A common trap for new business owners is assuming that anything vaguely connected to the business is deductible. The rules are more specific than that.
The three basic tests
Before claiming an expense, check whether it passes these basic tests:
- Business connection: The expense must relate directly to earning business income.
- No reimbursement: If someone else reimburses you, you cannot also claim the expense.
- Private use adjustment: If something is used for both business and personal purposes, only the business portion is deductible.
Immediate deductions versus depreciation
Smaller operating costs, such as subscriptions or stationery, may be deductible in the year they are paid. Larger assets, such as vehicles or equipment, often need to be written off over time.
The ATO’s business income and deductions guidance is a useful starting point, but getting advice before claiming unusual items can prevent problems later.
Source: ATO – business deductions
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