Sole trader tax deductions: what you can claim in Australia

Last updated 2 September 2026

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✅ Claimable

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✅ Claimable

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. Office setup costs✅ Claimable

The gear you buy to set up your workspace — a desk, an ergonomic chair, a laptop stand, monitor arms, storage, a decent lamp — is generally deductible when it is used for the business. If that chair is half work, half gaming, you claim only the business share. Bigger-ticket items may need to be depreciated over several years rather than claimed upfront.

4. Phone, internet and data✅ Claimable

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. The handset itself is claimable on the same basis.

5. Home office running costs✅ Claimable

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.

6. Motor vehicle and travel⚠️ Conditions apply

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 — and neither are the tolls, parking or Uber fares for that regular commute. Sole traders usually use either the cents-per-kilometre method or the logbook method, and each has its own record requirements. Our cents per km guide walks through the rates. For overnight business travel, keep the itinerary, accommodation and fare records.

7. Marketing, advertising and website✅ Claimable

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.

8. Professional services and fees✅ Claimable

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.

9. Insurance✅ Claimable

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.

10. Training, education and industry costs⚠️ Conditions apply

Courses, workshops, conferences, industry memberships, licences, registrations, and subscriptions to trade publications are deductible where they maintain or improve the skills you use in the income-earning activity you already carry on. The key word is “current”: a course that helps you pivot into a new field, or general personal development, does not qualify.

11. Materials, stock and contractors✅ Claimable

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

12. Super contributions⚠️ Conditions apply

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.

13. Meals and coffee⚠️ Conditions apply

Your regular lunch, coffee or snacks during a normal work day are private — the ATO treats them as personal fuel. Meals can be claimable when you travel overnight for work, or where you receive a genuine overtime meal allowance that is included in your taxable income. Keep the itinerary and receipts either way.

14. Clothing and laundry⚠️ Conditions apply

Everyday “work outfits” are not deductible, even if you only wear them to meet clients — if the clothing could reasonably be worn outside work, it is out. You can claim occupation-specific clothing, protective gear, and uniforms with a business logo, plus the laundry for those items: the ATO allows $1 per load of work-only washing (50 cents for mixed loads), and if total laundry claims stay under $150 you do not need receipts, only a note of how you worked it out.

Definitely not claimable❌ Not claimable

Some expenses feel like business costs but are private in the ATO’s eyes:

• Client entertainment and networking — taking clients out for coffee or meals, networking event tickets and industry social functions are personal, even when they lead directly to new work
• Personal grooming — haircuts, skincare and makeup are private, even when clients expect you to look polished (a makeup artist can claim products used on clients, not on themselves)
• Glasses and contact lenses — personal, no matter how essential they are to your work
• Child care — never claimable, even when you cannot work without it
• Your regular commute — travel between home and a fixed workplace, including its tolls and parking
• Fines and penalties, money you draw from the business for yourself, the private portion of any mixed-use expense, and 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. Our record keeping guide goes deeper on what the ATO expects.

• 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.

Questions sole traders ask most about expenses

Can I claim an expense I use for both work and personal life?

Yes, but only the business portion. Set a work-use percentage on the expense and keep a note of how you worked it out. In Indi, every expense on the Expenses screen has a “how much was for work?” field, so the split is saved with the record instead of being reconstructed in June.

Do I need a receipt for everything?

Keep written evidence for business purchases wherever you can — supplier, date, amount and what it was for. Small cash purchases still need a record, and bank statements alone rarely explain what something was. Photographing the receipt at the counter and attaching it to the expense is the habit that saves the claim.

Can I claim expenses before I had an ABN or made any income?

Start-up costs can be deductible where the business is genuinely being carried on, and some professional set-up costs have their own treatment. If your business ran at a loss, there are non-commercial loss rules that decide whether the loss can offset other income this year. Both are worth confirming with a registered tax agent.

What can I claim for working from home?

Running costs — electricity, gas, cleaning of the work area, and decline in value of office furniture and equipment — for the business-use portion. Occupancy costs like rent and mortgage interest are stricter and can affect capital gains tax on your home. Record home office costs as ordinary expenses with a work-use percentage.

How do car and travel claims work?

You use either cents per kilometre or a logbook, and each has its own record requirements. Home to a regular workplace generally is not claimable; trips between jobs, to clients and to suppliers usually are. Indi’s Mileage screen logs each trip with its date, purpose and distance and applies the cents-per-kilometre rate, so the claim adds up as you go rather than from memory.

Can I claim my coffee, lunch or client meals?

Your own meals during a normal work day are private, and client entertainment is generally not deductible at all. Overnight business travel is treated differently — keep the itinerary and receipts.

Can I claim work clothes?

Only occupation-specific clothing, protective gear or a logo’d uniform — plus laundry for those items at $1 per work-only load (50 cents mixed), receipt-free under $150 total. Ordinary clothes you happen to wear to client meetings are private.

How do deductions actually affect what I pay?

Deductions reduce your taxable income, not your tax bill dollar for dollar. Claiming $1,000 of genuine expenses saves you tax at your marginal rate, not $1,000. That is also why inventing claims is never worth it.

What if I’m registered for GST?

You generally claim the expense excluding the GST you have claimed back as a credit on your BAS. If you are not registered, you claim the full GST-inclusive amount.

How long do I keep the records?

Most business records must be kept five years from when you got the record or completed the transaction, whichever is later — including receipts, logbooks and asset purchase records.

What happens if the ATO reviews my claims?

You are asked to substantiate them: the record, the amount, and the reasoning behind any work-use percentage. An expense list with receipts attached and percentages already noted answers most of that immediately.

How Indi helps you track deductions all year

Indi is built for exactly this job. On the Expenses screen you add each business cost with a category, a receipt and a work-use percentage, and Indi keeps a running total of the potential deductions recorded for the financial year. Regular costs such as Adobe, Canva or your mobile plan can be tracked as recurring, so they get confirmed instead of forgotten. Vehicle trips live on the Mileage screen, where each logged trip is converted at the cents-per-kilometre rate.

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.

This article is general information only and does not take your circumstances into account. It is not tax advice — confirm what applies to you with a registered tax agent or the ATO. See our disclaimers for details.