Sole trader tax deductions: what you can claim in Australia

Most sole traders do not lose deductions because they do not know the rules. They lose them because the receipt was never saved, the subscription was never recorded, or nobody wrote down how much of the phone bill was actually for work.

This guide walks through the business expenses Australian sole traders commonly claim, the three tests the ATO applies, and the records you need so your accountant or registered tax agent can confirm the claim at tax time.

The three rules every deduction has to pass

According to ATO guidance on deductions for business, you can generally claim an expense when:

• the expense was incurred in carrying on your business
• it is for business use, not private use — where an expense is mixed, you claim only the business portion
• you have records that substantiate the claim

Two other points matter for sole traders. Money you draw from the business for yourself is not a deductible expense, because you and the business are the same entity for tax purposes. And if you are registered for GST, you generally claim expenses excluding the GST you claim back as a credit.

Common sole trader tax deductions

The list below covers the categories that come up most often for contractors, freelancers and people earning side income through an ABN. Whether each one applies depends on your circumstances.

1. Software, subscriptions and online tools

Design tools, accounting and record-keeping apps, cloud storage, website hosting, domain renewals, email, scheduling and invoicing tools, stock image or font licences, and professional platform fees. These are usually the easiest deductions to miss because they are small, monthly and charged automatically. A $32.99 subscription is nearly $400 a year.

2. Equipment and tools of trade

Laptops, phones, cameras, monitors, tradie tools, kitchen or studio equipment, safety gear. Lower-cost items are often claimed in the year you buy them, while higher-cost items are typically depreciated over time. The current instant asset write-off threshold changes from year to year, so confirm the amount that applies for the income year with the ATO or your tax agent.

3. Phone, internet and data

You claim the work-related portion, not the whole bill. If roughly 60% of your phone use is for client calls and business email, that is the share you claim — and you need a reasonable basis for the figure, such as a representative four-week period.

4. Home office running costs

If you run your business from home, running expenses such as electricity, gas, cleaning of the work area, and the decline in value of office furniture and equipment may be deductible for the business-use portion. Occupancy expenses such as rent, mortgage interest and rates have stricter conditions and can affect capital gains tax on your home, so get advice before claiming them.

5. Motor vehicle and travel

Trips between jobs, to clients, to suppliers or to the post office can be deductible; ordinary travel between home and a regular workplace generally is not. Sole traders usually use either the cents-per-kilometre method or the logbook method, and each has its own record requirements. For overnight business travel, keep the itinerary, accommodation and fare records.

6. Marketing, advertising and website

Social ads, Google ads, printed flyers, signage, photography for your website, business cards, and design work. Ongoing website maintenance is typically treated differently from the initial build, which can be a capital cost.

7. Professional services and fees

Accounting and bookkeeping fees, fees for managing your tax affairs, legal costs relating to the business, bank fees on a business account, and merchant or payment-processor fees.

8. Insurance

Public liability, professional indemnity, tool and equipment cover, and business contents insurance are commonly deductible. Income protection premiums have their own treatment, so check the specifics.

9. Training, education and industry costs

Courses, workshops, conferences, industry memberships, licences, registrations, and subscriptions to trade publications, where they relate to the income-earning activity you already carry on.

10. Materials, stock and contractors

Raw materials, consumables, packaging and postage, plus payments to subcontractors who help deliver client work. Keep their invoices and, where relevant, their ABN details.

11. Super contributions

Sole traders generally do not have to pay super for themselves, but personal contributions may be deductible if the conditions and caps are met and the notice requirements are followed. This is an area worth confirming with an adviser.

What you usually cannot claim

• private or domestic expenses, including your own meals during a normal work day
• entertainment, unless a specific exception applies
• fines and penalties
• money you draw from the business for yourself
• the private portion of any mixed-use expense
• expenses relating to income that is not assessable

Mixed-use expenses: the part people get wrong

A laptop used 70% for client work and 30% for streaming is a 70% claim. A phone plan shared with family needs a work-use percentage. A car used for both jobs and school pick-up needs a method and a record.

The number itself matters less than being able to explain how you arrived at it. Write the percentage down when you record the expense, while you still remember why.

Records: what to keep and for how long

Deductions live or die on evidence. For each business expense, aim to keep a record showing the supplier, the amount, the date, what it was for, and the business-use portion where the expense is mixed. Most business records need to be kept for five years from when you got the record or completed the transaction, whichever is later.

• receipts and tax invoices, including for small cash purchases
• bank and card statements for the business account
• a logbook or kilometre record for vehicle claims
• a note of the work-use percentage for phone, internet and equipment
• asset purchase records for anything being depreciated
• invoices from subcontractors

A simple routine that protects your claims

1. Record each expense when it happens, with a category.
2. Attach or photograph the receipt straight away.
3. Set the work-use percentage for anything mixed.
4. Confirm recurring charges as they hit, so subscriptions are not missed.
5. Once a month, check nothing is missing a receipt or a category.
6. Before 30 June, review the year and give your adviser a clean summary.

How Indi helps you track deductions all year

Indi is built for exactly this job. You add each business expense with a category, a receipt and a “how much was for work?” percentage, and Indi keeps a running total of the potential deductions you have recorded for the financial year. Regular business costs such as Adobe, Canva or your mobile plan can be tracked as recurring, so they get confirmed instead of forgotten.

At EOFY, your Tax Pack readiness score shows what is still missing — receipts, unconfirmed recurring costs, missing work-use percentages — and you can export a clean summary or share it with your accountant.

Try the Indi demo to see how a year of tracked deductions looks before tax time.

Your financial companion. Your sole trader money, sorted.