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Business Deductions

Date: 24 June 2025

Understand which business expenses can be claimed as tax deductions.

What you can claim

You can claim a tax deduction for most expenses you incur in carrying on your business if they are directly related to earning your assessable income.

Types of business expenses you may be able to claim deductions for include:

  • day-to-day operating expenses
  • purchases of products or services for your business
  • certain capital expenses, such as the cost of depreciating assets like machinery and equipment used in your business.

The amount of your deduction and when you can claim it will depend on the type of expense (for example certain capital expenditures are deductible over time) and whether it has any private or domestic purpose for which you must reduce your deduction. Also, some expenses are not deductible (for example fines).

There are 3 golden rules for what we accept as a valid business deduction:

  1. The expense must have been for your business, available as an allowable deduction and not for private use.
  2. If the expense is for a mix of business and private use, you can only claim the portion that is used for your business.
  3. You must have records to prove it.

You can also claim deductions for expenses related to protecting staff from safety hazards involved in performing their duties. For example, infection from transmissible diseases. This may include hand sanitiser, sneeze or cough guards, face masks, gloves, other personal protective equipment, antibacterial wipes and other cleaning supplies that are used for business purposes.

 

What you can’t claim

There are some expenses that are not deductible, such as:

  • entertainment expenses, other than those you provide as a fringe benefit
  • traffic fines
  • private or domestic expenses, such as childcare fees or clothes for your family
  • expenses relating to earning  income that is not assessable
  • payments for which you have not met your PAYG withholding or reporting obligations – non-compliant payments
  • the GST component of a purchase if are registered for GST and you can claim it as a GST credit on your business activity statement.

You generally cannot claim a deduction for the cost of capital assets that are dealt with under the capital gains tax rules, such as the land your business premises are on. Some exceptions apply for capital works, plant and certain expenditure of primary producers on improvements to land.

Your deductions may be limited for expenses incurred in relation to personal services income (PSI) if the PSI rules apply to that income.

 

*This above information was taken from ato.gov.au. For more information click here

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