Business Expense in Australia: What Can You Actually Claim
Running a small business is challenging enough without having to become a part-time tax expert. But when EOFY rolls around, that’s exactly what most business owners feel they need to be. Figuring out what counts as a business expense in Australia is one of those things that sounds straightforward until you’re staring at a pile of receipts wondering what’s actually claimable.
If you’ve ever second-guessed an expense or worried about triggering an ATO audit, you’re not alone. According to the ATO’s most recent small business tax gap report, incorrect deduction claims are among the most common compliance issues for Australian small businesses. Understanding the rules upfront saves you money and headaches later.
What Is a Business Expense in Australia?
A business expense in Australia is any cost you incur in earning assessable income from your business. To be deductible, the expense must have a direct connection to your business activities, be supported by records such as receipts or invoices, and must not be private or personal in nature. The ATO applies this test to every claim.
What You Can Claim as a Business Expense in Australia?
1. Training and Professional Development
Courses, workshops, and professional development that help you do your current job better are generally tax deductible. This includes industry conferences, short online courses, and memberships to professional associations. The key test: does it relate to your existing income-earning activities? If you’re retraining for a new career, the ATO treats that differently and it will not be deductible.
2. Motor Vehicle Expenses
If you use your car to visit clients, attend meetings, or carry tools or stock, you can claim a portion of the running costs. The two accepted methods are:
- Cents-per-kilometre method: claim 88 cents per km (2024-25 rate) for up to 5,000 business kilometres per year, no logbook required.
- Logbook method: claim the actual business-use percentage of all vehicle costs, including fuel, rego, insurance, servicing and depreciation. Requires a valid 12-week logbook, updated every five years.
Driving from your home to your regular place of work is not deductible. That is considered a private trip, regardless of how far away the office is.
3. Travel Expenses
Flights, accommodation, and transport costs for business travel are deductible. If the trip is entirely for work, the full cost is claimable. If you mix work and personal time (for example, a work conference followed by a weekend away), you need to apportion the costs and only claim the business portion.
For trips of six or more nights, the ATO requires you to keep a travel diary recording the dates, places, and purpose of activities each day.
4. Accounting and Professional Fees
Fees paid to your accountant, bookkeeper, tax agent, or financial adviser for managing your business finances are deductible. This includes BAS lodgement, tax return preparation, business structuring advice, and any ongoing advisory work. The cost of managing your investments is also deductible, but personal financial planning for private goals is not.
5. Bank Fees and Loan Interest
Interest on business loans, credit cards used for business purposes, and account-keeping fees on your business bank account are all deductible. The practical requirement here is keeping your business and personal banking completely separate. Mixing the two makes it much harder to substantiate your claims and is a common red flag for the ATO.
6. Donations to Charities
Donations of $2 or more to organisations registered as Deductible Gift Recipients (DGRs) are tax deductible. You can check whether a charity qualifies using the ABR’s DGR search tool. Note that fundraising purchases (raffle tickets, gala dinners) are generally not deductible even if the organisation is a DGR.
7. Bad Debts
If you’ve invoiced a client, included that amount in your assessable income, genuinely tried to recover the money, and ultimately had to write it off, you may be able to claim a bad debt deduction. The debt must be recorded as bad in your books during the income year you’re claiming. If you operate on a cash basis, bad debts generally cannot be claimed because the income was never recorded in the first place.
8. Repairs and Maintenance
Routine repairs and maintenance to assets used in your business are deductible in the year you pay for them. This includes fixing broken equipment, patching a roof on a rented business premises, or servicing a work vehicle.
The distinction matters: a repair restores something to its original condition. An improvement or renovation that makes the asset better than it was is a capital expense and must be depreciated over time, not claimed in full upfront.
9. Office Rent and Utilities
If you rent a commercial premises, the rent is fully deductible. Electricity, gas, internet, and phone costs directly related to the business are also claimable. Working from home? You can claim a proportion of your household expenses based on the area and time you dedicate to work, using either the ATO’s fixed rate method (67 cents per hour in 2024-25) or the actual cost method.
10. Marketing and Advertising
Costs to promote your business are deductible. This covers website development and hosting, Google and social media ads, printed marketing materials, and any agency or freelancer fees for creative work. If you build a website or brand asset that will have value beyond 12 months, those costs may need to be treated as capital expenses and depreciated.
11. Equipment and Assets (Instant Asset Write-Off)
From 1 July 2026, small businesses with annual turnover up to $10 million can immediately deduct the full cost of eligible assets under $20,000 in the year of purchase. Until now, this threshold had to be renewed each Budget, which made forward planning difficult. It is now locked in permanently.
Buy a new laptop, a piece of trade equipment, a tool, or any other eligible business asset under $20,000 and you claim the full amount in that financial year. No waiting, no depreciation schedules. For assets costing $20,000 or more, the standard small business pooling rules still apply and the cost is written off over time.
Quick-Reference: Deductible vs Non-Deductible
| Generally Deductible | Generally Not Deductible |
|---|---|
| Accounting and bookkeeping fees | Personal groceries or clothing |
| Business loan interest | Entertainment, including meals, events and tickets |
| Motor vehicle costs relating to business use | Fines and penalties |
| Training related to your current role | Late superannuation contributions |
| Office rent and utilities | Private phone or internet use |
| Marketing and advertising | Travel from home to your regular workplace |
| Donations to deductible gift recipient charities | Personal gym membership |
| Eligible equipment under $20,000 using the instant asset write-off | Assets costing $20,000 or more, which generally must be depreciated |
What You Cannot Claim as a Business Expense
Knowing what is off-limits matters just as much as knowing what you can claim. Here are the most common mistakes.
Fines and Penalties
Parking fines, ATO late lodgement penalties, and other regulatory fines are never deductible. The ATO’s position is clear: the tax system should not subsidise non-compliance.
Client Entertainment
Taking a client to lunch, buying concert tickets as a thank-you, or hosting a Christmas party are classified as entertainment under the FBT rules. Entertainment is specifically excluded from income tax deductions. There are some exceptions involving FBT, but they are narrow. The safe default is to assume entertainment is not deductible and check with your accountant before claiming.
Late Superannuation Payments
Super contributions are only deductible when paid on time. The quarterly due dates are set by the ATO and missing them results in the Super Guarantee Charge, which includes the unpaid super, an interest component, and an admin fee. You also lose the deduction entirely. Paying on time every quarter protects both your workers and your tax position.
Personal Expenses Paid Through the Business
Groceries, personal clothing, private phone bills, gym memberships, and school fees are not deductible, regardless of whether they were paid from a business account. The ATO looks at the nature of the expense, not the account it came from. Paying personal costs through a company or trust can also trigger Division 7A tax issues or create trust distribution complications.
Why Record Keeping Is the Part Most Businesses Get Wrong
The ATO doesn’t just check whether your claims are valid in principle. It checks whether you can prove them. That means records.
You need to keep receipts, invoices, bank statements, and written notes for five years from the date you lodge your tax return. For some assets and property, the period is longer. Cloud accounting tools like Xero make this significantly easier by linking your bank feeds, storing receipts digitally, and keeping your records in one place.
2026-27 BUDGET UPDATE
2026-27 Budget update: from the 2026-27 income year, the Government has introduced a $1,000 standard deduction for work-related expenses. This means eligible workers can automatically receive a $1,000 deduction without needing to itemise or keep receipts. If your actual work-related expenses exceed $1,000, you can choose not to use the standard deduction and instead claim your full expenses under the existing rules in that case, you will need supporting records for the total amount claimed.
This standard deduction applies to individual employees and sole traders claiming work-related expenses, not to deductions claimed through a company or trust structure. We will sort this for clients when preparing your return.
A reliable bookkeeper or accountant reviewing your records quarterly can spot issues before they become audit risks. At Acctivate, we work with business owners throughout the year, not just at tax time, so nothing gets missed.
Bills implementing this measure passed Parliament on 25 June 2026 and await royal assent.
Frequently Asked Questions About Business Expenses in Australia
What counts as a business expense in Australia?
A business expense in Australia is any cost you incur in the process of earning assessable income. The ATO requires that the expense be directly connected to your business activities, not personal in nature, and that you can substantiate it with records such as receipts, invoices, or bank statements. Common examples include accounting fees, motor vehicle costs, training, rent, and equipment.
Can I claim my home office as a business expense?
Yes, if you work from home, you can claim a portion of your rent or mortgage interest, electricity, internet, and cleaning costs. The ATO offers two methods: the fixed rate method (67 cents per hour worked from home as of 2024-25) and the actual cost method, where you calculate the exact proportion of your home used for work. You need to keep records of the hours worked and costs incurred.
Can I claim entertainment expenses for my business?
Generally, no. The ATO classifies most client and staff entertainment as non-deductible. This includes meals, drinks, event tickets, and parties. There are narrow exceptions involving Fringe Benefits Tax (FBT), but these are complex. If you are unsure whether a specific entertainment cost qualifies, speak with your accountant before claiming it.
Is superannuation a tax-deductible business expense?
Yes, but only if you pay it on time. Super contributions are deductible when paid by the quarterly due date set by the ATO. If you pay late, you cannot claim the contribution as a deduction and may also owe the Super Guarantee Charge, which adds penalties and interest on top of the unpaid amount.
How do I claim motor vehicle expenses for my business?
There are two methods for claiming car expenses in Australia. The cents-per-kilometre method lets you claim a set rate (88 cents per km in 2024-25 — confirm current rate before publishing) for up to 5,000 business kilometres per year without a logbook. The logbook method allows you to claim the actual business-use percentage of all car costs, but requires a 12-week logbook that you keep every five years. Commuting from home to your regular place of work is not deductible.
What records do I need to keep for business expense claims?
The ATO requires you to keep records for five years from the date you lodge your tax return. For most expenses, you need a receipt or invoice showing the date, amount, supplier, and nature of the purchase. For motor vehicles, you need a logbook or odometer records. For travel, a travel diary is required for trips of six or more nights. Note: from 2026-27, workers can claim up to $1,000 in work-related expenses without receipts under the new instant deduction. If your expenses exceed $1,000, you still need full records for the total amount claimed.
Can I claim a bad debt as a business expense?
Yes, but only under specific conditions. The debt must have already been included in your assessable income (meaning you invoiced and reported it as income), you must have genuinely tried to recover the money, and you must have written it off in your books as bad. If you use a cash basis for accounting, bad debts generally cannot be claimed because the income was never recorded.
Is the $20,000 instant asset write-off still available in 2026?
Yes, and it is now permanent. From 1 July 2026, small businesses with annual turnover up to $10 million can immediately deduct the full cost of eligible assets under $20,000 in the year of purchase. This was confirmed in the 2026-27 Federal Budget. Assets costing $20,000 or more are still depreciated under the small business pooling rules.
Simon Burke, CA
Simon Burke is a Chartered Accountant (CAANZ), Registered Tax Agent and Co-Founder of Acctivate Business Accountants, with a decade of experience in accounting and business advisory. Holding dual degrees in Business Management and Commerce and a Xero Advisor certification, Simon specialises in helping businesses build stronger foundations through smarter structures, cash flow strategy, and operational efficiency.
The items covered in this article are general in nature. Every business is different, and what’s deductible in your situation depends on your structure, industry, and how you operate. Before claiming anything you’re unsure about, get professional advice.
Not sure what you can claim?
At Acctivate Business Accountants, we work with Australian small business owners year-round. Whether you’re a sole trader just starting out or a company turning over several million, we help you stay compliant and claim everything you are legally entitled to.
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