Sole Trader Tax Deductions & Home Office Check (AU)

As a sole trader, freelancer or contractor in Australia you pay income tax on your business profit, not your turnover, so every legitimate deduction you claim lowers your tax bill. Under s.8-1 of the Income Tax Assessment Act 1997 you can deduct expenses you incur in earning your business income, but not private or domestic costs, and anything with mixed use must be split between business and personal. Common claims include working from home running costs (the ATO’s fixed rate method is 70 cents per hour from 1 July 2024, or you can claim actual costs), car expenses using the cents per kilometre or logbook method (Division 28), phone and internet, software, tools and equipment, insurance, accounting fees and personal super contributions you notify the fund about (s.290-150).

The ATO checks sole trader claims closely and uses data matching with banks, platforms and payment providers. You must keep records such as receipts, invoices, logbooks and diaries for five years (Income Tax Assessment Act 1936 s.262A), and claims you cannot back up can be refused, with penalties for false or misleading statements (Taxation Administration Act 1953 Sch 1 s.284-75) and interest on top. Claiming occupancy costs like rent or mortgage interest for a home office can also affect your main residence capital gains tax exemption. This check shows what you can claim, what records you need and where your claims might draw ATO questions.

Use this free tool to check which business expenses you can claim as an Australian sole trader or freelancer, including working from home, car, phone and equipment costs, and whether your records would satisfy the ATO.