempts to recover it, and you write it off in your books before 30 June of the year you claim. Cash-basis businesses never brought the income to account, so there's nothing to deduct. If the customer later pays, the amount goes back into your income.

Depreciation for bigger purchases

Anything that doesn't qualify for the instant write-off is deducted over time. Small businesses use the pool described above. Larger businesses, or anyone who opts out of the simplified rules, depreciate each asset over its effective life using the ATO's published schedules. Buildings and structural improvements to premises you own are claimed as capital works at a fixed annual percentage over decades, not depreciated like equipment.

Wages, contractors and staff costs

Salaries and wages, allowances, bonuses, leave paid out, super, workers compensation premiums, payroll tax, staff training, protective clothing and amenities such as tea and coffee are all deductible. Payments to contractors are too, with two traps. If a contractor doesn't quote an ABN, you generally have to withhold tax from the payment at the top marginal rate. And you lose the deduction entirely for wages or contractor payments where you were required to withhold PAYG and didn't, or didn't report the payment to the ATO.

What you can't claim

• Private and domestic costs, and the private share of anything mixed.
• Entertainment: meals, drinks, tickets and functions for clients or staff, with limited FBT-related exceptions your accountant can walk you through.
• Fines and penalties: parking, speeding, ATO late lodgement, council infringements.
• ATO interest charges incurred from 1 July 2025.
• Everyday clothing: suits and jeans, even if only worn for work. Only protective, occupation-specific or logo-bearing uniforms qualify.
• Commuting between home and your regular workplace.
• Capital costs: buying a business, goodwill, land or improvements to premises. These are dealt with through CGT or capital works.
• Drawings, income tax, HELP repayments and the super guarantee charge for quarters before 1 July 2026.
• The GST component of any expense if you're GST-registered. That's claimed on the BAS.
• Anything you can't substantiate.

Substantiation: the records that make a deduction stick

A deduction without a record isn't a deduction, it's an argument you'll lose. The ATO requires you to keep records explaining every transaction for five years from the date you lodge the return they relate to, and failing to keep or retain them attracts a penalty of 20 penalty units, which is $7,280 at the $364 penalty unit that applies from 1 July 2026.

Deduction	Evidence the ATO expects
Any purchase	Receipt or tax invoice showing supplier, date, amount and description (a full tax invoice for GST credits on anything over $82.50)
Home office fixed rate	Record of actual hours for the full year, plus one bill for each cost type
Vehicle	Trip diary (cents per km) or 12-week logbook with odometer readings and all running-cost receipts
Overnight travel	Receipts, plus a travel diary if away six or more nights
Assets	Purchase invoice, date first used, business-use percentage and how you worked it out
Personal super	Notice of intent and the fund's written acknowledgement
Bad debts	Invoice, recovery attempts, and the write-off dated before 30 June
Contractors	ABN quoted, invoices, and any withholding reported

Digital copies are fine. A photo of a receipt uploaded into your accounting software or the ATO app the day you get it is worth more than a shoebox of faded thermal paper in July. A separate business bank account means you never have to untangle business from personal spending, and it's the single biggest time-saver at tax time.

Legitimate ways to bring deductions forward

Before 30 June each year, three moves are worth a conversation with your accountant:

• Prepay expenses. Small business entities can deduct a prepayment immediately if it covers a period of 12 months or less that ends by the end of the following income year: next year's insurance, rent, subscriptions or a conference booking.
• Buy and install assets under $20,000 you were going to buy anyway, making sure they're delivered and ready to use by 30 June.
• Write off bad debts in your books before year end, after reviewing your debtor list for anything genuinely unrecoverable.

None of these create money out of nothing. You're spending a dollar to save your marginal rate on it, so only do them for costs the business actually needs.

Key takeaways

• Any expense incurred running your business to earn income is deductible, apportioned for private use, if you can prove it. If you're GST-registered, deduct the GST-exclusive amount.
• Key 2026-27 figures (as at September 2026): 70c per hour home office fixed rate, 91c per km up to 5,000 km, car limit $69,883, concessional super cap $32,500, and the instant asset write-off for assets under $20,000 where turnover is under $10 million.
• ATO interest charges stopped being deductible from 1 July 2025. Late super triggers the super guarantee charge, which is deductible under Payday Super from 1 July 2026 but still costs you interest and an uplift of up to 60%, so pay the ATO and your staff's funds on time.
• You can't claim entertainment, fines, everyday clothing, commuting, capital costs or the private share of anything.
• Keep every record for five years from lodgement. Failing to keep records carries a 20 penalty unit ($7,280) penalty, and undocumented claims fall over in an audit.
• Prepayments of 12 months or less, sub-$20,000 assets installed by 30 June and bad debts written off before year end all bring deductions forward legitimately.

Where to get help

• ATO: Income and deductions for business — the official rules for every category.
• ATO: Simpler depreciation for small business — the instant asset write-off and small business pool.
• ATO: Record keeping for business — what to keep and for how long.
• ATO app (myDeductions) — free receipt capture, trip logging and hours tracking that uploads straight into your return.
• A registered tax agent or BAS agent — for anything involving occupancy costs, vehicles over the car limit, bad debts, super strategy or the timing of a large purchase. Check they're listed on the Tax Practitioners Board register before you engage them.